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EU Watchdogs Declare Google a Monopoly

Photo Credit: Sidney Photo Credit: Sidney
Photo Credit: Sidney Photo Credit: Sidney

When a company’s name becomes a verb in the dictionary, there may be evidence of a monopoly.

Perhaps it is no surprise, then, that EU antitrust regulators have declared Google a monopoly and accused the tech behemoth of “anti-competitive practices.” The EU’s ruling was accompanied by a $2.7 billion fine and is expected to be followed by further regulation as the EU continues an aggressive investigation of the mobile phone and online advertising arms of Google’s business.

Google’s new monopoly status makes it easier for competitors to bring civil suits against the company. “We can expect to see a series of damages claims brought by the rivals that were excluded from the market by Google’s conduct,” said Peter Wills, co-head of competition law for Bird & Bird in London.

Google has historically remained more or less impervious to the regulatory efforts of watchdogs like the EU, as well as to general trends in the technology market. Share prices in Google’s holding company, Alphabet, have fallen just 1.8 percent, despite a prolonged selloff of technology stocks. Since the EU began investigations of Google in 2015, the company’s stocks have doubled. Today, Google boasts a $666 billion market capitalization, making it the second most valuable stock in the world, behind Apple.

However, the EU’s similar declaration against Microsoft in 2004 checked the Microsoft’s expansion into then-budding markets like internet advertising, thereby opening the door for Google’s rise. The recent ruling against Google may well facilitate the growth of some hitherto unknown corporate entity.

Typically, when the EU administers a regulatory punishment like the one it has levied against Google, it also mandates a specific course of action by which the company can repair the problem. The union’s decision not to provide such a mandate to Google, evidence of the EU’s ambivalence about how to handle the business implications of modern technology such as algorithms, means Google will have to devise its own strategies to reduce its “anti-competitive practices.” Ultimately, Google must prove that other companies pose significant competition to its business.

The classification of Google as a monopoly “will provide a cornerstone for assessment of other ongoing cases, especially regarding Android and Adsense,” says Jonas Koponen, competition chief at Linklaters law firm in Brussels. The EU’s review of these cases may lead to repercussions far more damaging to Google.

As it stands, websites that pay for the use of AdSense are prohibited from running ads that promote Google’s advertising competitors. If the EU forces Google to allow AdSense customers to run its competitors’ ads, Google would likely have to radically change is business models, or risk losing a considerable portion of its advertising revenue, which accounted for 85% of Alphabet’s total revenue last year.

The Android investigation could carry its own far-reaching implications. Currently, Google preinstalls its Google Play app store on all devices running the Android OS. If new regulations allow phone manufacturers such as Samsung to feature their own app stores on the phones they build, Google’s dominance could be further stunted. Moreover, Samsung, other phone manufacturers, and the host of other companies Google has bullied out of various markets could bring civil suits against Google.

The EU has been consistently tough on the giants of the technology industry. In 2016, it demanded 13 billion euros’ worth of unpaid taxes from Apple. In 2004, the regulatory pressure it imposed on Microsoft allowed Google to emerge amongst the world’s leading technology companies. Now, the EU is putting similar pressure on Google itself. Technology is rapidly changing the ways companies operate and forcing us to reevaluate business ethics.

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