by Lucie Greene
It’s getting tougher for Silicon Valley in its key strongholds, too, as opinions about it change and the extent of its gargantuan impact becomes apparent. Silicon Valley enjoyed a successful decade-long rollout across most established Western markets from the UK to Europe, but it is rapidly being challenged. In some instances its outsize role and dominance is spurring outright backlash in the form of fines, bans, and lawsuits by governments. Among consumers, the sheen and early innocence that saw these companies welcomed and often adulated is fading quickly toward collective suspicion or worse—for businesses built on soaring earnest tropes—irreverence. As the impact of Silicon Valley companies in distorting competition, society, property prices, and employment becomes truly apparent, it’s also reawakening collective social consciences in many countries. European nations are starting to protect their values, taxation systems, and regulations from rapid encroachment.
Silicon Valley’s ride until now may have been smooth, but its plans for global expansion face choppy waters.
European Revolt
Europe has always resisted Silicon Valley ideals, despite its massive success there (Google has a 90 percent market share in Europe, compared with roughly 64 percent in the U.S. thanks to competing players). French and Spanish taxi drivers went on strike against Uber. The Cannes Film Festival thumbed its nose at Netflix by creating a new rule that stopped films without cinema distribution in France from entering the competition (movies shown in theaters in France are subject to taxation to support the French movie industries and release-date regulations, which Netflix had sidestepped). Despite this, Apple, Google, Facebook, and Amazon have thrived in Europe. But things are starting to change. In the past year, European Competition Commissioner Margrethe Vestager has ordered Ireland to recover €13 billion in taxes from Apple. She has fined Facebook €110 million for misleading regulators during its purchase of WhatsApp. Amazon was ordered to pay €250 million to Luxembourg for illegal tax benefits. Google, meanwhile, was fined a giant €2.4 billion for flouting competition laws and abusing its dominant position in the search market at the expense of challenger versions. The European Union also recently ruled that Uber should be regulated as a transportation company, not as a technology solution or any other mask it’s attempted to apply to itself in a bid to skip the rules faced by regular taxi services.
The move has garnered Vestager considerable celebrity. In a profile with the New Statesman, she commented: “There’s no economic rationale behind the way some of these companies are set up . . . It’s not to serve the purpose of the company; it’s to serve the purpose of avoiding tax.” Elsewhere, commenting on tech company monopoly power, she added: “You can be big, and you can be successful . . . but you cannot abuse your power to stop others from challenging you from being the next big thing in five or ten years.”
In May 2018, of course, the General Data Protection Regulation (GDPR) came into effect, enforcing new privacy laws, strict new rules about using people’s data and their personal control of this. It was “designed to harmonize data privacy laws across Europe, to protect and empower all EU citizens data privacy and to reshape the way organizations across the region approach data privacy.”
This follows rising dissent at the behaviors of these companies. The free-flowing back-and-forth exchange of staff roles between Silicon Valley giants and European government is growing in public awareness. The Google Transparency Project, initiated by the Campaign for Accountability, an American ethics organization, has identified at least eighty revolving-door moves between Google and European governments since 2005, set up in a bid to safeguard against antitrust legislation. These moves included Tomas Gulbinas, a former ambassador-at-large for the Lithuanian government, and Georgios Mavros, an advisor to a French member of the European Parliament, who now both work as lobbyists for Google. Uber hired Neelie Kroes, formerly the European Commissioner for Digital Data, in 2016. In 2017, the Transparency International EU released a report that 50 percent of Google’s registered lobbyists used to work for the EU.
On the surface there’s nothing wrong with this—Barack Obama hired lots of people from Google to equip his administration with a better understanding of technology. As these giant companies continue to grow, and they brush up against regulatory issues, it’s also normal to hire heads of policy to navigate these waters. Still, too much crossover raises conflict of interest questions. Who’s being influenced by what?
“All organizations can benefit from the experience and insights that former politicians bring, but there is an issue with those who one minute are drawing up EU laws and the next are lobbying their former colleagues on the exact same issues,” Daniel Freund, head of advocacy at Transparency International EU, said when its study was released. “We need rules that prevent conflicts of interest or the capture of the institutions by lobbyists.”
Legislation to combat the influence of Silicon Valley has been mounting for a while. In 2016, a Berlin court upheld a ban on users of Airbnb (and similar agencies) renting out more than 50 percent of their apartments on a short-term basis without a permit from the city; rule-flouters risk a fine of up to €100,000. The city authorities have even set up a website where users can give anonymous tipoffs about Airbnb usage. The reasoning was that services like Airbnb distort rents and therefore affect availability of affordable housing. Regulations in Amsterdam and London prevent hosts from renting their properties for more than sixty and ninety nights per year, respectively, and at the end of 2016, Airbnb agreed to support this by limiting the number of nights its hosts could rent out their properties, the first time it has made such a concession.
Efforts at regulation have also taken on the gig economy: in 2015, Germany came down on Uber, demanding that its drivers obtain the same license as regular taxi drivers, causing the company to suspend its services in Hamburg, Frankfurt, and Düsseldorf. In France, Uber was fined €800,000 for operating UberPop, its service using unlicensed taxis. Two of the company’s senior executives were fined a total of €50,000.
