I wonder at which point the fines will outgrow the "cost of doing business" and really start to hurt?
Tech companies are getting fined so often in the EU recently that it seems we're seeing a new article about a 9+ digit fine every other week.
Tech companies are getting fined so often in the EU recently that it seems we're seeing a new article about a 9+ digit fine every other week.
For a sense of scale, VW North-America (~38B) is of a comparable revenue to Amazon EU (~44B). But the VW emissions scandal cost them almost a full years of that revenue, ... and they're not leaving the market. (In general, US fines are much higher than EU fines, BTW). Don't forget that such fines are generally unlikely to be levied very frequently because court battles are drawn out and law enforcement has limited resources too. Additionally, specifically in the EU (but also partially in the US) there's the issue that enforcement is fractured across states, so it's easier for a corp like this to absorb the occasional loss - had this fine been scaled for the entire EU, not just Italy, the cost might have been significant, but alas. Additionally, while punitive damages in civil litigation are obviously problematic, they do address real issues that (AFAIK, IANAL) the EU (an it's member states) doesn't have a real answer for - which makes rules-breaking less disincentivized. Finally, fines that are related to past revenue and disregard stock price and current revenue and growth are likely in any case to have less impact in shaping behavior in rapidly growing sectors (as in sectors with huge profit margins) - and amazon's EU business is rapidly growing.
If the aim of enforcement is to at the very least ensure a change in behavior, and, failing that, to actually fine a company out of business, then EU fines need to be much, much higher. Given how rarely they're levied, the extreme delay in collection, and how small they are, I kind of doubt they're enough to really trigger the kind of behavior you'd want - namely that large corps actually follow the rules right off the bat, and not just after years of being able to essentially manipulate the market into whatever shape they like.
Italian and most politicians love this to show they are doing something, instead of the hard work to define out working standards that actually help online e-commerce for small to medium sized business.
Uber tried to make the rules in Europe: they failed.
Europe has a stronger governance then in the US. And yes, it's a pro-market governance.
And I think at least in the cases I observed it hasn't fixed the 'problem' either.
The EU is a single market consisting of many sovereign states. Sovereign states are naturally protectionist. Each member state wants to support domestic businesses over their rivals from other member states, but a single market can't work like that. To overcome these natural tendencies, the EU set up a regulatory environment that undermines the advantages established businesses have in their home markets, in order to allow businesses from other member states successfully compete against them.
That same attitude bleeds to dealings with businesses outside the single market. EU regulators see large profits and large market shares as signs of insufficient competition, and they see insufficient competition as something inherently negative.
"We will back your participation in this "competition" only as long as your participation furthers our preconceived objectives about how the world and society and economy should work."
It stems from the idea that being an FTE at one place for a long time (and not really having any class mobility) is a good and decent thing to encourage for most of your society. Stability above upside.
It's the root cause of why the USA has a startup culture and Europe does not.
It's fine if that is your belief, but to pretend that it's "competition" when they have their thumb on the scale tilting it toward a specific social ideology is a bit disingenuous.
The core idea is that we see the market as a means to an end, not some end in itself. When the market is incompatible with societal good, the market needs to change, not society.
A market by itself only optimizes for maximum profits for shareholders, at the expense of everything else. Often, you want your economy to optimize for different things, so you direct the market to support your goals.
It's the root cause why inequality is so much worse in the US, why you have a much bigger housing crisis, why health care in the US is such a mess, why there's homeless people everywhere etc etc.
I don't think a single part of this claim a) logically follows from the previous paragraphs, or b) is actually true.
For just one example: the housing crisis is a lack of supply, which is the result of the exact same kind of status-quo-maintaining, market-forces-secondary-to-regulatory-aims (NIMBYism by property owners and their representatives) thing you describe as being the European norm.
To say that these philosophical differences are the root cause of failures in very complex systems is of course the popular and prevailing European narrative about the USA. (There is another, equally popular and equally false (but self-congratulatory) one in Europe about gun violence in the USA.) I just don't see much evidence to substantiate it.
44% of the housing stock is in public ownership, two thirds of the population live in public housing. Rent is affordable and housing stock is of high quality.
Market forces would not have solved this, as there is very little profit to be made with low-cost housing - so the lack of housing was fixed by state intervention and Vienna has the highest quality of life in the world [1] as a result.
[1] https://www.independent.co.uk/travel/news-and-advice/vienna-...
I’m fairly certain that this is not correct.
