Seriously? The whole story is about search and ads, and thus the Economist concludes with:
> But rather than trying to rein in American firms, European politicians should focus on fixing what is holding back the old world’s most promising platforms: the lack of a common digital market. Today only 15% of consumers shop online across borders within the EU.
So to fix a monopolist in search abusing its position, the EU needs to make it easier for me to buy shoes from Poland with simpler VAT laws. How are those related at all? There's probably plenty of reasons why no European PhD dropouts started a successful search company, but cross border e-commerce isn't one of them.
"There's probably plenty of reasons why no European PhD dropouts started a successful search company, but cross border e-commerce isn't one of them."
For digital goods and services, cumbersome VAT rules do make cross-border e-commerce more difficult. The recent new rules on digital goods where VAT is applied based on the location of the buyer means merchants now have to deal with different VAT rates for 28 EU nations. I can see the rationale for such an approach, and it is meant be fairer...but in practice it's cumbersome and bureaucratic. Users now have to supply their address details for simply downloading software (in order for the merchant to confirm their location). There is no benefit to the user other than having to give more of their personal info away to merchants. Plus, now merchants have to retain all that personal data for many years for accounting and auditing purposes.
Harmonising VAT on physical goods will probably never happen, but the EU could have proposed a single VAT rate for digital goods and services which might actually have gained traction. Did they ever pursue this? If not, why not?
> Harmonising VAT on physical goods will probably never happen
I wouldn't say that too quickly. People tend to paint the EU as some bureaucratic behemoth, but the whole point of the project was to vastly reduce administrative overhead for deploying to EU markets, and it has done so quite successfully. Compare "meet EU standards and it can be sold everywhere in the EU" to "have to double check the standards for every country we want to deploy to" - it's pretty obvious why the former is easier to deal with.
In fact, one of the biggest problems it is currently facing is that it's running out of things to fix in that sense. When it was about standardizing, I don't know, legally allowed substances in perfume, the benefits of standardisation far outweighed the hassle of changing local regulation. Now that its doing all kinds of things that can't be summarized as "everyone will (begrudgingly) go along because even in the worst case it benefits every involved nation", it's much harder to reach a consensus this way (paraphrasing a few books on the EU from memory).
Anyway, standardised VAT rules could fall under the old "benefits everyone"-category of projects, even for non-digital goods, so who knows?
last time i ordered from swiss to germany, tax used to be paid on import and there is the possibility to file for tax return on export. So, this change only moves the responsibility of paying the tax back to the seller. Offering a billing adress for online shopping is standard in almost every case. They are just closing a schutzluecke (a gap, a lack of protection)
Lacklustre cross border commerce is among the reasons why successful companies in one European country have trouble scaling up and competing with American giants who by default start in a market with over 300M people.
Google's internal response[1] covers it inadvertently. They show stats for various European markets with competition in the shopping category, mostly with other American companies.
> Lacklustre cross border commerce is among the reasons why successful companies in one European country have trouble scaling up and competing with American giants who by default start in a market with over 300M people.
While it would be nice to get the VAT problems sorted out, this is second to the problem of there being a couple dozen different languages being used in the EU. People shop domestically because they can use websites in their native language and when they have problems, can talk to customer service representatives in a language they understand.
It is really, really hard to get your service localized in couple dozen different languages (let alone provide actual customer service in all of them).
Even Amazon handles only a part of Europe, and if Amazon can't do that, what companies can? There are a few, but not all that many, and for many it isn't worth it, because your economies of scale quickly disappear when you have to build and maintain a separate presence in up to 28 different countries that mostly speak different languages. (That includes American companies, too, by the way, many of which simply choose to ignore Estonia or even Sweden and Portugal.)
If the problem was the need to maintain a specific presence, then they would let me use the english language version of the website. But they don't. I'm tired of "This content isn't available in your country" and "we can't ship x item to your country" messages...
Is website language localization really what's keeping e-commerce from taking off in Europe?? Having only 4-5 languages seems to cover most of the population, no?
Also, many of these people in these countries speak several languages already because of the close proximity and business with each other.
It's not just website language localization. It's having customer service that actually speaks the language. That's not impossible (Netherlands-based Booking.com supports a ton of different language), but online retail is a low margin business, and for most multinational businesses it is simpler to let the locals deal with the retail aspect. It works for Philips and Bosch, after all.
