Europe And The Looming Power Of Google
Anti-trust officials in Europe recently hit Google with a $5.1 billion fine, in an attempt to thwart its growing influence and monopolization of the market (1).
This was the largest fine against them yet, significantly bigger than the $2.8 billion fine imposed by the Europian Union in 2017, for favoring their own products in the search engine results (1).
Authorities in Europe are looking at Google differently lately. They’re pushing for more regulations on the spread of misinformation, hate speech, as well as antitrust, privacy, and tax issues.
As the power of companies like Facebook and Google grows, the threat of monopoly continues and regulators are wondering just how big these companies should be allowed to get.
According to The New York Times, European officials claim Google violated antitrust laws by fostering illicit partnerships with manufacturers like HTC, Huawei, and Samsung (1).
Their deal with the manufacturers meant they would have to use Google’s search bar and Chrome browser, over other competitors. Authorities in Europe say this was clearly a move to push out their competition.
Margrethe Vestager, the antitrust chief of Europe, said that Google had used Android as a way of strengthening their dominance of search engines, a violation of anti-trust laws under the EU.
Officials in Europe said Google had ninety days to end their practices, otherwise, they would receive another fine of up to 5% of the yearly revenues of their parent company, Alphabet Incorporated.
The EU Is The First Organization To Really Put Pressure On Big Tech
This all comes at a particularly volatile time, considering the United States and the European Union are currently in the middle of a trade war.
In a trip to Brussels last week, the president said that American businesses were not playing on an equal playing field with supposedly advantaged European competitors (1).
Europe, thus far, is the only region to punish Google for their violations of anti-trust laws. In the United States, they’ve allowed tech companies to grow and expand their influence.
However, Congress is increasingly becoming tougher on Google, and the average citizenry is now aware of the threat posed by companies like Google and Facebook.
While their reputation has suffered, Google continues to be a massive powerhouse in the industry, customers still use their products, and stock prices continue to increase.
Ever since the European Commission began their investigation of Google three years ago, their annual revenues grew from $75 billion to $111 billion (1).
Moreover, Google is dominating the mobile phone market, with around 1.25 billion Android devices sold around the world last year (1).
One of the issues is that authorities are investigating matters that consistently shift, as new markets appear, and old ones become less prominent.
A lawyer at Paul Weiss and a former antitrust investigator for the FTC said that constantly shifting markets “is where competition laws are most important (1).”
However, when cases are old, officials are no longer fighting relevant battles.
For the longest time, Google has portrayed Android as a platform where manufacturers and innovators can work together, and adapt to each others’ needs in a mutually beneficial relationship (1).
However, according to the European Commission, Androids come with deals that primarily benefit Google, and push out everyone else.
Google has been working with Android to ensure that their products are used on smartphones, instead of DuckDuckGo – a search engine that specializes in protecting users’ privacy – or the browser, Firefox (1).
Google also added financial incentives to manufacturers to use their products, and companies had to sign agreements so they wouldn’t sell phones that didn’t use Google’s applications.
Due to the very small profit margins in the smartphone markets, companies had to agree to Google’s stipulations.
As Google continued to grow in power, other competitors like Microsoft, Nokia, Oracle, TripAdvisor, and Naspers complained to regulators.
They created a group called FairSearch, which lobbied Brussels to diminish Google’s power in the industry. However, after striking a licensing deal with Microsoft, Bill Gates’ company dropped out of the group (1).
While Google, for the most part, has won the battle to put Android into smartphones, there could still be a fight to limit their monopolization of home electronics and automobiles.
Moreover, Europe’s actions could inspire others around the world to be more aggressive in their business dealings with tech companies.
The actions of one regulator are probably not going to make a huge difference, but it’s a start, and movements have to begin somewhere.
The History Of Anti-Trust Laws And Google
Interestingly, Google, at one point in time, was just a baby company and Microsoft controlled the market. Gary Reback, who spoke with the Boston Globe, said that Microsoft could’ve squashed Google when it was just a small company starting out (2).
In the 1990s, Gary spent much of his time convincing the Justice Department to file charges against the computer giant, Microsoft, which at the time was using their dominance of the home-computer market to give Internet Explorer an advantage over other browsers.
However, due to the antitrust cases in the past, both in the United States and Europe, Microsoft’s domination of the industry was relaxed, and Google was allowed to flourish.
Currently, Google controls approximately 90% of the search market, and their business model is set up to give users the right information as quickly as possible – a model that has brought them a lot of success thus far (2).
However, they do more than just provide a search engine. They own YouTube, which is the largest and most popular video-sharing platform on the net. And also Google Maps, and Chrome, which is the biggest search browser.
Android, as well, is the biggest mobile operating system. Google dominates the online advertising industry and its parent company, Alphabet Inc, sells a plethora of services.
US antitrust laws aren’t prepared for monopolization like this. During the Progressive Era, companies that expanded could easily dominate others, and for this reason, regulation was developed as a means of thwarting this power (2).
Ever since the 1980’s, courts have dealt with anti-trust cases on the issue of how they would affect consumers, primarily if they resulted in higher prices (2).
However, managing Google is difficult because all of their services are free. Lately, there have been signs of increasing aggressiveness in terms of how government branches deal with expanding power (2).
For example, the Justice Department tried but failed, to stop AT&T’s purchase of the company, Time Warner (2).
One Washington-based think tank, Open Markets Institute, is an organization dedicated to preserving competition itself. They are trying to reverse decades of court decisions in order to bring the laws back to the Progressive Era (2).
Some have called it the “New Brandeis” movement, after the former Supreme Court Justice, Louis Brandeis, who was an advocate for breaking up monopolies (2).
Instead of worrying about whether prices for consumers go up, these people are looking to bring back competition.
Open Market thinkers want to break up massive companies that are using their influence to force, for instance, organizations to use their products over others, such as what Google has done.
Back in 1890, the Sherman Antitrust Act was created to preserve a free market at a time when railroads and banks were gathering power.
John Sherman, one of the main authors of the law, said that we wouldn’t allow a king to have all of the political power, “so we should not endure a king over the production, transportation, and sale of any of the necessities of life.”
In 1911, the Supreme Court separated Standard Oil, which came to control the American energy business through railroads and pipelines. And in 1980, the courts broke up AT&T and allowed the telecommunications market to flourish.
Clearly, something can be done to thwart monopolization as we’ve accomplished in the past.