Signal Berlaymont: The global IT outage shows we should stop the EU from attacking innovation 

Last week, the world experienced what has been described as the “largest IT outage in history”, causing disorder at airports, outages for emergency services, and challenges at health care facilities. At its root was a software update Microsoft Windows devices, affecting 8.5 million computers worldwide. CrowdStrike, a security software supplier, was responsible for the update.

In response, Ciaran Martin, the former Head of the UK's National Cyber Security Centre, commented: "I wasn't that surprised that an accident caused severe global digital disruption. I guess I was a little surprised that the cause of it was a software update from a very well-respected cybersecurity company.”

One week later, the root of the problem becomes clearer. Microsoft came out with a spectacular accusation. It blamed nothing less than the European Union for the IT outage, arguing in a 2009 agreement the European Commission prevented Microsoft from blocking the likes of CrowdStrike from providing updates, as Apple had done. “In 2009, Microsoft agreed it would give makers of security software” such as CrowdStrike “the same level of access to Windows that Microsoft gets”, a Microsoft spokesperson stated.

European Commission dogma 

Like Apple, Microsoft has its own competing antivirus product. But following the European Commission’s antitrust dogma that companies should not be allowed to prioritise their own products in their own shop, Microsoft was not allowed to block CrowdStrike or any of the other alternative security providers.

Apple was somehow able to resist the pressure to sign up to a similar agreement, and blocked access access to the kernel – a computer program at the core of a computer's operating system – on its Mac computers in 2020, to improve security and reliability.

Of course, things are not so simple that it was only because of the EU’s restrictions we saw this outcome. Some argue Microsoft could still have created an extra software interface that both Microsoft and third-party security software makers would be able to use, reconciling the EU’s demands with security. But in any case, the restrictions acted as a contributing factor.

The episode is telling about the EU’s deeply misguided approach to competition policy, which I discussed before on these pages. It is one thing to aim to prevent dominant companies from “abusing” their market power. It is quite another to prevent companies from prioritising their own products in their own shops, and imposing billions of euros of fines if they do. This has been competition policy for years now, and recently was also enshrined into law, with the EU’s new Digital Markets Act (DMA).

With this legislation, the EU Commission recently forced Apple to grant access to its iPhone so users could install alternative app stores and web browsers. At the beginning of this year, Apple warned this brings “greater risks to users and developers.”  

A dirigiste approach 

Behind all of this looms a deeply dirigiste EU approach towards tech and innovation. When the EU agreed a preliminary deal on its Artificial Intelligence Act in December 2023, even French President Emmanuel Macron issued harsh criticism. Macron said, “We can decide to regulate much faster and much stronger than our major competitors. But we will regulate things that we will no longer produce or invent. This is never a good idea.”

Nevertheless, France did ultimately back the AI Act, which says a general-purpose AI model can be classified as containing “systemic risk” on the basis of very vague criteria, like “high impact capabilities”.

Recently, Frederik Anseel, a management professor at the University of New South Wales, warned "Europe has one superpower. When Brussels imposes a rule, it often becomes the de facto world standard. However, if it uses that superpower thoughtlessly too often and only ends up regulating, this becomes Europe's Achilles heel. As a result, the rest of the world may decide it is no longer worth the trouble and it is better to ignore Europe."

In fact, this is already happening. Only this week, Facebook’s parent company Meta warned the EU’s approach to regulating artificial intelligence creates the “risk” it will be deprived of the benefits of the new technology. This will create a “gap in the technologies that are available in Europe versus” the rest of the world. The problem here is the EU’s General Data Protection Regulation (GDPR), which requires companies like Meta to get an individual’s consent when collecting or using personal data. The regulation also requires Meta to disclose to these individuals the reasons why their data are being used.

According to the company, Meta will not “be able to serve [European consumers] properly” without being able to train on European data, as its AI models could not respond to the “cultural concepts and contexts they need”.

An attack on innovation

Unfortunately, we are witnessing a pattern here. EU regulation is an outright attack on innovation. Just last month, Apple announced it would block the release of Apple Intelligence, iPhone Mirroring, and SharePlay Screen Sharing to users in the EU this year. The EU’s Digital Markets Act forces Apple to downgrade the security of its products and services, Tim Cook's company says.

In response, outgoing European competition Commissioner Margrethe Vestager stated Apple’s decision not to launch its own artificial intelligence (AI) features is a “stunning, open declaration that they know 100 per cent that this is another way of disabling competition where they have a stronghold already”, adding that the “short version of the DMA [Digital Markets Act]” is “to be open for competition”.

This response by Vestager is very telling about how profound the problem is. She employs a truly arbitrary and distorted understanding of the concept “competition”. For most people, it's hard to see how Apple not releasing a product is “disabling competition”. Perhaps that’s not surprising, given she has served for ten years as EU competition Commissioner, and already announced in 2014 she found “it only natural that competition policy is political”, going on to oversee an ever more politicised competition policy in the following decade.

What Vestager’s statement makes clear is even if the European Commission would change its dogma, it would also be necessary to change or abolish the DMA [Digital Markets Act], which enshrined this dogma into law.

To save innovation in Europe, such an abolition could not come a minute too soon.