Europe’s Google Fines Cross the Line

Aug 13, 2018 Pascal Salin

The European Union's escalating fines on Google betray a simplistic understanding of what constitutes free and fair competition. If Google is a "monopoly," that is because it has outperformed all other market competitors, not because it has abused its position or benefited from state intervention to keep out competitors.

PARIS – The European Union’s regulatory bodies seem to be particularly hostile to Google. In June 2017, the European Commission fined the company €2.42 billion ($2.75 billion) for breaching EU antitrust rules, after concluding that, “Google has abused its market dominance as a search engine by giving an illegal advantage to another Google product, its comparison shopping service.”

Then, last month, the Commission went after Google again, fining it €4.34 billion ($4.94 billion) for “illegal practices regarding Android mobile devices.” Google had made agreements with mobile-device manufacturers and network operators “to pre-install the Google Search app and browser app (Chrome).” Moreover, it seems that the European Parliament and several EU member states would like to dismantle Google by separating its search engine from other possible revenue sources.

There is no doubt that Google holds a unique position on the Internet. In terms of search activity, it has commanded around 90% of the market for over a decade, leading many soi-disant defenders of competition to denounce it for “abusing” its “dominant position.” But most of these attacks are driven by a mix of misconceptions and questionable claims of harm by Google’s competitors.

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0 Comments on this paragraph, 12 in all 12 Comments on this article

Paul Daley Aug 21, 2018

The EU may be attacking Google at the wrong point. It might want to simply void patent protections for software innovations that contribute to the monopoly. Creating or endorsing monopoly rights and then complaining about their effect on competition is a bit awkward.
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Paul Friesen Aug 15, 2018

The fact that Google is successful does not necessarily mean that it is good at what it does. For things like operating systems and search engines, a dominant position breeds more dominance. So a dominant player can remain dominant even with a bad product.

I quit using Google a long time ago because of all the useless paid-for garbage they kept giving me every time I did a search. You had to scroll way down the results to find anything useful. I notice that they seem to have dialed that back a bit, but they are still no better than other search engines like Duck-Duck-Go. They just dominate because their dominance allows them to dominate.

Even in the absence of actual malign intent, governments need to control this sort of thing.
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K. Bauer Aug 15, 2018

On several paragraphs in this article I thought "Does he really think people are so stupid?". So a company that has 90% market share is ok as long as this "emerge from the free operation of the market"? This makes absolutely no sense.

A company that has the power of a monopoly also has the ability to misuse this power. A free market alone cannot stop this from happening - that’s why there are regulators. I doubt the author has the insight to judge whether or not coercion was used by google. It’s also not important. That’s because googles monopoly means that device makers need these contracts – and google knows this, too. So to speak of “voluntary contracts” is misleading here. Google uses its market position (search engine and android) to give its own services (apps, cloud, etc.) an advantage compared to third-party-vendors. They have this advantage because their apps are installed in advance and people often don’t bother to replace something that they already have installed because they would need to learn how to use the new app. This bundling of products was fined. It can be argued if the amount of the fine was justified. However, this article reads like “this fine is bad because regulation is bad”.
- Michael Public Aug 15, 2018
  
  You said it yourself. People don't bother to change their apps. It is the same logic as saying US purchasers of BMW don't bother to change their rims for ones made by Widget & Co. The fact that they can if they choose to means that no intervention is needed for BMW, and likewise for Google.
  - K. Bauer Aug 15, 2018
    
    But they can buy Audi and VW. ;-)
    Seriously, lets go for an example more near the topic: Samsung pre-installs its own apps on their phones. So does Sony. It's a selling point. They should be able to choose (what they think is) the best software for us.
    
    Now the EU said Google:
    - has required manufacturers to pre-install the Google Search app and browser app (Chrome), as a condition for licensing Google's app store (the Play Store);
    - made payments to certain large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices; and
    - has prevented manufacturers wishing to pre-install Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google (so-called "Android forks").
    (source is the second link in the article)
    
    I doubt BWM would be pressurized by any wheel manufacturer to exclusively use their rims.
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Michael Public Aug 14, 2018

The thing is that network driven tech products are subject to the network effect where their usefulness is equal to the square of their users. In other words, they will always trend towards monopoly. Besides, they could always use Bing (shame).
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Prashant Kotak Aug 13, 2018

This article is very much an economists’ point of view, focussing as it does on the monopolistic behaviour-or-not question around the second huge fine that the EU has slapped on Google. The problem is, this stance is so caught up in the minutiae of monopoly definitions that it cannot see the wood for the trees.

To me, it is inconceivable that Google will simply meekly keep on stumping up huge wads of cash to the EU in fines. There are several reasons for this, not least that it would encourage other regulators across the globe to attempt to extract money from Google and the other tech giants. But these fines are just a precursor to the next set of battles, which will be that the EU will soon enough demand that Google and the other giants open their tech stacks for inspection for various types of compliance, and they will ask for this trans-nationally, because neither code nor data respects any national boundaries when located in the Cloud; and frankly, there is close to zero chance that any US company would agree to any of that. Additionally, the EU hierarchy’s eyes have suddenly lit up because they have stumbled upon a wonderful new cash-cow, and they are likely now to try and pull the same sting on the other tech giants and lesser tech companies, especially given that a long-standing cash-cow, the UK, is about to leave the stage exit right, so the EU will be short of a bob or two.

