Why EU regulators can rein in Big Tech, and the U.S. can’t

When Amazon announced last week that it was backing off a bid to purchase Roomba-maker iRobot, the two companies cited a familiar refrain: “Amazon’s proposed acquisition of iRobot has no path to regulatory approval in the European Union,” read a statement from iRobot.

That the EU was scrutinizing the deal came as no huge surprise: Over the last few years, European regulators have also stymied M&A efforts between Adobe and Figma and Booking Holdings and Etraveli, and have put Silicon Valley giants like Apple and Google under the microscope. In the case of iRobot, the Massachusetts-based company laid off hundreds of employees following the call-off, and its CEO Colin Angle stepped down.

The European Commission, the executive body of the EU, said in a statement that Amazon “could have restricted competition in the market for robot vacuum cleaners, leading to higher prices, lower quality, and less innovation for consumers.”

“Our in-depth investigation preliminarily showed that the acquisition of iRobot would have enabled Amazon to foreclose iRobot’s rivals by restricting or degrading access to the Amazon Stores,” said Margrethe Vestager, the European commissioner for competition, in the statement.

Over the years, the EU has passed regulations such as the General Data Protection Regulation (GDPR) and the Digital Markets Act to protect individual’s personal information and establish fairness across digital platforms. Kevin Desouza, a business professor at the Queensland University of Technology and a fellow at the Brookings Institution, says these regulations have been very comprehensive and clear in terms of how they will be enforced and who will be responsible.

“When it comes to the EU’s approach to regulation, whether it’s GDPR, the Digital Services Act, or the Digital Markets Act, I think eventually a tech company is going to have to play by those rules,” Desouza says. “If done well, technology regulation is about promoting responsible innovation and I think the EU probably has the greatest chance to create a model that works where we have responsible technology innovations.”

The EU has continued to pass laws to get ahead of upcoming issues in technology. After proposing the framework for an act to regulate AI in 2021, the EU is currently in the process of passing the world’s first comprehensive AI law.

How does the United States compare in the antitrust department? University of Tennessee law professor Maurice Stucke says that correction to antitrust laws—which are enforced via the Federal Trade Commission and the Justice Department—is badly needed to advance technology regulation and innovation in the U.S. And such reform would need to come from Congress, he says, pointing to the Major Questions Doctrine, which mandates that any agency making sweeping policy actions must only do so following clear authorization from Congress.

“The courts can’t form questions about our economy and say they value one form of competition more than another form of competition,” Stucke says. “That’s a policy judgment reserved to Congress and not to the courts.”

For Amazon and its Big Tech peers, the failure of the iRobot deal serves as another reminder that large technology companies would be wise to rethink how they can generate more structured growth, rather than growth just by acquisition, says Desouza.

“Once a company reaches a certain scale, organic innovation can be difficult,” Desouza says. “However, these large tech companies do have a lot of cash at their disposal. Instead, they could invest significantly into turning to operability as a key value and incentivizing more organic growth.”

A significant focus of regulators is considering how large tech company deals will affect the market and impact consumers. Jason Schaffer, an information security leader, shares the importance of risk management and personal safety when it comes to large mergers and the regulation of emerging technologies.

“Technology is evolving at such a rapid pace, governments and regulators are continually forced to play catch up and identify the risks,” Schaffer says. “The ideal is a balance between consumer protection and safeguarding of the market while continuing to encourage innovation.”

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