The market was never an end to itself. Literally go back and read anywhere from Smith, Hume to Hayek. That is just a straw-men argument.
> When the market is incompatible with societal good, the market needs to change, not society.
And who and how is it determined, what the social good is? Are bureaucrats loosely connected to politicians loosely connected to voters a better an more reliable form of social preference allocation then the price mechanism under the same law? Not by any existing evidence in social science.
But the core of your argument is basically the government whenever it feels like it can just intervene in the market directly and put its finger on the scale. Not by fundamentally changing the rules, just be direct intervention whenever they don't like something. Often that is a foreign competitor and some vague hard to prove claims about market power. And often it is the citizens of that country that end up having higher prices or higher taxes. French book market being a good example.
Many times it has been shown historically that the monopolies far, far, far more often are government created then market created. And laws to establish 'fair competition' are usually strongly sponsored by the very competitors who get crushed in the market, often for good fundamental reasons.
The first Anti-Trust law in the US was by local butchers to prevent centralized butchers with refrigerated rail-cars. Would it really be 'fair competition' to give money to local butchers to prevent them from this 'unfair competition'. No, its how you get a stagnate economy depended on subsidies.
Very often its just governments doing what they want for the political clients that they have. French publishers, German news organization.
A perfect example is Germany where German Newspaper have fought tooth and nails for years against 'Google News' and basically want to monetize every link to their sites. This is all done in the name of 'fair competition' while introducing laws that are really the opposite and hurt user freedom in the process.
> It's the root cause why inequality is so much worse in the US, why you have a much bigger housing crisis, why health care in the US is such a mess, why there's homeless people everywhere etc etc.
If you think housing and health care are examples of 'free market fundamentalism' then you are very badly informed.
Regulations reduce competition by raising the bar to entry and the unforeseen consequences of compliance.
So, regulations are necessary part of free markets. The question is what regulations are good and what regulations are bad.
There are empirical and game theoretical examples where regulations create better outcomes than nonviolent free market competition. There are games where the tragedy of the commons occur i.e. Nash equilibrium creates bad outcome [0]. This is also true in the real world e.g. collapse of the Atlantic northwest cod fishery.
[0] https://www.youtube.com/watch?v=6wNj9hOIt9g
[1] https://en.wikipedia.org/wiki/Collapse_of_the_Atlantic_north...
And free markets imply free people - slavery is the opposite of that.
Taxing externalities is also necessary, and it's tax, not a regulation. But that is something we're still working on, with little success it seems. See the carbon/pollution international issues with China, Russia, Australia.
Also, a simple tax can not solve the tragedy of the commons for fisheries as long as fishing will remain profitable. Nash equilibrium involving full exploitation remains as long as there is a profit. Fish are not an externality that can be reduced to avoid taxation, but the objective. While cap on fishing will work.
Infrastructure is the usual example. If your company owns something like a cellular network or a local power grid, the EU requires that you let other businesses use it for a fair price to sell their services to customers. This regulation creates more competition and lowers the prices for customers, while simultaneously making businesses more efficient and less profitable.
Surely a marjet without competition, i.e. monopolised, is no longer free? Or what does 'free' mean?
it depends to whom you ask.
in the US, for a long time, anti-trust was kinda cozy with monopolies - they were accepted as the natural outcome of a free market: the most efficient solution.
In the EU there is more emphasis on market competition, and big monopolists are seen as problematic.
The same argument that justifies monopoly also justifies soviet-style central planning. It just changed the 'monopolist' in charge.
Do not confuse regulations made to fix even worse regulation with an actual healthy, competitive free market.
In Eastern Europe, after the fall of communism, people would lay Ethernet wire between apartment buildings to create ad-hoc communication networks. There were dozens of them. Today that is illegal and we only have a single Internet provider per city block.
This is literally wrong. OpenBanking only applies to the biggest banks and not little guys, and it allows little guys to access data stored in huge banks.
How does thay reduce competition? It reduces bar to entry
I can think of 10 startup banks like monzo and starling and have accounts in 4 of them, where is this lack of competition?
Is it also regulator's fault there is no competition in running water and sewer providers? In your world there is no such thing as capital requirements, barriers to entry, natural monopoly, all issues are summed as 'regulation = bad"
real world experience suggests the contrary is true.
What actions the US government took to "institute" Bell's monopoly?
One of the main points is that Amazon cannot have private deals, de facto monopolizing the business of logistic.