The same year, the European Commission opened its antitrust investigations into Google over various competitive issues, from manipulating their search results to highlight Google shopping options, to practices in search and advertising in which advertisers are prioritized, to varying search engine speeds in Google’s favor.
Finally, privacy has been a rising concern in Europe. After the Edward Snowden revelations about the American government’s mass surveillance in the U.S., it became clear personal data from European users of services like Google, Microsoft, and Facebook—also passing through servers in the U.S.—was potentially at risk. This created great controversy in Europe, including a subsequent case brought by Austrian lawyer Max Schrems against Facebook for privacy invasion, which resulted in a European Union court declaring invalid the Safe Harbor rule, which allowed U.S. tech companies to store EU personal data in the U.S. for processing. A new agreement has been reached—though it’s a moot point whether that really matters when it comes to the UK with the introduction in 2016 of its Investigatory Powers Act, a counterterrorism initiative allowing the British state to indiscriminately hack, intercept, record, and monitor the communications and internet use of the entire population.
In 2018, new privacy rules are going into effect, giving regulators in European countries more power to fine technology companies for improperly collecting or sharing user data.
It started, at least in the public mind, with the landmark “right to be forgotten” ruling in 2014 by Europe’s highest court, which declared that individuals had the right to request removal from searches personal information they felt was misrepresentative, no longer accurate, or irrelevant. As Julia Powles, of Cambridge University, commented in a paper on the case: “In some modest but incomplete way, the case recognized and protected our fundamental rights over personal data—those meaningful, yet intangible links that are the building blocks of our identities and relationships, and that have become the substrate of the dig
ital economy.”
Why is Europe stronger at tackling Silicon Valley influence? It’s linked to its collective strength, says Powles. In other words, the European Union has authority over numerous countries and packs a big enough punch not to be scared. “That makes it able to engage with something more societal and at a scale that matters. The only language that companies talk is value to shareholders, so it’s a significant enough market that withdrawing or bulldozing just doesn’t work. It [Big Tech] has to pay attention.”
The Special Relationship
Big Tech’s experience in mainland Europe stands in contrast to the UK, where Silicon Valley companies have thrived.
“The UK has consistently undermined the European project. It’s the most pro-business,” says Powles. “There’s no moral, cultural compass on the seizure of more communal values, which you feel most strongly in European countries. You see it in all sorts of regulations, like the [European] regulation of working hours, insuring the way public services need to accommodate people with disabilities.”
When Silicon Valley giants started planting their London offices around 2012, much as it would pain stoic Brits to admit, the locals were deeply excited. Overcome by the glamour of these American tech brands, they flocked to them. They tweeted about the free food in the lobby (“It really is free!”), and took selfies by their logos. Doors were flung open to executive offices. Meanwhile, any invitation to present to or meet with Silicon Valley company employees was greeted with enthusiasm. Since then, Silicon Valley companies have established a bigger and bigger stronghold in the UK. And their mystique has been propelled by the relative distance these brands—Facebook, Apple, and Google—kept from British media.
The UK’s tax rules have also made it an attractive place for Silicon Valley giants to plant major operations. London may become a bigger tech hub yet, if the European Commission continues to crack down on the tax breaks given to tech giants. Prime Minister Theresa May has said she would “welcome” Apple to the UK after it was hit by the European Union with its €13 billion tax bill. And, as Brexit prompts a migration of banking and other sectors to European cities, more incentives are likely to be introduced to lure the tech giants to London in search of headlines about new jobs and trade. Signaling this in 2017, UK Chancellor of the Exchequer Philip Hammond announced a budget allocation of more than $674 million to boost innovation and technology. Theresa May has doubled the number of visas available to specialist tech workers. Meanwhile, Foreign Secretary Boris Johnson, in an interview with Britain’s The Times newspaper, suggested relaxed legislation was on the horizon for tech companies. “We have a very original economy, very different from other European countries—tech sectors, bioscience, bulk data, this is a very innovative place to be. We may in the future wish to regulate it in a different way from the way that Brussels does.”
London is already, in many ways, a Silicon Valley colony, a loyal outpost floating alongside a grumpier Europe now clamping down on Big Tech. The lavish headquarters built in the San Francisco Bay Area are swiftly being replicated near the River Thames. By 2020, Google’s King’s Cross campus will transform the area into an urban Google village and take on 3,000 new workers, bringing the total employed at the London HQ to a potential 7,000 people. In fact, King’s Cross may soon become known as Silicon Cross—Facebook recently announced it would be planting its headquarters in the area, according to the Times UK. It will span 65,000 square meters, tripling Facebook’s presence in the capital. In 2017, Amazon employed 15,500 in the UK, and Facebook an estimated 1,500. Snapchat established its international HQ there. And Apple will be the biggest tenant at the vast $10 billion Battersea Power Station redevelopment in south London, due for completion in 2021. “Here in the UK, it’s clear to me that computer science has a great future with the talent, educational institutions, and passion for innovation we see all around us. We are committed to the UK and excited to continue our investment in our new King’s Cross campus,” Google Chief Executive Sundar Pichai said in a speech announcing the plans.
