For more than a year, the US Federal Trade Commission (FTC) has been investigating the tech majors for alleged anti-competitive behaviour. Just this past week, the US Department of Justice (DoJ) filed a federal antitrust lawsuit against Google.
The DoJ alleges that Google has paid massive sums of money to exclude competitors in order to enjoy a monopoly in search services and in advertising. It is reported that other, state-initiated lawsuits and investigations may be forthcoming; the Attorney General William Barr has indicated that he intends to continue to closely scrutinise other companies in this space.
However, this is not the first time Google has faced such accusations. After a decade-long battle with the EU Competition Commission, it was found guilty of anti-competitive behaviour and for abusing its dominant position in the search and advertising markets.
In two separate verdicts delivered in February 2017 and July 2018, Google was ordered to pay a record-setting fine of € 10 billion for abusing its dominance in the online shopping sector and for excluding competitors in default search engine settings on Android phones, respectively. A decision on the legality of Google’s acquisition of FitBit (a fitness wearable company) is still pending. Appeals have been filed on behalf of Google, and the company has indicated that it intends to pursue every possible action challenging the European regulator’s ruling and fine.
Google continues to be an undisputed leader in a majority of the categories it operates in. Its experience in the EU has not resulted in any change in its market share. Indeed, there is no evidence that the rulings have made it change its ways in any perceptible way.
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Google’s showdowns in the US and Europe have brought to mind comparisons with what is thought to be a similar crackdown on Microsoft in the late 1990s. However, this comparison appears too simplistic. The tech landscape of 1998, when the Microsoft matter was first brought to the notice of the EU Competition Commission, is dramatically different from the one prevailing today.
Major tech companies have managed to diversify their businesses into integrated, inter-connected conglomerates. Unlike Microsoft of the 1990s, Google and several others have managed to establish a foothold in this space. Google has linked its business interests in a seamless manner affording it the staying power and financial clout to challenge the regulator in appeal.
Given the context and background, the DoJ’s anti-trust lawsuit appears to be neither revolutionary in its claims nor far reaching in its approach. More importantly, it is unlikely to cause any significant impact on Google’s business model or its established market presence.
For one, the scope of this lawsuit is very limited. The narrow targeting focuses exclusively on Google’s search function. This may well mean that the DoJ’s actions are unlikely to affect Google’s advertising and product-bundling practices. The manner in which Google has established a stranglehold in the advertising — along with others such as Facebook — has brought grief to large swathes of the media landscape in the last two decades. Google has gathered clout by acquiring companies in related and ancillary sectors, a significant issue which is missing in the recent lawsuit. Instead, the complaint is restricted to Google’s abuse of dominance in the search domain, by excluding competitors. It thus fails to effectively illustrate how Google leverages its dominance in the search category to achieve similar success in other product lines.
In the context of precedents set in similar lawsuits against Microsoft, and Google’s own experiences in Europe, the outcome of this litigation appears easy to predict. It is unlikely to further the broader goals of the US Federal trade Commission (FTC) and DoJ to regulate big tech. Instead, the entire exercise brings to light the diminished role of the consumer and the highly volatile nature of this sector in general.
Several countries are waking up to the regulatory gap created by the growth of these tech conglomerates. In India, the Competition Commission of India (CCI) has investigated Google for alleged abuse of dominance and follows the EU in its competition jurisprudence. The focus in India and the EU is on the consumer and anti-competitive behaviours are determined in relation to the potential harm to consumers.
In the US, this lawsuit is seen as a departure from the innovation and market-centric approach that is typically followed. The DoJ lawsuit stresses on harm to the consumer by Google’s alleged exclusionary practices as opposed to harm to competitors in the search-engine/advertising market. The narrow consumer-focused approach is unlikely to result in any major changes.
Notably, although Google enjoys a market share of up to 90 per cent in these domains, the EU’s findings of abuse of dominance in this area did not affect this at all. It is obvious that Google’s dominance in a particular sector will continue to translate into success across product categories regardless of any direction to break up the corporate entity.
Another point to consider is the timing of this lawsuit. It is pertinent to note that there has been bipartisan movement in the US to regulate and control how tech companies handle political speech and advertising. The social media companies that have considerable market presence in advertising, e-commerce and other ventures would benefit greatly from government support.
The lawsuit appears to be politically motivated, directly affecting how these companies must position themselves with respect to the government in power. It is impossible to ignore this while analysing the reasons and motivations of the US DoJ in filing this lawsuit at this juncture, weeks away from the US Presidential election.
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There is urgent need for better and more stringent regulation of big tech in the US but anti-trust litigation is unlikely to achieve this. The sector will never be effectively controlled or kept in check by the imposition of fines or by ordering the splitting of major corporate entities, since power is concentrated in the hands of very few players anyway.
Major companies in this space enjoy unprecedented dominance in the segments that they initially entered and have enjoyed success in related sectors. Facebook, Google, Amazon, Apple and others have leveraged their power to facilitate the acquisition of other businesses and successfully branching out into other sectors.
For instance, Google cements its position as a market leader in the search category because it owns Android, which is loaded into a significant number of smartphones in use today. This way, it is able to ensure that it appears natural and logical for users to switch to Google-owned YouTube, adopt its Chrome web browser or use its other offerings such as Google Maps, Gmail and, of course, Google search. Being a market leader for so many years has meant that the consumer will be unwilling to switch to an unknown, untested alternative.
Any antitrust inquiry focusing on these limited issues is therefore much too little and too late. A prescient regulator ought to have identified these concerns at the time when the Microsoft case was being litigated. But it is difficult to predict with any degree of certainty the turns that new technology and individual preferences may take.
For now, the lesson from Europe is clear – it is not possible to place any fetters on the ubiquity of Google’s presence in our everyday lives by labelling it anti-competitive. Meanwhile, Google appears to be more than adequately prepared to fight this battle.
What is needed is a comprehensive regulatory framework that is mindful of the interlinked manner in which tech companies operate. Additionally, a robust data protection framework would enable effective regulation of this sector. Given the fact that these companies operate across jurisdictions, it will require regulators and stakeholders working in concert to arrive at a practical and effective solution to this unique problem.
Until then, this antitrust litigation is a paper tiger, distracting us from the very pressing and urgent issues raised by the practices of the global tech giants. The much more weighty issues — access, digital rights and free speech, cross-border data processing, international taxation and financial regulation and compliances with local laws — remain unaffected by the tunnel vision of the regulators worldwide. Time will tell whether the narrow focus has been a calculated move — to appear to be wielding the stick while actually ensuring that the monopoly chugs along unaffected.
(Shrinidhi Rao is a Delhi-based lawyer and policy professional specialising in human rights law and advocacy and policy research. She also practices at the Supreme Court and Delhi High Court. Views are personal)