France’s digital minister to Silicon Valley: Strong regulation is good for competition and innovation

Disclosure: VentureBeat’s airfare and hotel in Paris were paid for by Business France, a government agency that supports and promotes French companies. The trip was part of a weeklong startup tour of the French Tech ecosystem. 

However much progress France’s startup ecosystem makes, the country’s image abroad is still often defined by its regulatory clashes with Silicon Valley superpowers.

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Indeed, on a chilly Paris morning this week, as France’s digital minister, Axelle Lemaire, met with a delegation of international reporters, across town government officials were raiding Google’s offices as part of a tax evasion investigation.

During a question and answer session, I asked Lemaire about what seems like a contradiction to many in Silicon Valley:

On the one hand, the French government is throwing enormous resources at startups and innovation (more on that in a later post). At the same time, regulators in France have been cracking down on companies like Google, Uber, Facebook, Apple, and Airbnb over issues like competition, taxes, privacy, and personal data.

“I think there’s a lot of laziness behind it by journalists,” she said. “The word ‘regulation’ doesn’t have the same meaning in France as it does in the United States. We are in favor of free markets and free trade. I suppose this is an idea that we can share with the people in Silicon Valley. But we disagree about who needs to be protected in this story.”

In the view of France, she explained, regulation is a way to ensure that competition flourishes and that users are protected.

“What we realize is that the biggest Internet giants consider that the only legislation that applies to them are their terms of service,” Lemaire said. “And this is true for private information and fiscal issues.”

Because users are at the heart of these companies’ business model, she argued that it should be in the interest of tech giants to make sure these customers feel a high level of trust and security

“The users are the real economic power of these giants,” she said. “Once there is no longer trust, because they think their personal data will be exploited, that’s bad for the digital economy. When we’re saying we want personal data to be protected, it’s not because we want to harm the companies. This is the way to ensure the digital revolution continues.”

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As another example, she pointed out that the cost of telecommunications and mobile services in France is drastically lower here than in the United States because the government strictly enforces competition rules. By making sure more players can enter the market and compete, costs have fallen. (This is something I’ve written about in the past, since moving from Silicon Valley to France in 2014.)

“If the cost of mobile services is among the lowest in the world, it’s because we have a regulatory framework that works,” she said.

In the realm of Internet services, however, the French government is concerned that big players are stifling innovation and competition, rather than promoting it.

“We want to ensure that they do abide by the agenda of free competition,” she said. “And that’s something we hear from startups and some large groups, that it is becoming very difficult to enter the market as a newcomer. And that might be a sign of unfair competition.”

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Finally, she pointed out that Paris is Airbnb’s largest market and that the government welcomes the service as a powerful new model for French citizens. Last year, the government reached an agreement with Airbnb when the company agreed to collect and pay tourist taxes.

That said, as new economic models emerge, Lemaire believes the government is not obligated to just step aside and let companies do whatever they want.

“We have good cooperation with Airbnb,” she said. “The French want to rent their apartment but they also want to use these service around the world. There is a place for Airbnb and their model and equivalent companies.

“But we are at a transitional moment. Ten years ago, there was no Airbnb. It’s our role to make sure the landscape evolves in a way that is fair.”

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