The close relationship between tech companies and British government goes back to Tony Blair. Talk to many of those involved in the government’s digital programs, and they describe an almost fan-like relationship between government and the London tech world in the early days of Silicon Valley expansion and with the emerging “Silicon Roundabout.” Matt Biddulph jokingly coined the term Silicon Roundabout as early as 2008, describing the area of tech startups around Old Street tube station near the City of London. The area has since seen a growing presence of Silicon Valley tech companies. Tech companies accelerated further during David Cameron’s era.
“The government were very keen to ensure that they were seen to be supporting the UK tech industry,” says Tiffany St. James, former head of public participation for the UK government and an executive director of the British Interactive Media Association (in 2004 she was one of the architects of Directgov, the British government’s first consolidated information and services website).
Tech was identified as a major new sector for economic growth with lots of emphasis on investment in the tech startups and programs. Google and Facebook, as well as new startup founders, were a frequent presence at Number 10 in the Cameron era, mirroring Barack Obama’s close connections to the tech world. Martha Lane Fox (or rather, Baroness Lane-Fox of Soho), founder of lastminute.com, an early digital travel disruptor in the UK, has in many ways been the face of “digital government” and digital championship in the UK, having led the centralized digitization of its platforms with the Government Digital Service. She’s also on the board of Twitter.
But there’s rising dissent about tech’s influence in the UK and new discourse about the purported economic benefits they bring. Despite attempts to make the UK a digital media hub for homegrown businesses, much of digital ad spending, a growing market in the UK, is going to Google and Facebook. GroupM, WPP’s media group, estimated UK ad spending in 2017 at £18.8 billion. While traditional media advertising is declining, the UK has established itself as the most digital-centric advertising market in the world. GroupM found that digital display demand continues to rise strongly and predicted a 15 percent rise for 2017, particularly into social media, and, within digital, from static to video. “The largest driver is paid search which is accelerating again. It benefits from rising automation, geo-targeting capabilities, and the point-of-sale immediacy of mobile for performance-minded advertising,” it said. As noted earlier, it’s estimated that as much as 99 percent of that growth worldwide is going to Facebook and Google.
The close ties between tech and the UK government are also under growing scrutiny.
In April 2016, New Scientist published the findings of a leaked document that revealed the extent of Google-owned DeepMind’s collaboration with the National Health Service, which had not been publicly announced. The Royal Free London NHS Foundation Trust (responsible for three London hospitals) gave Google’s artificial-intelligence company DeepMind access to health-care data on more than a million patients to build an app to alert doctors about the risks of severe kidney injury. Sensitive information including HIV status, abortion procedures, and drug-use history was included in the data. The NHS was reportedly paying DeepMind for use of its Streams app, which alerts clinicians’ smartphones if a patient’s condition deteriorates. It also allowed them to view patients’ medical records and see where patients are being cared for. The partnership generated criticism and debate, as evidenced by a paper authored by Julia Powles and former New Scientist journalist Hal Hodson, attacking the deal’s “lack of clarity and openness, with issues of privacy and power emerging as potent challenges as the project has unfolded.” It was argued that there was a lack of transparency about how the data would be used, and lack of clear consultation with involved patients.
DeepMind issued a rebuttal, and said that no data was shared with parent company Alphabet and it is normal for the NHS to share data with third parties. Medical professionals w
ere quoted citing the app’s efficiency benefits. The app is being investigated by the UK’s Information Commissioner’s Office.
Other voices have joined the mix. Labour party shadow minister for Industrial Strategy, Science, and Innovation Chi Onwurah called for regulation and greater transparency of Facebook and Google’s algorithms. “Algorithms aren’t above the law,” Onwurah, who studied electrical engineering at Imperial College London, told the Guardian. “The outcomes of algorithms are regulated—the companies which use them have to meet employment law and competition law. The question is, how do we make that regulation effective when we can’t see the algorithm?” Onwurah also wrote a letter to the Observer, the Guardian’s sister paper, calling on Google, Facebook, and Uber to “take responsibility for the unintended consequences of the algorithms and machine learning that drive their profits.”
More recently, in a challenge to Facebook, Google, and Twitter, Prime Minister May has called for tech companies to take faster, greater action in removing extremist content and information that aids terrorism. Tech companies have responded with statements about the “millions” of pounds they are devoting to developing machine learning that will automate this.
How that progresses will be interesting to watch. What’s clear is that UK consumers, at least, are starting to view this group more critically. But recent incidents have also exposed sometimes paradoxical demands on tech companies and how we feel about them. When it comes to private technology companies having free access to medical records, there’s discomfort. Even if it does create efficiencies—despite how willingly people give data to Weight Watchers, Fitbit, and others for their tailored fitness regimes. When it comes to companies sharing personal consumer data with police, or counterterrorism services, the answer is less certain. No one wants to help a terrorist, do they? These questions are going to continue as artificial intelligence, technology, and data transform and become symbiotic with every aspect of the way we live, and more times than not, new services and systems are created by private companies, not the state. What do privacy and ethics look like in an era where technology is, effectively, everything? And how should the state protect us?
