The European Union Versus the Tech World
Digital Conflicts is a bi-weekly briefing on the intersections of digital culture, AI, cybersecurity, digital rights, data privacy, and tech policy with a European focus.
Brought to you with journalistic integrity by Guerre di Rete, in partnership with the University of Bologna's Centre for Digital Ethics.
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N.11 - 2 July 2024
Author: Andrea Daniele Signorelli
In this issue:
Europe Versus the Artificial Intelligence Oligopoly
Apple Rebels Against the European Union
European Tech Jewels Face Challenges
Europe Versus the Artificial Intelligence Oligopoly
For some time now, and especially since the introduction of the Digital Markets Act and the Digital Services Act, the European Union has been paying attention to the concentration of power held by Big Tech companies, their abuse of dominant positions, and the obstacles they put in the way of anyone who threatens their tight grip on the market.
These issues are also emerging in the field of artificial intelligence and have led the EU to announce an investigation into the partnership between Microsoft and OpenAI (which produces ChatGPT) and between Samsung and Google. As Politico writes, "Margrethe Vestager, the EU's competition commissioner, said officials had concluded that they couldn't review Microsoft's $13 billion investment in OpenAI under merger rules but would send the companies follow-up questions under antitrust rules ‘to understand whether certain exclusivity clauses could have a negative impact on competitors’".
The EU executive also wants "to better understand the effects of Google’s arrangement with Samsung to pre-install its small model 'Gemini nano' on certain Samsung devices," she said. "The risk we see is that big tech companies could make it difficult for smaller foundation model developers to reach end users".
“‘The large foundational models behind AI services require enormous amounts of data, computing power, cloud infrastructure, and talent, which only a few players possess’, Vestager said. According to her, European antitrust authorities are also monitoring so-called ‘acqui-hires’, where a company buys another to acquire talented workers (as may have been the case with Microsoft and AI developer Inflection). ‘We will ensure that these practices do not escape our merger control rules’, Vestager affirmed”.
Apple Takes On the European Union
Microsoft and Google are not the only companies facing new problems with the European Union. On June 24, the EU announced that it may soon fine Apple for violating the Digital Markets Act. According to the EU, Apple is preventing app developers from freely directing App Store users to cheaper alternatives. If the EU's preliminary investigation is confirmed, Apple could face a fine of up to $38 billion (10% of its annual revenue under the DMA).
Unlike what has happened so far, there is a sense that Apple intends to retaliate against the new European threats. Or that, in any case, the time when Big Tech bowed to EU dictates without much resistance may be coming to an end. As Wired Italy notes, "assuming that Apple was already aware of the European Union's intentions, it seemed suspicious that just a few days earlier, on June 21, Apple announced that its highly anticipated Apple Intelligence would be launched worldwide, but not in the European Union".
"The whole world will be able to see how Apple intends to use artificial intelligence to help us in our daily lives, but not the 450 million inhabitants of the European Union. As many have pointed out, Apple's move is preemptive: the European Union has made no statements regarding Apple Intelligence and has not (yet) put obstacles in the way of Tim Cook's new project. It was Apple that voluntarily decided to indefinitely postpone the launch of Apple Intelligence on our continent".
Apple's decision stems from fears that Europe could force the company to hand over to third parties all the information it collects about its users. The information is collected so that Apple Intelligence can help users better manage their professional and daily life – reminding us of commitments, retrieving the documents we need, scheduling appointments according to our availability, and much more (including a significant improvement to Siri, which has so far fallen short of expectations).
What stands out, however, is Apple’s decision not to roll out Apple Intelligence even before the European Union raised any issues. This is an unprecedented move: until now, Silicon Valley companies have always followed the motto "ask forgiveness, not permission" (the latest example being Meta's attempt to train its AIs with our data).
"The feeling is that Apple is now trying to present Europe with an unprecedented situation: Cupertino is threatening not to comply with strict European regulations, preferring to forgo the introduction of some important innovations altogether and risking turning us into a second-rate technology market".
Challenges for European Tech Jewels
Over the past few months, worrying news has emerged about two of the European Union's most important tech companies, both based in Sweden: the streaming giant Spotify and the climate tech unicorn Northvolt (batteries). Let’s start with Northvolt: the company has raised $15 billion in total and, as Sifted writes, "carries the weight of Europe’s domestic battery hopes on its shoulders."
Recently, however, some difficulties have emerged: "Last week, it was reported that a €2bn contract Northvolt had with German carmaker BMW — which is a shareholder in the company — had been canceled due to production delays. The contract, which was signed in 2020, was worth around 4% of Northvolt’s order book, which stands at $55bn according to the company’s 2022 annual report. An industry source told Sifted that Northvolt was two years behind schedule on the order when it was canceled".
To make matters worse, plans to open a fourth battery factory in Borlänge, also in Sweden, have been canceled. The reason for these problems, which are similar to those experienced by other companies, could be linked to oversupply. "Demand for lithium-ion batteries for both EVs and stationary storage came in at around 950 GWh last year. Global battery manufacturing capacity was more than twice that, at close to 2,600 GWh".
Some bad news also comes from the typically turbulent front of Spotify, which announced in June that it would again raise subscription prices again (for now, only in the U.S.), less than a year after the last increase, which also affected Europe.
"As in 2023", Slate notes, "the updated cost tiers have been imposed in response to persistent profitability concerns, most urgently stemming from the costs of Spotify’s aggressive push into audiobooks, a venture that has been a heavier lift than the company likely expected."
"On Spotify’s most recent quarterly earnings call, [Daniel Ek, Spotify CEO] sounded flabbergasted that in the aftermath of the company’s biggest-ever round of layoffs—17 percent of the workforce, about 1,500 employees, axed in December—there had been an ensuing impact on basic operations and even user growth". In a generally difficult scenario for tech startups, Spotify's staff cuts were justified by rising expenses and declining stock market value.
However, it is the musicians—the ones who make Spotify what it is—who are the least happy with the direction the company is taking. By raising prices, focusing on other areas (like audiobooks or video podcasts), cutting staff, and still not having found a business model that allows for fair compensation to artists, Spotify seems less interested in providing a quality product and more interested in pleasing shareholders. Spotify seems to be following the tech trend that sociologist Cory Doctorow calls "enshittification”.