Why Trump Is Right to Question the EU’s Fine Against Google
Posted July 26, 2018 8:31 p.m. EDT
Updated July 26, 2018 8:35 p.m. EDT
It didn’t take long last week for President Donald Trump to blast America’s latest economic foe, the European Union, for imposing a $5.1 billion antitrust fine on Google’s parent company.
“I told you so!” Trump wrote on Twitter. Calling Google one of “our great companies,” he asserted that the European Union “has truly taken advantage of the U.S., but not for long!”
Let’s put aside the fact that Google controls more than 90 percent of the internet search market in most of the union’s member states, according to the European Commission (compared with just 63.5 percent of the market in the United States). That makes it hard to argue that the Europeans have somehow “taken advantage” of Google.
But on the merits of the antitrust case, Trump has a point.
It’s hard to find any antitrust expert, European or American, who has endorsed the logic or outcome of the ruling by the European Commission.
The commission, which is the union’s executive arm and oversees its competition policy and antitrust law, found that Google had run afoul of those regulations in several respects.
But the heart of the decision involved Google’s insistence that mobile phone manufacturers that use its Android operating system and want to preinstall the Google Play app store must also install a suite of Google apps, including the company’s search engine, its Chrome browser and its mapping, calendar and photo programs.
The commission called this a classic “tying” arrangement, in which a company extends the market dominance it enjoys in one area (in this instance, the app store) to others, specifically the browser and search engine. (For some reason, the commission’s logic did not extend to any other Google apps.)
“Google has used Android as a vehicle to cement the dominance of its search engine,” Margrethe Vestager, Europe’s antitrust chief, said in announcing the ruling.
The focus on tying arrangements is reminiscent of two famous Microsoft cases: one in the United States, in which the government accused the company of illegally tying its Internet Explorer browser to its dominant Windows operating system, the other in Europe, where Microsoft was found to have abused its Windows dominance by embedding its media player.
The outcomes in both cases are now widely viewed as irrelevant, since by the time they were decided, Explorer and Windows Media Player had been overwhelmed by technological change and competition — from Google, among others. Microsoft’s share of the browser and media-player markets is insignificant today.
But even if the European Union’s Microsoft precedent is viewed as sound, Google’s competitive situation is different. “There’s only a superficial resemblance to Microsoft,” said Pinar Akman, director of the Center for Business Law and Practice at the University of Leeds in England, who has received support from Google for some of her research.
Unlike adding a rival media player to the Windows operating system, which at the time was a slow and cumbersome process, adding rival apps to an Android-based phone can be done “in seconds,” said Akman, an antitrust expert. “The commission put a lot of emphasis on the value of preinstallation. But just because an app is preinstalled doesn’t mean consumers are going to use it. It’s very easy to download a rival app.”
Google’s photo app, for example, has struggled to compete against Instagram and Snap, even though it comes preinstalled on Android-based phones as part of the Google suite.
Christopher L. Sagers, an antitrust professor at Cleveland-Marshall College of Law, agreed that if installing a rival app is as easy as Google claims, “it would make for a pretty solid argument that whatever dominance Google has retained in mobile search has nothing to do with anti-competitive conduct, and rather just reflects its superiority as a product.”
Curiously, the commission’s statement announcing the ruling did not address that issue. (A full written decision is not expected for months.) So I opened the Google Play store on my Android phone and searched for Bing, Microsoft’s search engine. I was able to download it in seconds. Google suggested I “might also like” an array of other search options, including Firefox and DuckDuckGo, which were displayed on the same page and equally accessible with a touch of my finger.
Even though Google requires phone-makers to use the full suite of Google apps if they want to install the Play store, there is nothing to prevent those companies from also preinstalling rival apps. “Why doesn’t Microsoft just pay manufacturers to preinstall Bing?” Akman asked.
Apple, for one, makes Google the default search engine on the iPhone’s Safari browser, even though Apple does not use either the Android operating system or the Play store. Oddly, the commission excluded Apple as a Google competitor, saying that because the company produced premium-price products, it did not constrain Google’s ability to dominate the broader market.
“Can you imagine a U.S. court finding that Android and iOS don’t compete?” said Sagers, referring to Apple’s operating system.
Samsung, too, preinstalls a range of rival apps in addition to the suite of Google products.
The commission’s stated mission is to protect European consumers by assuring them the benefits of competition. But the commission does not seem to have considered the possibility that Google’s search engine and browser have achieved such high market share because consumers prefer them, or that consumers might also like having the apps already installed on their phones. The commission argues that when a phone comes with a single search engine preinstalled, it confers an enormous competitive advantage on that product. To support the theory, the commission said that on phones using Windows operating systems, which come with Bing preinstalled, 75 percent of searches are conducted using that engine.
But Windows-based phones accounted for only 0.15 percent of the global market at the end of last year. That renders the data irrelevant, Akman said.
A closer analogy, though not one cited by the commission, can be found in Russia. Last April, Google reached a settlement with rival search engine based there, Yandex, under which it agreed that phone-makers could preinstall Yandex on Android devices and let consumers decide which app would be their default search engine.
At the time, Google and Yandex each had about 48 percent of the Russian search market. Since then, Yandex has increased its share to 51 percent; Google’s has dropped to 45 percent.
Even if preinstallation offers Google an advantage over rival app producers, that does not mean it harms consumers or violates competition law. I, for one, like having the Google apps preinstalled on my phone, unlike most of the clutter imposed on me by my phone service provider, Verizon.
Google has said it will appeal the commission’s decision. Given the commission’s track record — it has rarely been reversed — the company would seem to face long odds. Still, the European Union’s highest court sent a 2009 antitrust judgment against Intel back to a lower court for further review last year. The higher court’s opinion clarified that the purpose of European antitrust law was not to protect inefficient competitors at the expense of consumers. That could give Google an opening.
Then again, the Trump factor must now be considered, especially since the president, after all but declaring economic war on Europe last week, seemed to declare a truce on Wednesday.
“I don’t think the Google ruling is anti-American,” Akman said. “There are plenty of rulings against European companies, too. It’s just that the American tech companies have been so successful, and have achieved so much market power, that they’re going to come under scrutiny.”