1. That fine mention in this article 2. The outage that happened in AWS US-East-1 region earlier this week
Companies who host on AWS don't care that the retail arm abuses its market position, they care about reliability.
some SLA's include extra compensation. there is reputation damage, ie lost future sales. perhaps also extra costs were made to resolve things.
hard to estimate those though.
Rarely they change behavior of companies, because fines are still peanuts compared to profit they gain by this.. so not really getting your comment.. they are relatively so small we cannot even call them fines.
Empirically, we know that is not true. Some legislation embodies bad ideas.
China - alleged communists - have outperformed the EU at creating a viable software industry. Regardless of the arguments about what approaches are good and bad, there is pretty evidence that whatever "good" means, Europe is struggling to achieve it.
If anything, this could be because of the communist aspect. Companies of a certain size become entwined with the government in China. Funding isn't really a concern when the state backs you up. Similarly, but without state support, the US has Silicon Valley investors who'll always throw cash at companies with the right connections and sometimes random people with decent business ideas.
Does the EU have anything similar to grow companies?
In fact, I would argue because of the many small countries, many companies are incredibly entwined with the government. Because many of these countries only have few large companies.
I think the West loves saying 'all China suggests is because the government just finances every single company'. In reality this just doesn't seem to practically hold up. If all the companies are always losing money and have infinite money. Why are many they so good as scraping, forward looking, innovative and so on.
Its not government money that makes some of the China car makers better at software, or faster at adopting new innovations.
A contractor of Arianespace for Ariane 6 had an issue, RUAG had an issue with fairing. And the Swiss government jumped in. And this happen very often in many industries. I am not confident that all of the recent space companies in China would get the same treatment.
It doesn’t mean companies are free to just lose money. It means they can take risks and not just milk immediate profits for stock gains.
> It means they can take risks and not just milk immediate profits for stock gains.
Given how many US companies do the same and how many companies are heavily protected in Europe I fail to see this as sufficient explanation.
Sufficiently large companies are required to have a certain percent of their staff be CCP members making decisions. That also comes with money tied up in the company. That doesn’t mean every company is backed up by the government. You’re making wild straw men and getting enraged at your own argument.
And also that doesn't explain why so many initially small companies end up being successful.
Those warning shots from EU counties could very well be interpreted differently than they were meant to be.
They took a massive loss on that fine so it’s way more than a finger wave. Please put some effort into justifying your statements.
Fining more than revenue in Italy is one thing and may look bad on paper if you take an italy-centric view but 1B is ~1% of Amazon's quarterly revenue. Amazon is a massive company and Italy could be a loss-leader for years maybe even decades and not make a dent. All the while Italian businesses suffer and wealth compounds somewhere else.
There's also no absolute way to measure the market share/billions (and in which related markets) they've captured by the abuse they've perpetrated. Generally governments fine too little and too late, not too much and too early.
They might never profit enough from Italy to make up for this.
Please note that I'm talking about revenue not profit ("income"). In 2020 (and 2021, which to be fair are maybe a little bit skewed) Amazon was consistently making >$90B in revenue for the quarter. Key word being revenue.
> The company also delivered its largest quarter by revenue of all time at $125.56 billion, pushing it past the symbolic $100 billion mark for the first time.[0]
Wow it's frustratingly hard to find such a simple thing as revenue for a company graphed by quarter -- ycharts is at least straight forward[1].
[0]: https://www.cnbc.com/2021/02/02/amazon-amzn-earnings-q4-2020...
If you paid 1.3B one-time to secure yourself a revenue stream that pays out 200MM than you would have otherwise gained a quarter, you're going to make your money back in ~6 quarters. It's absolutely worth it to take the temporary hit to income (obviously better if you didn't, which they were counting on) -- in fact knowing up front it'd be worth it.
Considering only the hit to short term income makes sense only in the short term, I think -- the Italian industry that was muscled out because they didn't want to use FBA, or the italian logistics providers that weren't chosen because of the incentive to use FBA face more difficulty. Amazon is amplifying solidifying it's own revenue streams, and that effect is likely to persist past a quarter or two.
I may be mistaken but I think of it like the other non-profit making tech companies that are floating around -- unexpected losses in the service of market domination are worth the gained and/or even-more-stabilized revenue streams.
If you see the 2020 numbers Amazon has made 21.33B (on 386B revenue). AWS business in 2020 has generated 13.5 of that (with a 45B revenue)
Hard to quantify (well the authorities gave it a shot) how much the abuse garnered them, but governments tend to under-penalize rather than over-penalize corporations.
