WHAT did GOOGLE do SO WRONG to get a slapping from the EU?
The Chocolate Factory just wanted to make the world a Lovelier Place
Analysis Google made the internet a bit more crappy and considerably less diverse, breaking its own vows along the way. That’s what the EU’s competition division declared earlier today, in a formal Statement of Objections. So what’s their beef?
If you’ve a long memory, you’ll find uncanny parallels with Microsoft’s behaviour in the 1990s. Back then, Microsoft trawled the Top 10 Utility download charts for inspiration, pinched the best ideas, then copied them into their Windows platform monopoly – ending the prospects of independent software developers capitalising on their innovation. Disk compression? We’ll have that. Browser? We’ll have that too.
So, too, with Google, which raced into a monopoly position in a number of markets and has leveraged that to exclude competition, the European Commission alleged earlier today. The funny thing is that this isn’t how Google’s founders thought the world should work – at least, that what's they thought not so long ago.
Do no evil. For a bit
For co-founder and CEO Larry Page, Google’s early success was down to not being a portal, a vertically integrated publisher. When I first met the executives in 2000 it was a profitable private company which said it had no need to compromise its principles by ad revenue or becoming anything other than a simple indexer of web pages. Advertising itself was fatally corrupting to a search engine, the company founders once believed.
Writing in their PhD paper in 1998, Larry Page and Sergey Brin described paid advertising as “insidious”, because it “often provides an incentive to provide poor quality search results”. Therefore, they’d create a new search engine – Google – since “it is crucial to have a competitive search engine that is transparent and in the academic realm”.
By 2004 it was no longer possible for Google’s founders to kid themselves advertising wasn’t part of Google’s business. But they still kidded themselves they were being fair and making the world a better place. Page told Playboy magazine in 2004:
Most portals show their own content above content elsewhere on the web. We feel that’s a conflict of interest, analogous to taking money for search results. Their search engine doesn’t necessarily provide the best results; it provides the portal’s results. Google conscientiously tries to stay away from that. We want to get you out of Google and to the right place as fast as possible. It’s a very different model.
Five years later much of Google’s product development effort was devoted to keeping users within Google – a strategy formalised with the launch of Google+, the “social network” that you never asked to join, and that you can never leave.
"You get people to enthusiastically use services by making them compelling and awesome and easy to use. You don't get people to enthusiastically use your services by forcing them to,” ranted Star Trek actor Will Wheaton in 2012.
Hang on, doesn’t everyone love Google?
Competition law differs in each jurisdiction, but it broadly enshrines a common principle: a cartel or a single company leverages its market dominance to raise prices or prevent competition. Enjoying a monopoly position in a market isn’t considered harmful per se, and doesn’t invoke competition law. Nor does reaping monopoly profits.
The law does come into play if abuse, a leveraging, is considered to have taken place to thwart the normal workings of the market. Here, recent American interpretations and European interpretations have differed in their definitions of “harm”.
Since 2001, US courts and regulators have demanded that consumer harm be invoked, for example, when showing that prices rose. Europe takes a different view: if competition was stifled, then by inference, consumers lost out. Yet in each case an empirical rule of thumb can be used to give us some clarity. Which is: did during the period of alleged abuse, new entrants enter the market to challenge the monopolist?
Classical economics tells us that when a dominant player reaps monopoly profits, this is a huge incentive for rivals to try to knock it off its perch. Rivals flood the market, bidding to do just that. That’s why purists hate antitrust law, arguing that if you wait long enough, the market will do its work, and tinkering in the meantime does more harm than good.
Neither Microsoft’s Windows platform nor Google’s search monopoly seem to pass this particular smell test. Rivals didn’t flood the market. Nobody entered the paid OS market after the mid-1990s, and what vertical competitors Google has, are hanging on by their fingernails.
“It was the dog that didn’t bark,” says David Wood, lawyer for the iComp consortium which is pursuing Google.
Google's Rachel Whetstone responded to reports of anti-competitive conduct by posting a GIF of a baby.