Google EU fine sends shockwaves across tech

The massive fine that the European Union levied against Google on Tuesday is sending shockwaves across the tech industry, highlighting the intense regulatory scrutiny that companies face when doing business across the Atlantic.

The EU’s executive body, the European Commission, imposed a record $2.7 billion penalty on Google after a seven-year investigation into whether the company was promoting its own comparison shopping tool over those of its competitors in search results.

{mosads}“What Google has done is illegal under EU antitrust rules,” said EU competition policy chief Margrethe Vestager. “It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.”

Google is also facing two other EU investigations into similar practices on its mobile and advertising services — all of which could have major repercussions for regulators around the world.

“European consumers are now poised to enjoy better protections than U.S. consumers,” said Luther Lowe, vice president of public policy at Yelp, which has been fighting with Google for years over its search practices.

“This acts as a forcing mechanism for other antitrust cops across the globe. They’ll ask, ‘Why don’t consumers in my country have those same protections?’ As such, this important move by the European Commission can be viewed as the first of many dominoes to fall.”

In a statement, Google general counsel Kent Walker defended the company’s practices and said that it was considering its next steps after the EU decision.

“We respectfully disagree with the conclusions announced today,” Walker said. “We will review the Commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case.”

Other U.S. tech giants could be next in line for severe fines. Facebook and Amazon have been under scrutiny from Europe’s regulators, and Apple was recently ordered by the EU to pay $14.5 billion in back taxes to Ireland.

Back in the U.S., the picture looks much different, with federal regulators known for taking a light-handed approach.

The Federal Trade Commission (FTC) conducted its own investigation into Google’s search practices before voting unanimously in 2013 to end the probe without imposing any fine.

There are a number of theories as to why tech companies face more regulatory scrutiny in Europe than in the U.S. Critics of the EU approach have accused the continent’s leaders of promoting protectionism.

“Their efforts over the last 20 years to regulate their way into the internet economy have all failed,” said Larry Downes, project director at Georgetown’s Center for Business and Public Policy.

“This is all they’ve got left — to punish successful
American and Chinese companies in the hope that will somehow help them build their own internet economy.”

But advocates for a more interventionist approach to antitrust law in the U.S. say administrations from both political parties have largely failed to crack down on what they see as anticompetitive behavior.

The EU fine appears to be the biggest antitrust action taken against a tech company since 2001, when Microsoft agreed to overhaul its practices in order to settle a costly, drawn-out lawsuit brought by the Department of Justice. Many believe that settlement helped clear the way for internet companies like Google to flourish.

Matt Stoller, who studies antitrust policy at New America and advocates for greater scrutiny of large companies, says that the hands-off approach in the U.S. is “deeply embedded in both parties.”

“I think it’s because the Europeans have kept up the antitrust tradition and the Americans have not,” Stoller said.

“Aside from the Microsoft case … you’ve seen a pretty poor showing [in the U.S.] for a really long time, but that’s not true in Europe, where they take competition policy more seriously.”

It remains to be seen whether the Trump administration will ramp up regulatory oversight of Google and other tech companies. The federal agencies responsible for antitrust issues are said to be understaffed, and Trump has yet to name his pick to lead the FTC.

Many on the right have long been critical of Google and its ties to Democrats, and Trump may be under pressure from some in the GOP to go after the search giant.

Given the president’s volatility on many issues, antitrust experts steer clear of trying to predict how this administration will approach tech’s antitrust concerns.

But few doubt that the EU’s decision will impact the U.S., possibly creating an opening for Google foes like Yelp or Oracle to take their grievances to domestic regulators.

“You can no longer just say, ‘Those concerns about anticompetitive conduct are just purely theoretical,’ you can point to the European Commission basically finding Google guilty,” Stoller said. “American courts don’t have to recognize that as binding precedent, but they can’t ignore that it happened.”