[0]: https://ycharts.com/companies/AMZN/revenues
[1]: https://www.macrotrends.net/stocks/charts/AMZN/amazon/revenu...
I was very careful to avoid writing income for that very reason, I did not say that it was their income -- I said they "made" that much, which they did, they made that much revenue. It's in the link itself as well. 1% of quarterly revenue is still not a lot to pay.
Income can also be a misleading indicator to watch -- if you're going to make a royalty deal for example you'd better do it on revenue, not income.
It is when your net margin is in single digits[1] (5% as of sept 2021, but has been as low as 1%).
[1] https://www.macrotrends.net/stocks/charts/AMZN/amazon/profit...
Until fines recur like revenue does it's a drop in the bucket.
This fine might not be that much in itself, but it sets the precedent, which makes fines in other countries more likely.
I do agree with you though, just like the australian news outlets fining FB+Google thing, governments are figuring out that international mega corps are also a good source of income by way of fines.
I fear that even this is also short sighted -- even when imposed by static fines like this, the 1.3B number looks huge, but what we can't see is whether it was actually economical for Amazon to do this (I think it was), and the thing is the companies that were destroyed as a result are much harder to re-create in an environment where Amazon still has the overwhelming amount of marketshare/monopoly power. Eventually, if this continues and Amazon decides to hit back, the lack of natural competition (due to fines that came too little too late in regards to anti-competitive behavior) may put the nation state(s) between a rock and a hard place.
In all seriousness, is it documented anywhere where these fines end up and who exactly benefits from them?
Wut? Italy tax revenue last year has been 708B euros, this is < 0.2% of just that
I agree that when it comes to IT, Italy doesn't perform like California, New York state, the UK, the Netherlands, the Scandinavian countries and a few other US or European states or countries. Notice how all those states and countries have English as the official language or a very strong second language.
But Italy has lots of other great achievements in industries areas like culture, food, tourism, and in more traditional heavy industries like car manufacturing, trains, etc.
English has nothing to do with it, and there are enough Italians who can speak English to handle all transactions with foreigners.
And the more people talk about "culture, food, tourism", as if Italy were some third world tropical island, the more you know it's getting bad.
Yes, California, Washington State, and New York easily beat most other places on the planet when it comes to IT, including Italy. 30 years ago, when high-tech meant electronics, Japan was a leader. When high-tech meant mechanics, Germany was one of the leaders. Now, high-tech increasingly means digital, and the language of the digital age is English. Places where close to 100 percent speak English at a high level at a young age have an advantage.
I visit Italy almost every year, and it's one of the places in the rich world with most immigrants. They literally drown trying to reach Italian shores. Yes, it's not of the highly skilled type, but they are foreign and they want work.
Whereas Italian democracy and public administration leaves something to be desired, Italy didn't have a near coup in 2021, and Italian parties are not busy trying to win elections by preventing voters from other parties from voting. It's whole legal system is not so fragile that half its population cares whether one octogenarian justice dies during what they consider the wrong president.
From a startup perspective, Italy is not where it happens right now, but neither is the US Midwest. Italy's population is very old, and it's not a leader in the English speaking digital economy. Let's see what happens.
It's like tariffs - just another form of protectionism.
Companies who want to operate in a country have to follow that country's laws and stick by that country's regulations. That's why Apple have to make islands appear bigger than they are for China reasons.
US companies can't just operate the same as they do in the US in other countries where people seem to have more protection from malpractice than in the US. Certainly from the outside looking in.
The US can only take measures in the US on EU companies that are breaking US law and/or regulations. It's not tit for tat like tariffs which are clearly arbitrary.
And they do: https://www.bbc.com/news/business-28099694
No if we had a decent system for making the likes of Amazon, Facebook, Apple, et al, actually pay taxes in the countries they clearly do business in I think that would be better than one off fines, however big.
It was a quid-pro-quo system that started becoming imbalanced when EU failed to create competitive business in tech. But that is not USA's fault.
Which ones?
- BP: 35.5
- Volkswagen: 25.6
- Deutsche Bank: 18.3
- UBS: 16.8
- BNP: 12.1
- Nat West: 13.4
- Glaxo Smith Kline: 7.8
- Credit Suisse: 10.4
(in billions)
edit: formatting
As German, fine the fuck out of the corrupt people in Deutsche.