Digital Czech Republic, Prague, 8 February 2019
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Ladies and gentlemen
This is a special event. An event that approaches digital technology from every angle - the way we travel and the way we interact with government, the way we learn and the way we work. And I think that’s very important. Because digital technology is not just about finding different ways to do a few things. It’s really creating a new kind of society.
It’s a society where the connections that hold our lives together - with friends and fellow citizens, governments and businesses – are all becoming digital and connected. Where we depend on digital technology for many of our most important relationships – and where each of those relationships can be mined for data.
The fact is, digital technology is changing our whole society at once. So the way we respond has to involve us all too. So I am pleased to be here with you today.
The importance of innovation
But that’s not easy. Because the digital world keeps changing. And in fact, what makes it so exciting and important is not just the things it can do for us today, but the even brighter future it promises for tomorrow.
Innovation can make our lives healthier, more fulfilling, more fun. Communication apps and social media networks can bring us closer together. We can spend less time stuck in traffic, less time searching for information – and more on the things that make our lives worthwhile.
Innovation can help our economy grow and create jobs. And it can give us the tools to face our most challenging problems – like the smart grids that can make it easier to bring down our energy consumption, by letting us adjust the electricity we use to what’s available, not the other way round.
But that very same power can also do harm. The same smartphones that help us stay connected can also become effective tools of surveillance. The same artificial intelligence that can help to make better and faster decisions than humans can also become a way to entrench prejudice and bias.
Regulating digital markets
That’s why we need rules – to make sure that innovation is used in a way that’s good for our society.
It’s why we need privacy rules, like the EU’s new rules on data protection. Because the right to control our data – to decide what information we share about ourselves, and with whom – is a fundamental part of our humanity.
It’s why we need rules to make sure artificial intelligence supports, instead of harming, our fundamental values. So the Commission has put together a group of experts, who published draft guidelines for trustworthy AI in December. And the final version of those guidelines is due in March.
Parts of our digital world have grown up in a grey zone, where online businesses have not had to follow all the rules that apply offline. And perhaps that even helped the online world to grow faster. But that doesn’t mean it’s how things should be in the future. Because what happens online doesn’t stay online – it affects the whole society we live in.
When workers face unfair working conditions, their well-being – and that of their families – suffers. When digital businesses don’t pay their fair share of tax, governments have to cut vital services, or put even more of the costs onto those who are least able to pay.
So we should expect the online world to live up to just the same standards that apply offline. That’s why, for example, the European Commission has proposed to make sure digital companies pay their fair share of tax. And it’s why the Commission is studying the conditions of workers who provide services through online platforms.
Regulation and innovation
And we can’t be put off from applying these rules by the fear that it might hold back innovation.
It’s true that these rules give innovators new things to think about. Companies that want to use data, for instance, will have to work harder to explain what they want to do, and why. And perhaps, in the end, some innovative ways to use data will never become a reality, if companies can’t persuade us that the benefits they offer are worth the cost to our privacy.
But that’s not something to worry about. It’s something to welcome.
Because innovation and disruption aren’t positive in themselves. We value them because of what they do for our society. And we can’t let them override our most fundamental values – values like freedom, and fairness, and democracy.
Competition and innovation
And besides, the rules that protect those values can also help innovation thrive.
Innovation is costly, time-consuming, uncertain – and none of those are things that set the hearts of businesses alight. So to give companies the drive to invest in innovation, you need competition. You need them to know they have no choice but to innovate, if they want to survive.
Our connected, digital world gives us almost endless possibilities. But to turn those possibilities into reality, we need to be able to find what we’re looking for. And the platforms that help us to make those connections – the search engines, the online marketplaces, the social media networks – are the secret to making the Internet work for us.
Those platforms are private companies, with their own interests – which aren’t always the same as the interests of their users. And yet they define what we see of the digital world – because the things they don’t show us might as well not exist. So it’s vital to make sure they don’t misuse that power, to drive out competition and harm innovation.
That’s why we fined Google nearly two and a half billion euros, for misusing the power of its search engine to drive out rivals in the market for comparison shopping services.
