Europe’s Case Against Google Might Help Rivals More Than Consumers
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Version 0 of 1. In a persistent (and thus far fruitless) effort to hobble giant American technology companies, the European Union has again taken aim at Alphabet’s Google search engine. Last week, European antitrust regulators claimed that Google had “abused its dominant position” because Google search is preinstalled on most mobile devices, which harms consumers by “stifling competition” and “restricting innovation.” At first blush, it might seem the Europeans are onto something. If device manufacturers want to preinstall the Google Play app, they must agree to install Google search and its Chrome browser as well — and make Google the default search engine. With some manufacturers, Google pays to have its search function preinstalled as the default option — an estimated $1 billion a year to Apple, according to a court filing last year. If these claims seem a little like déjà vu, that’s because anyone over the age of 20 has seen this before: Microsoft embedded its Internet Explorer browser in its Windows desktop operating system, a so-called tying arrangement. In the late 1990s, the Justice Department and European Union regulators accused Microsoft of illegally trying to extend its dominant position in operating systems to Internet browsers and search. (Microsoft ultimately settled the cases.) But the rapid rise of mobile and tablet devices has pretty much rendered all that irrelevant. The latest version of Internet Explorer still has the largest market share for desktop Internet browsers, but it has only a negligible share for fast-growing mobile and tablet devices, where Google Chrome is far ahead. Technological change has also undermined the superficial similarities between the old Microsoft case and the new Android one. Back then, consumers who wanted a rival browser like Netscape to run on their Windows operating system rather than the (free) Explorer had to go to a store, pay for a disk with a rival program and then install it. Today, a free rival browser is a tap away. When I checked into Google Play this week, there were more browser choices than I knew what to do with, including some I’d never heard of (Maxthon?). But I’m satisfied with Google’s offering and have no interest in further cluttering my phone’s display screen. It’s so easy to substitute or add apps that it’s not even clear Google’s agreements with manufacturers would be deemed tying arrangements. “I don’t think they meet the requirement,” said Herbert Hovenkamp, an antitrust expert at the University of Iowa College of Law. “There’s almost no limit to your ability to add additional apps or to delete the Google app and substitute a different one.” Of course, there’s obviously an advantage to being the default app, or else Google wouldn’t be paying Apple such a large sum. “On the other hand, anyone can change if they’re unhappy,” Professor Hovenkamp said. Nor do manufacturers have to preinstall any Google apps on devices using Android, which is an open source system, available free. Amazon’s Fire was an Android mobile device with a built-in Amazon shopping app, but it didn’t come with Google Play or Search preinstalled. Fire was deemed a flop, in part because it lacked popular Google apps like Gmail and Maps. Even if Google is found to be using a tying arrangement, that’s not necessarily illegal or bad for consumers. Scott Hemphill, an antitrust professor at New York University School of Law, said tying arrangements are common across a wide array of products and industries. “No one complains because they don’t have a choice of transmission manufacturers in their cars,” Professor Hemphill said. These same issues were raised last year in a class-action suit in a Federal District Court in California. The two named plaintiffs both bought Android phones, one in Louisville, Ky., the other in Des Moines, Iowa, and complained that they hadn’t realized they came with Google search already installed. Judge Beth Labson Freeman of Federal District Court struggled to find any evidence that either had suffered any harm. She found that Google’s conduct had no impact on the price of the phones, since both Android and the rival apps are free. And their broad accusation that Google’s behavior “threatened harm to innovation and consumer choice” — almost the same words adopted by the European Union — was “entirely too conclusory and speculative,” she ruled. There was no evidence Google’s behavior prevented consumers “from freely choosing among search products or prevented competitors from innovating.” She dismissed the suit. So who exactly is being hurt by Google’s behavior? It’s not, apparently, consumers, in whose name this battle is being fought. Google’s search engine is even more popular in Europe, where it has a more than 90 percent market share, according to the European Union, than it is in the United States. The driving force pushing the European action was a consortium of Google’s corporate rivals — foremost among them, ironically, Microsoft, which once complained loudly about European overreaching. It has backed a lobbying group called FairSearch, which hailed the European action against Google as “a crucial step to end abusive business practices.” (Microsoft and Google said this week that they were burying the hatchet and would withdraw regulatory complaints about each other around the globe. Microsoft has said it will no longer back FairSearch.) If Microsoft really wants to compete with Google’s search engine in Europe, it has the wherewithal to outbid Google and pay manufacturers to make Bing their default search engine. The Russian Internet company Yandex has been the most vocal in urging European action against Apple, which is even more ironic considering that Russia is not a member of the European Union and has been sanctioned over its annexation of Crimea. Yandex has dominated Internet search in Russia but has recently been losing ground there to Google. It filed — and, no surprise, won — similar claims in Russia. (Google is appealing that outcome.) Even if competitors like Yandex would stand to benefit, “the purpose of antitrust law, at least in the U.S., is to protect consumers, not competitors,” Professor Hemphill said. Professor Hovenkamp echoed that thought. “Europe is moving pretty far into left field with this case,” he said. “It seems like over-regulation for the benefit of competitors that won’t end up doing consumers any good.” |