You can get away without offering this for some types of products and services, but remember that you are competing with local vendors who do.
And yes, of course, there are other issues, such as shipping overhead (for anything that involves physical products) and payment method preferences. But language on its own is already a significant obstacle towards exploiting economies of scale beyond the national level.
> Lacklustre cross border commerce is among the reasons why successful companies in one European country have trouble scaling up and competing with American giants who by default start in a market with over 300M people.
Yes, but search is very low on the list of industries where that matters.
Plenty European internet companies have trouble getting outside their founding country, sure, but the trouble is language, culture, lack of a unified media landscape, etc, not VAT rules. Anybody who tells you different is just trying to find a scapegoat for their inability to execute cross-culture.
This indeed makes Europe a more difficult starting point, but good luck fixing that with politics.
Yep, and this article recommends that Europe improve cross-border internet shopping rules to somehow "fix" the fact that the monopolist in search is not from Europe.
Their biggest competitor, who filed the anti-trust complaint in question and are the most likely winner from all this, is Microsoft. They're also not from Europe.
Yes. Large European platforms wouldn't need Google. You would just go straight to your favourite when looking to buy something. Like many Americans go to Amazon.
Yeah, because that's what Google, Twitter, Facebook and all do "cross border commerce"...
Not to mention the fact that before the digital age, when all international commerce actually involve moving physical goods across physical borders, Europe had no problem scaling up to multinational corporations.
It's kind of the basis of the article. The European Commission is focusing on shopping as the core of the case right now, so that's what the article is about.
It's arguing that if you want to improve competitiveness of European shopping sites, there's much that could be done to make sure they aren't hobbled in the first place.
Indeed; but that's because the premise of the article seems to be that the EU is doing this out of jealousy and spite. As much as US companies may despise it but outside of their own borders they simply need to adhere to different rules though.
In the US a belligerent defiance coupled with some strong lobbying goes a long way but, like you're seeing with Uber now, that approach doesn't work as well across the pond. Likewise in this case is just about challenging Google's use of its dominance to compete unfairly in other markets (which is illegal.)
That it happens to be about pushing domestic shopping sites down the rankings to favor their own results is rather incidental; at it's core this is just a shot across the bow to make it clear that if Google wants ad-money from Europe they must play by Europe's rules.
I hope Google gets that because these are not relationships you want to become adversarial or else someone might just decide to close the little tax loophole that lets Google escape taxation of its EU revenue.
Blah, the economist doesn't make sense since 2008. I was a 6-year long subscriber but after the Crimean (Russian vs US) crisis was analyzed without even a hint of objectivity, I start noticing that the quality started deteriorating further and further... Until you see articles like this one or others regarding the EU crisis.
The economist is a conservative, strongly pro-war (seriously, it supported fearsomely every major US/NATO war, last I remember was it's views on the need for USA to openly attack Syria. Disgraceful articles...), pseudo-liberal magazine.
You see good articles every now and then, but since most of the times you can't even tell the author (since it has a very specific policy about them), you're not sure what you're reading... Bug generally speaking I stopped trusting the 'E' long time ago.
I've come to really appreciate Bloomberg Businessweek. However, I've always felt the The Economist was flawed. To me it has resembled the type of conversation I would imagine an economics 101 student having with a student further along in an economics curriculum.
Why do Americans insist on generalising the many countries and cultures of Europe into one big amorphous blob and then generalising about Blob Europe? Just because the EU exists, doesn't mean that Europe is suddenly an equivalent to the 52 states of the US.
Different countries within the EU have different laws, different markets, different cultures, different ways of doing business, and most obviously, different languages. Germany is different to France is different to the UK is different to the Czech Republic is different to Turkey.
This is why there's no single "European search engine" - and this is why America is the most attractive (and competed in) market for digital products - it's huge, well-off, and it's a lot more homogenous (at least in language and general culture) than Europe.
> Why do Americans insist on generalising the many countries and cultures of Europe into one big amorphous blob and then generalising about Blob Europe?
I'm not entirely sure what you're responding to, but the Economist is a European publication.
Although I would probably expand that out to ask why people from the UK also like to reason about (continental) Europe as a singular entity also, when they should certainly know better.
