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Not by land, not by sea; this time by ethernet and fiber optic cable. Zealous European regulators are in the news daily for their investigation of US based giants such as HP and Google. And those guys in Switzerland are actually serious about regulating banks. As funding to support the regulatory regime envisioned in Dodd-Frank flounders, European regulators are filling the gap.
Since we have recently seen all too well how corporations act when unregulated, this is a positive development. At least someone is minding the hen house. But long term, the US must regulate its own companies. Not for some jingoistic reason, but substantively because American regulators can best craft solutions that are tailored to our markets and provide for the best opportunity to protect main street. You think the European regulators care about citizens in Dubuque, Iowa?
What the Europeans are doing:
The European Commission as well as the French government on its own behalf are each investigating Google’s practices. Google (ever heard of it?) is the world’s largest internet search provider and, as such, often draws the ire of antitrust regulators around the world. The French Commerce Authority recently judged Google’s role in its market “dominant” with a market share of 43%. (Click here to read more) The Authority did not impose sanctions for this dominance, and even commended Google’s innovation. However, strong warnings were issued that Google must mind its conduct. With such a dominant role, competition laws will limit its actions.
In addition, the European Commission is looking into Google’s recent practice of placing its own ads and sites ahead of competitors’ sites, which are in fact more popular. (Click here and here) This has the potential to change the entire search engine paradigm. The Commission has welcomed the French report as “consultative”, but must complete its own, more antitrust-focused inquiry before any decisions are made. The Commission has the power to fine Google up to 10% of revenue – quite a sum considering Google’s size and wealth.
Hewlett Packard
In 2009, German Prosecutors alleged that HP had paid bribes to Russian officials in order to land a $46 million deal – ironically with the offices of the Russian prosecutor general. DOJ and the SEC have recently stepped up efforts to collaborate with the Germans and Russians in the investigation, but what took so long? Why are other countries regulating American businesses quicker than our own agencies? Click here for the WSJ article.
Basel III
The final text of Europe’s central banking overhaul, Basel III, was published yesterday. (click here for the Reuters story) Debate still rages over the advantages and disadvantages of new regulations set to be phased in from 2013 to 2019. One thing however, is not hotly debated – the new Basel rules are a monumental step towards securing the banking industry against risks and shocks like those experienced in 2008. Today’s Wall Street Journal claims that banks would have to add nearly $762.85 billion in order to meet the Basel III demands if they were implemented immediately. Because the international banking system is so interconnected, these changes in Europe will have dramatic effects on this side of the pond as well. Over the coming years we can expect to see safer, sounder financial institutions throughout the world thanks to Basel III.
While Europeans Are Pushing Forward The Americans Are Dragging Their Heals
Whistleblowers
We blogged about it a few weeks ago, but this story calls for another mention: the SEC lacks the funding it needs for its whistleblower department and it is unclear when the money can be expected. Dodd-Frank’s core reforms mean nothing without the funding it needs and the teeth it deserves. The whistleblower division of the SEC is essential to Dodd-Frank’s central mission.
The CFTC
In addition, Dodd-Frank awarded great new powers to the CFTC to set limits on commodities trading and curb overly-risky investments by limiting the size of positions traders can take. According to Jeffrey Sparshott’s article in today’s Wall Street Journal, CFTC regulator, Gary Gensler “got cold feet” before voting on a formal proposal to regulate the commodities market. The vote has been postponed – most likely until after the New Year. Those in the know are concerned that the rules in their current form may not work as intended. The CFTC should be sure to get it right, but what is taking so long?
Assisted by Zach Kady