In short, we are building to a huge face-off between the EU and the US tech giants. So what happens next? For what it’s worth, I see a good likelihood of the following scenario playing out over the next two to four years:
If Google lose the appeal, and are then slapped with another huge fine in the next eighteen months or so (a likely enough scenario), I think they will refuse to pay and will instead threaten to disengage from the EU jurisdiction altogether – an action that would throw the powerlessness of the EU into sharp relief. If the EU back-off/back-down, they would suffer a huge loss of credibility, perhaps fatally. Likely they won’t want to go there, so they will instead double-down by deeming Google as lawbreakers. This would the entail shutting down all Google servers across the EU, erecting a firewall akin to the ‘Great Firewall of China’ and threatening any EU business that uses Google services, including Cloud services, with prosecution. If a war between the EU and the tech giants starts to escalate, an obvious beneficiary would be China. A less obvious but no less significant beneficiary would be…Brexit Britain. A much more significant consequence would be an instant, continent-wide recession.

The current situation is very dangerous, because we are very close to the point where the tech leviathans are so entrenched and so far ahead, that it will become impossible to challenge them. But the EU are picking a fight where no outcome looks good for them. They have no tech companies that can step in and replace the giants - such a nexus of companies can come about in Europe, but it would take years, probably at least five. Nevertheless, I think the EU will attempt to brawl it out with the US tech giants. And why do I think they will do something this stupid? Because for technocrats, the EU apparatchiks don’t actually understand tech reach and how it can bypass most aspects of non-digital world infrastructure. They know about the technical staging of law, processes and regulation in a non-digital setting. They are highly structured old-world style managers. They think tech can be governed in the same way as other aspects of the non-tech economy. They are going to find to their cost that it can’t.
- K. Bauer Aug 15, 2018
  
  You depict the EU as the David and Google as the Goliath. Would you do the same if it was China vs Google? Because they have a comparable size of economy (even without UK). Google has lost against China. Of course they don't have a free market. However, Google has a lot to loose if it gets barriers in their way on how to operate in the EU.
  
  Also don't forget this is not a first - the same happened with Micosoft and the internet explorer in 2013. The row worked there (IE shares down). And I more and more often use DuckDuckGo.
  - Prashant Kotak Aug 16, 2018
    
    I have been predicting a clash between the EU and the tech giants for a while. My contention is, the only country that can regulate the tech giants is the US, like they once did with the phone company. This they won't do now because of the rise of tech in China. The EU can't do it. They have now woken up to the threat the giants pose to their social models but it's late in the game, and I don't think they fully understand that nature of the tech-driven change under way. They have a big market of rich people, but that is the only big weapon in their armoury - not enough to control the US giants, who absolutely want this market, but not at the cost of surrendering control over their tech stacks, because doing so would pose an existential threat to themselves.
    
    In this context, yes I would think the same if it was Google vs China. I know the history of the battles the various tech giants have had in various jurisdictions and those prove nothing. The tech giants simply have to wait, to "play nice", until they are so entrenched that taking them on comes at a huge cost - for the EU, for China, for anyone. My contention is we are very close to that point, so we will start to see trials of strength, as the giants come under regulatory attack; and ominously for the EU, four of the five giants are reaching this point simultaneously, so this is not a fight that they can win on multiple fronts. I don't agree there are alternatives to Google, and the other giants, at least not in Europe. Blocking the US tech giants in Europe would stuff the European economy. But having embarked on this fight, I think the EU will find it difficult to back out. It is a matter of machismo. There is a mood abroad in Europe that the EU must build itself up as a unitary power base independent of the US - various PS articles will attest to this. And I think it will come off badly in any fight with the tech giants.
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  - Prashant Kotak Aug 15, 2018
    
    Putting aside the core of your argument for a moment, DuckDuckGo is just whitelabled Bing. So you've switched from Coke in a Coke bottle to Pepsi in plastic cup.
    - K. Bauer Aug 15, 2018
      
      The point is:
      Google is replaceable if consumers would care enough.
      (at least the search engine - android is another matter due to the app store)
      
      Their name or reputation is vital to their success - so this fine does exact pressure beyond the monetary side.
      
      BTW: This just prompted me to switch the standard search engine in my browser to duckduckgo. Let's see how it goes. That it's equal to bing seems to be controversial (Id didn't know that before). Sources?
      Funny thing is: I only chose DuckDuckGo because it shipped with Firefox O_o
      - Prashant Kotak Aug 18, 2018
        
        https://www.quora.com/How-is-the-Bing-API-used-by-DuckDuckGo
        
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