The European Union’s Antitrust Proceeding Against Google

The European Union (EU) has revealed at least two broad complaints against Google for abusing its market power.  A Google product called Search Sense runs search on third-party websites and presents the results to consumers.  In the first complaint, the EU says Google unfairly favored presenting its own adverts to consumers over presenting those of its rivals.  In the second complaint, the EU claims that Google used its Android operating system to favor the insertion of Google applications such as Google search and Google Maps in smartphones.  A possible third complaint relates to Google’s dominance in advertising placement.

Antitrust-related accusations against Google’s search software had been simmering since at least 2011, and the EU filed formal charges in 2015 claiming that Google uses its dominance in search to favor its own service in the comparison shopping market.  Canada had launched a similar investigation into Google’s abuse of its dominance in online search, but concluded that there was insufficient evidence to pursue the matter further.  American officials previously investigated claims that Google’s search services violated federal competition rules, though they eventually decided not to bring charges.

The formal complaints against Google applications-riding in on Android coattails began in 2013 when a European association of competitors called FairSearch claimed that Google violated competition rules by unfairly favoring Google services — like its search engine and Google Maps — on its Android smartphone operating system over those of rivals.  The Android operating system has a market share of 77% among European smartphones, just 3 points less than its 80% worldwide share.  The Federal Trade Commission is also investigating whether  Google broke antitrust laws using its the Android operating system to bolster the company’s products.

Android’s high market share is not necessarily evidence of strong arm or unfair tactics.  Google does not charge license fees to cellphone makers for their selection of Android as an operating system, nor does Google require inclusion of Google applications in Android phones.  When smartphone makers choose to include Google applications along with Android, the consumer’s exposure to adverts and Google applications generates revenue to offset Google’s costs of developing and maintaining Android and gives consumers an experience like what they are accustomed to online.

The EU’s antitrust proceedings will resume at the end of October 2016, and they are expected to reach a conclusion in 2017.  Of course, numerous appeals could delay any serious outcome for many years.  If the EU rules that Google has violated competition laws it could impose a fine of up to $7 billion.

While the US and Canada have dropped some investigations for lack of meaningful evidence, Russia and a few other countries have launched antitrust investigations.  The results of investigations into purported misdeeds by technology and finance successes seem to balance out in a curious way.  For example, Volkswagen’s “defeat” mechanism, Deutsche Bank’s mortgage practices, Microsoft’s one-time dominance in operating systems, and now Google’s prowess in adverts and Android can be lined up to provide offsetting trade advantages.  We caught the familiar whiff of protectionism in the wake of the Snowden NSA revelations and the ensuing Privacy Shield histrionics.

It is almost as if EU-US trade negotiations continue not on quality and price, but in the form of dueling regulatory rules and fines.

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