With its Statement of Objections against Google on Android, the European Commission is rightly exercising its role as guardian of fair competition. Now it’s time for Member states to put in place a coordinated effort at EU level on the taxation of big tech companies.
“The European Union has the duty to ensure freedom of competition”, only by doing this we can “ensure the innovation that is necessary to the growth of our economy”.
These words from EU Commissioner for Competition Margrethe Vestager lay out a basic principle that the Union has a responsibility to protect.
Fair competition and consumer protection translate into lower prices and greater choice for all EU citizens. In addition, they provide the basis for the creation of a single digital market in which European entrepreneurship can prosper.
To give just two examples: the cost of phone calls in Europe has been reduced considerably compared to ten years ago; and families and business are now able to freely choose their electricity and gas supplier.
On April 20, the EU published a Statement of Objections against Google in which it claimed that its “Internet search”, mobile operating system (Android) and app store management practices were contrary to European competition law.
Commissioner Vestager accused the US giant of promoting its products at the expense of its competitors, forcing smartphone producers willing to install the Android operating system to also install Google’s apps.
This despite the US company’s claim that “Android is an open-source operating system based on open innovation”.
In the past, the Union has been a strong guardian of fair competition, as in the two cases involving Microsoft (condemned for the lack of free choice related to its web browser and abuse of dominant position) and Intel (sanctioned in 2014 due to its market monopoly in a model of popular processors).
Given Google’s dominant position, it will be necessary to identify structural remedies, as happened in the past with telecom companies, Microsoft, and other players in similar conditions. We enjoy the results of these remedies every day, with these markets now fully competitive.
The EU must ensure pluralism in the market so that it can establish a fair level of competition. Only if the rules are the same for everyone will it be possible to give birth to large technology companies.
The new technologies field is particularly complex and delicate: its huge opportunities must be accompanied by major investments in research and technology.
Google covers approximately 90% of the smartphone operating system’s market thanks to Android.
Consequently, it can also dominate the app and online search markets (the two are crucial for advertising sales) as well as the market for videos thanks to Youtube.
This massive presence means the Mountain View-based company holds the largest share of the online advertising market.
Thinking about the incredible numbers that all this produces, we must also address the issue of the relation between large hi-tech companies and European tax agencies.
We are awaiting a European tax regulation: in the meantime, individual States are moving in a random order.
Google will pay the British treasury a £130 million bill in back taxes, a value that many analysts consider to be too low bearing in mind the amount owed since 2005. France has chosen a different path, seeking as much as €1.6 billion from Google in unpaid taxes.
What about Italy? Amidst disputes between tax authorities and the judiciary, as well as agreements rejected by the company, the government’s position remains unclear.
Picture credits: David Macchi
Until EU Competition Commissioner Margrethe Vestager got very serious about Google antitrust enforcement this past year, previously negligent antitrust enforcement authorities facilitated a dominant Google search and search advertising business
Wake up world, you’ve been disintermediated.
Google now essentially stands between you and most everyone and everything on the Internet.
Google’s dominant search engine + its dominant Android operating system (OS) + its world-leading Chrome web browser + its uniquely-comprehensive, Internet utility functionality of 193 products, services and tools = a virtual Google “Inner-net” regime.
Google’s Inner-net has practically assimilated most all of what the public open-source WorldWideWeb does for Internet users and much, much, more.
And it also has practically insinuated Google-controlled code into a virtual intermediary position between most everyone and most everything on the Internet.
Think of the WorldWideWeb increasingly as the public and open façade of the Web, and Google’s Inner-net as Google’s private, and more closed regime of mostly-dominant, Google-controlled operating systems, platforms, apps, protocols, and APIs that collectively govern how most of the Web operates, largely out of public view.
This makes Google your de facto global governing gatekeeper technically for most all things Internet, if you are an Internet platform, network, business, competitor, advertiser, service provider, manufacturer, content provider, app developer, stakeholder, group, or user.
In other words, one now must go through Google-controlled code somehow to virtually access most all competitive Internet information, apps, devices, software, APIs, networks, the cloud, the Internet of things, etc. — going forward.