In spite of Google’s long history of innovation, its first efforts in that market were not all that successful. And Google’s solution was to call in the big guns – to use the power of its search engine to give its own comparison shopping service a head start.
So it started to systematically show its own services at the top of its search results, while it demoted rivals so they only appeared – on average – on page four. And the effect on its rivals was immediate – and devastating. Some of them lost more than 90% of their clicks. Because you can’t sell your products, if consumers can’t find you.
And that could have seriously harmed innovation. Because Google’s rivals knew that the efforts they spent on innovating would simply be wasted, if they couldn’t get consumers to notice their products. And Google also had less need to innovate, to stay ahead of those rivals.
And we also need to make sure that businesses don’t use mergers to get rid of innovative rivals.
There have been several times, in the last few years, when we‘ve had to step in to deal with mergers that threatened to harm innovation. In 2015, for instance, the drug company Novartis bought a line of cancer medicines from its rival, GSK. And we only approved the merger after Novartis agreed to sell off the similar drugs which it was already developing, so innovation would continue after the merger.
And in 2017, when we looked at the merger between two large chemical companies, Dow and DuPont, we discovered that they planned to cut back on their research efforts after the merger. That would have meant less innovation, and left farmers stuck with pesticides that were less effective and more toxic. So we only approved the merger after the companies agreed to sell DuPont’s worldwide research arm for pesticides.
And the principles behind those cases are every bit as relevant in the digital world. If a merger threatens to harm innovation, we can step in to stop that from happening.
The future of competition policy
But the future will be even more challenging for innovation. And we need to make sure our competition rules have what it takes to deal with this new world.
Just last month, we held a conference in Brussels, with some of the world’s leading experts on technology and society. And one issue that came up again and again was how to keep innovation strong.
At the conference – and also in the more than a hundred written contributions we got in advance – many people expressed worries that monopolising data could harm innovation. Because data is the raw material for artificial intelligence – the information which machine learning algorithms use to understand the world. And if just a few companies monopolise that raw material, it could be hard for anyone else to produce innovative AI.
And many experts – like the Nobel prize-winning economist, Jean Tirole – also worry about what could happen to innovation, when the companies that dominate our digital markets get into the habit of buying up startups that could compete with their own services. Because when you bring all those different services under one roof, the drive to make them better may start to fade away.
That’s what our merger rules are there to prevent. But some experts think those rules might not be as effective as they could be, when startups are bought early in their lives. Because it can be hard to tell, so early on, if a startup would have become a serious competitor. But also because the Commission only gets to see the biggest mergers, where both companies have rather large revenues – and some of these deals with startups might fall below that threshold.
So we continue to look closely, to see how serious these concerns are in practice – and whether our rules, or the way we apply them, need to change to keep up. And I’ve asked our special advisers to look at innovation in the report they will produce next month, on what digitisation means for consumers, and how competition enforcers should respond.
In his Autobiography, the great liberal thinker, John Stuart Mill, reflected on his most famous book, On Liberty. Its message, he felt, was “the importance to man and society of a large variety in types of character, and of giving full freedom to human nature to expand itself in innumerable and conflicting directions.”
And what’s true of humanity and society is true of innovation as well.
There are many digital businesses with great histories of innovation. But we can’t rely on just a few companies – no matter who they are – to deliver the innovation we need. Because no one – however successful they might have been in the past – can be sure of coming up with the right ideas for the future. So the best guarantee of innovation is openness and variety – and as competition enforcers, it’s our job to help protect those things.
Life finds a way, says Jeff Goldblum in the film Jurassic Park. And there’s a temptation to imagine that innovation, too, will always find a way. That the best ideas are bound to succeed, no matter what powerful companies do.
But innovation only really makes our lives better when it’s converted into real, useful products and services in people’s hands. And whether that happens depends on how well markets work.
So we can’t just trust that innovation will break down every barrier. Innovative ideas can be the fuel for our future. But for that to happen, we need to make sure they have a chance. Because in the end, it’s not technology that will decide our future. It’s us.