The US Justice Department opened another monopoly case in the technology sector for the first time in 22 years this week. Google has to answer for the improper use of its dominant market position.
From 1998. It had been that long since the judiciary in the United States had a tech company in their sights. The dubious honor fell to Microsoft at the time. The software giant had to answer for unfair competition. He also supplied his Internet Explorer browser with his software package. The case dragged on for a long time, and eventually a half-hearted compromise was reached. But the years of legal battle made Microsoft lose ground, and the fledgling search engine Google, among others, benefited from this. Afterwards, neither Republican President George W. Bush nor his Democratic successor Barack Obama did anything about the unbridled growth of the high-tech sector. Under Obama, it was briefly considered to prosecute Google, but that plan was canceled.
If we let Google continue like this, Americans will never discover the benefits of the ‘next Google’.
United States Attorney General
Google controls nearly 90 percent of the online search market in the US. In Europe that percentage is even higher. To achieve that position, the company used secret, exclusive deals with other players in the market. “No one can workable challenge the dominance of Google,” said US Attorney William Barr. “If we let Google continue on this anti-competitive path, we will lose the next wave of innovators and Americans will never know the benefits of ‘the next Google.’
The most notable deal that Google struck is undoubtedly the one with Apple. Google pays Apple $ 8 billion annually to make its search engine the default in the Safari browser of the Apple operating system. This means that the Android devices and the Apple mobile phone have the same search engine.
Alphabet Inc, Google’s listed parent holding company, argues that the US investigation has “serious flaws.” Unless the next president calls off the investigation, this case too will drag on for years. And just like with Microsoft, end up with a vague compromise. But the case could cost Google ground.
Research into Google’s market position is not new. In 2010, the European Commission turned its sights on Google because competitors complained that the company was abusing its dominant position in the search market. In 2012, Joaquín Almunia, the then EU Commissioner for Competition Policy, decided not to open a formal investigation but to negotiate with Google to resolve the complaints. His successor Margrethe Vestager took a more serious approach and in April 2016 filed a formal complaint against the Android system, Google’s operating system on two-way radios. In July a complaint followed against Adsense, Google’s advertising arm. The issue resulted in a € 2.4 billion fine for the advertising market in 2017 and a € 4.3 billion fine in 2018 for the abuse of Android’s dominant position. Google appealed in both cases.
In the US, Google has already been in the crosshairs of the authorities. In 2011, the Federal Trade Commission (FTC), which monitors competition, opened an investigation to see if the company’s market dominance was too great. The case related to the advertising market. In 2007, the FTC had approved Google’s acquisition of Doubleclick, an online advertising specialist. Three years later, it was allowed to take over AdMob, which significantly increased its reach in the digital advertising market. The FTC counted on Apple to provide sufficient counterweight. In vain. Apple closed its ad network some time later. After two years of investigation, the FTC closed the case in 2013 without a formal complaint.
The key question now is of course: does the American court have any chance against Google?
The key question now is of course: does the American court have any chance against Google? The judge in charge, Amit Mehta, has been appointed by Obama. He has experience in unfair competition. Not long after his appointment, he banned a merger of Sysco Corp. and US Foods. He took advantage of the option of prohibiting mergers if they threaten to distort competition. Mehta also ruled last year that Trump could not prevent his financial data from being released. Because there are so few cases in the field of competition, a competent judge is an advantage for the government.
Eleven Republican states have joined the complaint against Google. It is expected that more states will follow after the presidential elections.
In Congress, both Republicans and Democrats are in great discomfort about the monopolies of high-tech companies. Despite the deep political divide between the two parties, a report of over 400 pages was recently published on the digital market, the major technological platforms and how the market now works. Both camps want to change something. There is a strong consensus that Facebook and Google are abusing their dominance, but they disagree on the remedies. The Republicans want to adjust individual companies, the Democrats want to split off some activities from the internet molochs.
Political turmoil over the technology sector is also felt at the FTC. Two days after the complaint against Google, the American business newspaper The Wall Street Journal announced that a formal complaint against Facebook is also being considered, for the same reasons as against Google: abuse of market dominance to hinder competition. Incidentally, monopolies are not prohibited in the US. It is about the abuse of a dominant position that prevents any serious competition.
The context of the complaint against Google is therefore rather favorable, but that will not be enough. Investigating distortions of competition due to a dominant market position is a tricky business. Google states that its services are usually free and that consumers ask for them. Moreover, technology often evolves so quickly that the facts are outdated at the time of the court ruling.
Europe is now trying to do the opposite and work out rules that prevent large companies from gaining a dominant position. That is not an easy task. The rules must guarantee fair competition, but must not paralyze competition.
The American laxity of the past twenty years has made it very difficult to contain the major players. In fact, the US is unlikely to sacrifice its champions on the altar of fair competition. In the digital world, just like in the real world, a serious battle for dominance is taking place between the US and China. This is noticeable in the American measures against Chinese companies such as Huawei and TikTok. This geopolitical reality is an important certainty for American companies.
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