How Many Fines Does it Take to Change Google's Behavior?
Last week, on November 10th, the European Commission landed a major win in the battle to regulate the ‘Big Tech’ industry. Google lost their appeal in relation to a $2.8 billion fine for the case of Google Shopping in 2017. (Sein and Zakrzewski) In it, the EU Commission argued that Google infringed European antitrust law by unfairly favoring their services over those of its rivals. (Scott) This is only the first of a series of fines the EU has imposed on Google over the last few years for anticompetitive behavior - Google Android in 2018 and Google AdSense 2019. While the General Court’s decision last Wednesday may haven lifted the spirits of EU lawmakers, there is still a lot of skepticism over the success of the EU’s approach. While the fines accumulate, the competitive landscape of major markets where Google is involved remains unaltered.
On the other side of the Atlantic, the concerns over the amount of power these technological giants face are also shared. In July of 2020 the CEOs of Amazon, Apple, Google and Facebook appeared before the Committee of the Judiciary in the US Congress. (Barbaro) The dominant power these companies hold was the focus of the hearing, but the concerns raised by the members of Congress went beyond that. Republicans voiced their anger at the censorship present in online platforms, pointing at the violation of the right to freedom of expression. Democrats showed discomfort and worry at the amount of power these giants have, and how such a position may threaten fundamental rights like privacy.
The issues raised during the hearing show the complex nature regulating technological companies. The trend from both sides of the Atlantic seems to be to ensure that the markets stay competitive by enforcing antitrust law. Or, at the very least, trying to do so. But, if the questions asked to the CEOs serve as a guide towards the true nature of the problems we face against Big Tech, antitrust law may not be enough.
Google’s relation with both American and European regulators for its potential anticompetitive behavior is a good example of how antitrust law may not be as effective in regulating the growing power of Tech Giants. In 2010, the Federal Trade Commission (FTC) launched an investigation regarding Google’s search practices – in particular if it had violated section 2 of the Sherman Act. (Legal Information Institute) The final report of the investigation, filed in January of 2013, found Google had operated lawfully within the antitrust framework of the US. The main reason provided by the FTC was that the improvement of Google’s services had been exclusively in the interest of the consumers, and that any type of negative impact it may have had on competitors were “a common byproduct of «competition on the merits» and the competitive process that the law encourages.” (Federal Trade Commission) In other words, Google cannot be sued for being “too good” at its job, nor for constantly improving its services. For Google’s competitors, however, the FTC’s interpretation of fair competition demonstrates a lack of knowledge of the reality of the industry.
As Google recognizes, the technological industry has massive Research and Development (R&D) costs to maintain the services offered competitive in their respective markets. If such is the case, there is a considerable advantage for a company like Google, who’s resources – both financial and human – are not comparable to many of its competitors. And in the rare occurrences where start-ups have had the upper hand in the development of a particular technology, the response from the big players of Silicon Valley has been the same: buy the competition away. (Moss) Under these circumstances, the “competition on the merits” that the FTC defends seems more of a theoretical illusion than a description of reality.
Google has also defended themselves from anticompetitive accusations by arguing that, even if some of their practices may harm competitors, their focus is always on improving the consumer’s experience. In fact, this idea is repeated time and time again in their dedicated page on “Google’s approach to competition,” (Google) their response to the lawsuit filed by the Department of Justice and 11 Republican DOJs in October of 2020, and the testimony provided by the CEO Sundar Pichai during the Congressional Hearing on July of 2020. (US Congress) The argument goes as follows: the main objective of antitrust laws is to protect consumers from harmful practices of companies in a monopolistic position. Google faces, allegedly, fierce competition in the markets where it is involved, and is not even the dominant player in some of them. Furthermore, their constant improvements are done to ensure the users of Google’s services have the best experience and can keep on using their products for free (this is an essential point for the company). Therefore, Google fits perfectly within the legal framework of antitrust law, because it's always for consumers and remains “competitive”.
The defense makes a lot of sense, and Google does a decent job of offering data that proves their point. And yet, to me, this position seems extremely dangerous. If Google can justify its decisions on key areas that have a direct impact on internet users – privacy policies, recollection of data, processing of that data, unauthorized use of third-party information, etc. – by saying “it’s ok because we do it for the consumers”, and this is within the legal framework of antitrust law, then there is no future to regulating the practices of the Tech Giants. Structural separation and fines may have been useful at a certain point in time, but is clearly not enough for the challenges we face today, and not with an industry that operates in such a different fashion. Our laws are unequipped to face the challenge of services that defy some of the economic presumptions under which we have operated so far. If the services offered by these tech giants are “free”, and if that produces the consumers’ surplus to be effectively infinite, then how can we say they are not beneficial for consumers? What is the monopoly price for these markets, and in what way are we seeing an actual abuse of power in these terms?
Google has appealed the other two fines imposed by the EU in 2018 and 2019, and we are yet to hear the responses from the General Court. But even if the fines were dismissed again, the question still remains: does a $2 billion fine really matter to a company with a profit of $90 billion a year? Probably not.
Sources:
Perry Sein and Cat Zakrzewski, “E.U. court dismisses Google’s appeal of $2.8 billion antitrust fine.” https://www.washingtonpost.com/technology/2021/11/10/google-eu-court-fine/
Mark Scott. “Google Fined Record $2.7 Billion in E.U. Antitrust Ruling.” https://www.nytimes.com/2017/06/27/technology/eu-google-fine.html
Michael Barbaro, “The Big Tech Hearing.” https://www.nytimes.com/2020/07/30/podcasts/the-daily/congress-facebook-amazon-google-apple.html?smid=url-share
Legal Information Institute, “Sherman Antitrust Act.” https://www.law.cornell.edu/wex/sherman_antitrust_act
U.S. Federal Trade Commission, Statement of the Federal Trade Commission Regarding Google’s Search Practices In the Matter of Google Inc. https://www.ftc.gov/system/files/documents/public_statements/295971/130103googlesearchstmtofcomm.pdf
Moss, Diana L. What Does Expanding Horizontal Control Mean for Antitrust Enforcement? A Look at Mergers, Partial Ownership, and Joint Ventures. https://www.antitrustinstitute.org/wpcontent/uploads/2020/11/Moss_Horizontal-Control_11.4.20.pdf
Google, “Our approach to competition in the U.S.” https://blog.google/competition/#facts
Walker, Kent. “A deeply flawed lawsuit that would do nothing to help consumers.” https://blog.google/outreach-initiatives/public-policy/response-doj/
U.S. Library of Congress, Congressional Research Service, The Google Antitrust Lawsuit:
US Congress, House, Subcomittee on Antitrust, Commercial and Administrative Law of the Committee on the Judiciary, Online Platforms And Market Power, Part 6: Examining The Dominance Of Amazon, Apple, Facebook, And Google,116th Cong., 2nd sess. https://www.govinfo.gov/content/pkg/CHRG-116hhrg41317/pdf/CHRG-116hhrg41317.pdf
Initial Observations. https://crsreports.congress.gov/product/pdf/LSB/LSB10544