The Corner

Economy & Business

Looting Google: When Mercantilists Turn to Theft

Politico:

The European Commission issued Google a fine of €2.42 billion Tuesday for abusing a dominant position over internet search, concluding a landmark inquiry that dragged on for seven years and handing Silicon Valley its largest regulatory setback to date.

Margrethe Vestager, the European commissioner for competition, said the company systematically manipulated its results page to promote its own Google Shopping service and push smaller rivals down its search rankings. The Danish commissioner, who has championed a hard line against Google in her enforcement action and in her speeches, gave the American tech giant 90 days to make key changes to the way it does business in Europe — with a warning to get its wider house in order.

It wouldn’t do to have a company promoting its own services, of course. Just wouldn’t be right. 

But wait, there’s more:

The Commission continues to pursue two charges issued last year against Google’s Android operating system and its advertising business. The Commission’s decision instructs Google to ensure its give “equal treatment” rival comparison shopping services equally to its own Google Shopping service — although how it does so is up to the search engine, which has 60 days to inform the Commission of its plans.

Reuters explains:

In effect, the Commission is forcing Google to demonstrate that rivals have made substantial inroads into its businesses before there is much chance of it being let off the regulatory hook. EU competition chief Margrethe Vestager promised Google was in for years of monitoring to guard against further abuses.

Because who better to decide what is a truly competitive market than an unelected bureaucrat?

 Okay, okay, that’s a bit harsh: Vestager was an elected politician, quite a senior one in fact, prior to her arrival in Brussels.

Before that she was a political apparatchik.

Wikipedia puts it likes this: “Vestager has been a professional politician since the age of 21.” To say Vestager’s direct experience of the private sector is limited may be something of an overstatement.

Politico:

Vestager also warned Google that it must refrain from “any measure that has the same or an equivalent object or effect,” in what appears to be a veiled reference to concerns over Google’s other vertical search services, like local, flights or news.

Google must comply to the Commission’s satisfaction or risks daily fines capped at around €12.5 million a day.

Now, Google can be irritating and all that, but this seems, well, a bit much…

Robert Atkinson, the president of ITIF, a science and technology think tank, had this to say:

Today’s ruling is bad for consumers and bad for innovation. The Commission has effectively decided that some companies have become too big to innovate. The Commission’s actions have created a cloud of uncertainty that will make large tech companies overly cautious about making changes to the user experience and service offerings that would benefit consumers.

The decision in this case shows the fundamental problem with the EU’s approach to antitrust issues: It is willing to take heavy-handed actions to protect competitors, at the expense of consumers. This is evident in the Commission’s decision to levy a record €2.4 billion fine against Google in a case where consumers were helped, not hurt, by the development of a product-comparison tool that allowed users to shop online more effectively. The only real beneficiary of today’s ruling is the EU’s treasury.

It is, of course, only a coincidence that Brexit threatens to leave something of a hole in the EU’s finances (the UK is a major contributor to the EU budget).

Reading Atkinson’s words made me think of something else, of a depiction of a society in which no one, however gifted, however innovative, is allowed to do too well, because that would be unfair, the society described in Kurt Vonnegut’s Harrison Bergeron. If you haven’t read it already,  bow your head in shame and then take the time to read it now, and then, the next time you read what Vestager has to say, think back to one of the characters in that story, one Diana Moon Glampers, the Handicapper General, because that, in essence, is who Vestager is.

But what’s also at play here is the fury that the EU’s leadership feel about their failure to keep up, about Europe’s failure to develop Googles, Amazons, or Facebooks of its own. 2000 saw the unveiling of the Lisbon Strategy. It was designed to make the EU “the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion,” and all by 2010.

How did that work out?

So if the EU could not central plan its way to success, it could at least try to take those pesky Americans down a peg or two. Yes, I’m familiar with and understand the principles underlying the antitrust argument the Commission is trying to make (essentially abuse of a dominant market position), but the decision to proceed with the case was political, not legal, and the motives blended the anti-Americanism that is never too far from the EU’s agenda with the mercantilism that has always been a part of it.

Here’s Quartz reporting from 2015:

If anyone thought European Union digital commissioner Günther Oettinger was bluffing when he recently suggested… the EU might rein in big internet companies like Google, Facebook, and Yahoo, they may not think so now. According to leaked documents from Oettinger’s office, the EU has been mulling the idea of establishing a new regulator to aggressively go after dominant (and mainly US-based) web platforms, essentially clearing the way for European competitors.

I’ve commented on this topic a few times before on this very Corner, noting in 2014 how the European parliament was poised to cast a (symbolic) vote calling for the break-up of Google (the measure passed), and then, in another post, quoting this from an article in the Library of Economics and Liberty:

The day before the charges against Google were announced, Günther Oettinger, the EC’s so-called “digital commissioner,” publicly complained that “our online businesses are today dependent on a few non-EU players,” warning that “this must not be the case again in the future.”

The message was clear. Vestager’s actions today are just the latest example of how it continues to be acted upon.

So what to do? There would be a certain pleasure in seeing Google and America’s other tech giants simply pull out of the EU leaving that miserable union to its own inadequate devices, but there’s still too much money to be made over there for that. A spot of retaliation would not, however, be entirely inappropriate from an American administration that purports to believe in free and fair trade, because those are not the rules Brussels is playing by — or will play by.

This is not the last heist that the EU has in mind.

 

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