And the Google gatekeeper’s gazillion gates tend to remain open and free for only as long as it takes for Google to become dominant in the new targeted area, and then Google tends to close those supposed ‘open’ gates with default settings that favor Google. Google’s default dominance rule-of-thumb is that ~90% of users automatically acquiesce to new Google default settings.
What an epic failure of antitrust enforcement this is.
The FTC obviously facilitated Google’s dominance in approving its acquisitions of DoubleClick and AdMob, and in suspiciously shuttering its Google search bias and Android tying investigations shortly after the 2012 Presidential election.
Remember the Clinton Administration DOJ blocked the Microsoft-Intuit acquisition in 1995 which prevented the vertical-ization of Microsoft’s OS dominance of the tech sector into other sectors, and successfully sued Microsoft in 1998 for monopolization in bundling its Internet browser into its dominant Windows operating system.
Until EU Competition Commissioner Margrethe Vestager got very serious about Google antitrust enforcement this past year, previously negligent antitrust enforcement authorities facilitated a dominant Google search and search advertising business by approving challenged acquisitions that later proved anticompetitive, and facilitating monopolization of the mobile operating system market by ignoring the anticompetitive bundling ramifications of its dominant search business being contractually tied with Android, Chrome, YouTube, Maps, Play, Gmail, etc. via Android OEM contracts.
Commissioner Vestager’s expected decision in the coming weeks that Google search is indeed dominant at >90% EU market share, and that it has abused its search dominance in preferencing its own shopping service over competitive shopping services, likely will prove to be powerful precedents for the queue of EU and private antitrust complaints lined up to build upon them.
The biggest development everyone appears to be ignoring is the huge anticompetitive implications of Google’s plans to consolidate its Chrome browser-based operating system with its Android mobile operating system this year — per WSJ reporting.
Simply, folding Chrome’s browser-based OS into Android’s App-based mobile OS would create one global, heavily-bundled, Google Inner-net operating system that could auto-default to Google’s: Search, browser, ad-tech platform, Analytics, Translate service, Gmail, YouTube video distribution, Map location services, RCS multimedia messaging services, Apps, Play store, etc.
And Google’s Inner-net operating system default search and browser could then preference or auto-suggest any or all of Google’s 193 products and services including: 23 search tools, 10 advertising services, 33 communications and publishing tools, 15 development tools, 13 map-related products, 7 operating systems, 11 desktop applications, 46 mobile applications, 27 hardware products, and 8 general services.
This pending sweeping opportunity for Google to much more broadly self-deal or preference Google platforms, apps, products, services and tools over competitors’ offerings raises the stakes on whether Commissioner Vestager’s remedy for Google’s abuse of search dominance case will require Google to abide by a firm, enforceable, and accountable, non-discrimination-principle-remedy, like the EU made Microsoft abide by for several years in its antitrust remedy for Microsoft anticompetitively favoring its Explorer browser over competitive browsers.
Ironically, Google will have an especially hard time credibly opposing a future mandate of an EU non-discrimination-principle-remedy for tying its current market-leading Chrome browser to its dominant Android mobile operating system.
That’s because in 2009, Google’s current CEO, Sundar Pichai, helped publicly lobby the EU in a Google blog post stating: “Internet Explorer is tied to Microsoft’s dominant computer operating system, giving it an unfair advantage over other browsers.Compare this to the mobile market, where Microsoft cannot tie Internet Explorer to a dominant operating system, and its browser therefore has a much lower usage.”
In sum, as critically important as the EU’s final decision is on Google search dominance and its abuse of dominance in Google shopping for online businesses dependent on search, the EU’s Android OS tying investigation is as critically important to offline businesses that Alphabet is targeting with disintermediation going forward: ISPs; automakers; manufacturers of drones, robots, wearables, and home energy/automation devices; and biotech, health care, and finance-related companies, among others.
In a nutshell, Google search and search advertising is about dominating the virtual world of the Web and online content of all kinds. One the other hand, Google’s Android operating system/browser is about also dominating the real world of all IP-enabled devices, vehicles, drones, robots, networks, sensors, cameras, microphones, wearables, implants, and the Internet of things.
Any industry in the real world targeted by Alphabet for disintermediation should ask industries in the online world what it is like to try and compete against an unaccountable, dominant, Google global-gatekeeper and biased-broker that self-deals with impunity.
Forewarned is forearmed.