I've worked outside EU in an awesome startup. The VP of engineering went for a worldwide tour of hype IT capacities, to learn how the like of Twitter, Facebook, Volkswagen or Barcklays perform top-of-the-class software development nowadays. He made a blogpost of about 700 lines about worldwide companies. Europe was at the bottom, in 5 lines: "Europe: Nothing interesting. These guys haven't even moved to Agile after 13 years". I felt insulted but I have to reckon he summarized it well.
I'm a sole trader with a "product" strat-up in France. I spend about 10% of my time on paperwork. I've have a police inspection yesterday "because I'm flatsharing". We have mandatory taxes and charges of about 70% [1]. There's no way we can become big.
[1] Income tax: 20%, Mandatory unemployment/state/health benefits 46%, VAT 20%, land tax $300 for using my own flat for professional purpose, corporate tax, mandatory non-computerized accountant $2800, bank $300, and unclear legislation compared to, say, UK, requiring hours and hours of reading and tax dodging.
Sooo in the US he went to Twitter and Facebook, and in Europe he went to Volkswagen and Barclays, and then he ascribes ancient software dev techniques to geography?
As equally (un)valuable anecdata, I'll quote Jeff Sutherland, one of the two guys who made up Scrum, who told me that in his opinion, Scandinavian companies are way ahead of the agile curve[0] than American companies. But hey, maybe he went to Goldman Sachs and Spotify to draw that conclusion, who knows.
[0] not that "agile" is somehow better than "not agile"[1], but you catch my drift
Yeah, lets compare a pair of tech companies which have been around for less than a decade with a car manufacturer and a bank, both of which have software in use today that was created decades ago and operate in heavily regulated environments.
Apple, meet Orange: Surprise! They taste different.
The taxman cannot in reality come and check your home to see whether you actually work there or not. Can you rent a brass plate address somewhere which has a nominal working place, on a cheap rent? A room in a warehouse in an industrial area could be shared by several (let's say thousands) or people who actually work at home but claim a company residence there. Yes, criminal, but not immoral...
I think you under estimate European bureaucracy. While they don't visit every home they do visit some. As you say tax evasion is criminal; it's a really bad idea to lie to tax authorities.
Here's the UK government talking about visiting your home to check your business accounts if you run a business from that home and they want to check your compliance.
Of course you must not lie to tax authorities, but matters are often up to an interpretation and it is not unreasonable that there's a business address even if in reality a person does not want to incur every day the expense, emissions and enmity of traffic in order to travel to that place of business.
In Helsinki, we did have this silly "let's chase the home offices" bureaucracy in 1970's and 1980's but that hunt went to grave at the same time with the Soviet Union, deservedly.
You misunderstood, perhaps intentionally? This wasn't about paying tax for generated income. This was about paying land value tax for using own home for professional purpose.
Over here (Finland) you actually get a deduction for that, not additional tax - although in general we have very very few deductions.
I share your pain, but in many european countries, politics are scrambling to reduce their deficit, so it's not a thriving age for small players. Economically, it's more a surviving age.
You would have better success of doing things on your own, making a product, having a minimal business model. I'm really wondering if there are angel investors in France, but so far I would consider avoiding the company model entirely, like john carmack described it.
It would certainly forbid you from doing certain things, but in this day and age I don't think it's possible to compete with the big boy's club.
>Google (whose executive chairman, Eric Schmidt, sits on the board of The Economist’s parent company) told staff in an internal memo that it has a “very strong case” to make against all the allegations.
Is no one going to address the validitiy of their arguments against Google? If you've followed HN / Reddit the past few days, you would've thought that the EU is some crazy entity of whack-jobs. But I can't find much in the way of analysis of why this might seem actually be a worthy debate.
The problem is that the Statement of Objections is private and will apparently remain that way for some time (this article says "many months"), so no one really knows what the arguments are (except the European Commission, Google, and presumably folks like "Fair Search").
Microsoft is just the evil empire that keeps on giving. The Windows monopoly is weaker than ever, but the scam patents and the PR machine to drive out competition are still moving politics to keep Microsoft's fading monopolies powerful enough to slow progress in the industry.
> But rather than trying to rein in American firms, European politicians should focus on fixing what is holding back the old world’s most promising platforms: the lack of a common digital market. Today only 15% of consumers shop online across borders within the EU.
So to fix a monopolist in search abusing its position, the EU needs to make it easier for me to buy shoes from Poland with simpler VAT laws. How are those related at all? There's probably plenty of reasons why no European PhD dropouts started a successful search company, but cross border e-commerce isn't one of them.