Those Who Can’t, Regulate

Citing concerns over hate speech and fake news, Germany is moving directly to regulate internet platforms who fail to control their users speech—a move that will just happen to impose significant costs on U.S. tech giants with no major German competitors. Heidi Tworek writes at Foreign Affairs:

In April 2017, the German cabinet passed new legislation on hate speech that the German Bundestag is scheduled to adopt in the summer. The law enables Germany to fine social media companies up to 50 million euros ($55 million) for not reacting swiftly enough to reports of illegal content or hate speech.

The law has an aptly German name Netzwerkdurchsetzungsgesetz, or Network Enforcement Law. But its main target is U.S. tech giants, which provide the main social media networks in Germany. […] U.S. companies dominate Internet usage in Germany. With the exception of Xing (the German equivalent of LinkedIn), all major social media channels used by Germans are American. Twenty-eight million Germans have a Facebook account, and Google has nearly a 95 percent market share in search in Germany (compared to a 89 percent market share worldwide).

[…] The new law applies to social media platforms with over two million users and imposes large fines if they do not delete posts contravening hate speech law within 24 hours of receiving a complaint.

In addition to the direct cost of the fines—which, depending on how the law is structured, could add up quickly to sums even Facebook would have to notice—the new law will carry significant compliance costs. These will come on top of already-existing “voluntary” EU compliance measures.

And, surprise-surprise, the German direct-regulation approach may spread to Brussels:

[German Justice Minister Heiko] Maas aims to expand Germany’s approach to all of Europe, probably by introducing similar legislation in Brussels. With Emmanuel Macron as France’s newly elected president, Maas might succeed. Macron said during his campaign that he wanted to stop fake news and “regulate the Internet because today certain players are activists and have a very important role in the campaign.” The new German law is about more than fighting fake news. It is about finding the boundaries of free speech that best protect democracy. These are big questions, and the answers are not as clear as some might like.

Even in the U.S., increases in internet-based extremism and live-streamed violent crime have led to some voluntary censorship on the part of internet giants. But because, as Tworek notes, Europe in general and Germany in particular has a different idea of how much ‘free’ speech is permissible, this sort of thing takes on whole different dimensions on the Continent, catching much of what we would consider potentially-off-color but perfectly legal political speech.

This poses big ideological questions, which Andrew Stuttaford highlights at NRO. Tworek for her part sees it more neutrally as a question of balancing two different visions for society. That’s an interesting debate, but it really only scratches the surface of what really going on here.

As we’ve pointed out before, the European tech sector is lagging badly behind the U.S.: to take one example, as of 2015 only 8% of the world’s “unicorns” (startups worth over $1B) were based in Europe, as opposed to 67% in the U.S. While Germany is generally regarded as more economically adept than its European competitors, its manufacturing sector has had trouble adapting to the internet of things; clearly, from Tworek’s report, its social media companies, such as they are, are also generally losing the fight to American competitors.

Unfortunately, the European impulse has often been not to ask “where are our Googles?” but “how can we kneecap America’s?” Thus Brussels has promulgated a raft of regulations and launched wide-ranging investigations that seem—and at times overtly have been acknowledged—to be undertaken with protectionist motivations. The best-case read on such moves is that they represent an attempt to foster Europe’s domestic tech industry while preserving differing cultural norms. The worst-case is that Europe’s well-connected conglomerates, often the successful products of the last industrial revolution, are pressuring the state to hold off the next one. This has become enough of a pattern to ask, is Germany’s new internet regulation a sign of ideological difference or protectionism?

Well, what’s German for porque no los dos?