Europe Is Toughest on Big Tech, Yet Big Tech Still Reigns

https://www.nytimes.com/2019/11/11/business/europe-technology-antitrust-regulation.html

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LONDON — Richard Stables should have felt vindicated when the European Union announced a $2.7 billion fine in 2017 against Google for breaking antitrust laws. He had raised alarms about the search giant’s power for years.

But rather than feel victorious, Mr. Stables felt resigned. His company, Kelkoo, once a leading online shopping destination in Europe, was crushed by Google’s competing service while the case was underway.

“It took basically eight years to get something done,” Mr. Stables, 50, said in an interview at his London office. “That’s a complete disaster.”

Regulators in Brussels have been heralded as the world’s leading tech industry watchdogs. But Mr. Stables and other veterans of the Continent’s antitrust battles are telling American authorities, who are investigating Google, Amazon, Apple and Facebook, something else: There is a lot to learn from Europe’s mistakes.

Antitrust investigations in Europe have taken years to complete, in part because company lawyers use stalling techniques that give the tech giants added time to squeeze out rivals, according to companies, lawyers and consumer groups involved in the cases against Google. The inquiries have centered on single aspects of the companies, like Google shopping, rather than their entire business. And once regulators have stepped in, the penalties have focused on headline-grabbing fines rather than structural changes that would restore competitive balance.

Europe’s regulators have taken antitrust actions against numerous tech companies. None have faced more scrutiny over the past decade than Google — yet critics say it has emerged virtually unscathed. Its revenue rose to $137 billion in 2018, up from $23.7 billion in 2009, when rivals filed the first antitrust complaint.

“You have to move fast and impose remedies that actually bite,” said Thomas Vinje, an antitrust lawyer who represented companies against Google in Europe.

In recent weeks, the authorities in the United States and Europe have signaled that they believe tougher antitrust enforcement is necessary.

Margrethe Vestager, the top antitrust regulator in the European Union, who has fined Google more than $9 billion since 2017 for antitrust violations, is pushing new approaches. She has invoked a rarely applied rule, known as “interim measures.” It acts like a cease-and-desist order, forcing a company to stop acting a certain way until an antitrust investigation can be completed.

Another idea floated by Ms. Vestager, whose office is investigating Amazon and exploring cases against Facebook and Apple, would shift the burden of proof in cases involving large tech companies. It would require them to show how their behavior helps consumers. Usually, regulators must demonstrate harm to consumers.

Regulators in Germany and Britain have called for tougher rules, including expanding the scope of antitrust enforcement into new areas of the digital economy like the collection of data.

In the United States, Makan Delrahim, head of the Justice Department’s antitrust division, recently said remedies as far-reaching as breaking up the companies were “perfectly on the table.”

“If the American authorities learn from Europe’s experience, they have a big opportunity” to restore competition, said Shivaun Raff, a co-founder of Foundem, a price comparison website that filed the original complaint against Google in 2009. In October, she met with federal and congressional investigators in Washington.

The Kelkoo experience demonstrates the challenge.

Founded in 1999, the website was an early online success story in Europe. With a name that plays on the French saying “quel coup,” meaning “what a bargain,” Kelkoo became a top destination for consumers in countries like Britain, France and the Netherlands to compare products listed on different websites.

The sector became a hot area of the internet economy. Yahoo bought Kelkoo in 2004 for about $550 million, before it was sold again in 2008 to the British private equity firm Jamplant for less than a quarter of the price amid wider problems at Yahoo. Also in 2008, Microsoft bought the owner of Ciao.com, a European competitor, for about $490 million.

But in February 2011, the traffic that Google sent to Kelkoo and others tumbled. Google had a similar shopping service and was now putting its own listings at the top of search queries.

“It basically smashed the market,” said Mr. Stables, the company’s chief executive. “Our free traffic that came from Google dropped by 92 percent in two or three years. Our revenues took a massive hit.”

He closed offices in Germany, Denmark, the Netherlands, Sweden and Spain. More than 150 people were laid off. Mr. Stables and others took their complaints to regulators in Washington and Brussels, arguing that Google was abusing its dominance by changing its search algorithm to force its way into new markets like shopping, travel and restaurant reviews.

“We were just the tip of the iceberg,” Ms. Raff said. “We are one of hundreds or thousands of companies that have been hurt.”

To Ms. Raff and others, the case seemed clear cut because the companies were armed with data showing how Google had hurt their businesses to help its own.

But the companies struggled to find a receptive audience. In 2013, the Federal Trade Commission decided not to take on Google.

The European Union reached a tentative settlement with Google in the case in 2014, but the agreement was abandoned after complaints that it would not restore competition. In 2015, after Ms. Vestager took over as the top antitrust enforcer, preliminary antitrust charges were filed against Google — five years after an investigation was officially opened. It would be another two years until Ms. Vestager finished the case, imposing the $2.7 billion fine.

As the investigation dragged on, rivals say, they suffered and Google solidified its dominance. Competitors complained that Google used stalling tactics, taking advantage of due process rules to resist requests for information and to demand access to evidence submitted by other parties.

“Google used what may charitably be called its rights of defense, which was good lawyering,” said Mr. Vinje, who represented Google’s competitors. “By the time the decision was issued so many years later, Google had largely achieved its objective of pushing the pioneers in the comparison-shopping market out and basically dominated the market itself.”

Google, which has denied wrongdoing, declined to comment.

Tommaso Valletti, who was involved in the Google cases when he was the chief competition economist for the European Commission, said criticism of European regulation was unfair. American authorities allowed the companies to grow unimpeded for years, he said. Fixing the problems would take more than antitrust enforcement from Brussels.

“Europe has led the way in realizing that there are potential problems related to digital platforms that can be also dealt with through antitrust enforcement,” he said.

The European Commission issued its final ruling against Google in the shopping case in 2017, but rivals say the company still hasn’t properly applied remedies outlined by regulators to create a level playing field for websites like Kelkoo.

In 2018, the commission fined Google a record 4.34 billion euros, worth about $4.8 billion today, for illegally using its Android mobile phone software to block rival search engines. Remedies in that case, including giving customers more search engines to use, are still being argued over.

In a third case, related to an online advertising practice that Google has since ended, the European authorities fined Google €1.5 billion, or about $1.7 billion.

Google is appealing all three decisions, leaving open the possibility that the fines could be voided.

Rivals said the European verdicts validated their complaints. But they warned that the power dynamics had not changed.

Mr. Stables, his voice rising with frustration, implored regulators to act.

“This is a very dangerous moment,” he said. “Eventually you’ll end up with an internet dominated by just a few companies.”