Dateline  Newcastle upon Tyne - Saturday 14th September, 2024 06:12

EU COMMISSION SEARCHING FOR A BARGAIN

by Tim Jones, 28th June, 2017

There is no doubt that Google is a successful company. It makes a profit from its business model. Could this be why EU mandarins have imposed a €2.4 billion fine?

You and I use Google's clever search engine free of charge in exchange for seeing some minimal adverts. However, there is a recent wrinkle that has caused EU anti-competition bureaucrats to sizzle in their saunas.

Google Shopping? Where's the problem?
The EU's argument is that when you search for something consumable Google gives prominence to items that appear in its own Google Shopping section.

Google Shopping,^[1] which used to be called Google Product Search, Google Products and Froogle, was invented by Craig Nevill-Manning to give a price comparison list from both online and high street traders in searches.

At first, Google Shopping showed products and prices sent in by vendors, with profits being derived from AdWords advertising, like other Google services. In 2012, Google changed its Shopping operation to be powered by merchants paying to list their products on the service.^[2]

Now it is clear that Google is the market leader in online searches, and here is where the EU competition tin pots start rattling. They operate on a Victorian, Classical Economics model, where monopolies are forbidden as they cause distortion to the supply and demand equation. Heavy regulation is applied as monopoly status is approached to not only keep goods affordable but also promote competition.

It's the same argument that says Rupert Murdoch, boss of The Times, News Corp, Fox News, and The Sun should not take full control of Sky Television as he would hold a near monopoly of news production for the UK.

More laissez faire economists argue that companies should occupy positions in the market according to their ability, popularity, and profitability. Google is a major Silicon Valley innovator, say the Freedman acolytes, so should become as dominant as it deserves. Many in the USA cannot grasp what the EU is saying. Competition regulation is the enemy of free enterprise and the American dream.

EU Commissioner for Competition
Margrethe Vestager is a Danish politician, who served as a Member of Parliament from 20 November 2001 until 2 September 2014. She has been a career politician since leaving university in 1993.

She took over from Joaquin Almunia in 2010 with a zeal for punishing those foreign companies selling to Europe who in some way disadvantage the home grown vendors. Google, Microsoft, and Cyprus Airways were some of her targets.

In the case of Cyprus Airways, Vestager ordered the airline in January 2015 to pay back over €65 million in what she said was an illegal subsidy as part of a restructuring package. Cyprus withdrew European operations resulting in 550 lost jobs and reduced competition.^[3]

Almunia had initially opened the Google case in 2010, reaching a settlement by 2014, but he was unable to bring it to the European Commission before his term ended. Vestager inherited the investigation with a greater enthusiasm for chasing Google for alleged competition violations.^[4] She also started investigating the tax affairs of Fiat, Starbucks, Amazon, and Apple.^[5]

All companies are formed to make a profit. There is nothing illegal about that. Shareholders on the one hand and customers on the other accept this trading principle that was evolved during the eighteenth and nineteenth centuries.

If some companies rise above others in activity and profits it is because they do the job better in some way. Maybe they have more innovative products, maybe a price advantage, or even a better after sales service. It seems to me that Google scores on all of these. being free of charge to the user like you and me. It manages to deliver relevant results, so its innovation works. The fact that it can use our browsing history to deliver tailored content is not only useful to us, but attractive to its paying subscribers, the advertisers.

The EU Competition Commissioner can see this as clearly as we can. The truth is that Vestager, who innovates nothing, who has never made a saleable product in her life, who works for a protectionist cartel, wants to derive income from successful foreign businesses by means of a Mafia style racket.

Is this an Open Market?
Commissioner Vestager said, "What Google has done is illegal under EU antitrust rules. 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."

Europe's latest efforts to rein in technology companies stem from continuing unease that Silicon Valley has come to dominate how the continent's 500 million citizens interact online.^[5]

Google has rebuffed the EU's claims, saying that its services had helped the region's digital economy grow. It has also said that significant online competition remains in Europe, including from companies like Amazon and eBay.

Some of Google's competitors want to curb the company's services in Europe, which includes its search algorithms, Google's most important intellectual property. Google will oppose this.

This protectionist attitude of the EU is hypocritical. Would the Commissioner fine Mercedes Benz or BMW for only supplying German radios in their cars? After all, this excludes other suppliers.

Could Google avoid this infringement of its commercial activity by withdrawing or crippling its offering to Europe?

There is a dependency in the EU around digital advertising. Removing this threatens online businesses in Europe, putting a swathe of companies, small freelance enterprises in particular, out of business. This ruling has the potential of adding to Europe's already abysmal unemployment rate. This witch hunt is stupidity without equal.

Change or suffer even more
The American giant company has 90 days to comply with the anti competition ruling. It needs to remove its link between search results and its shopping channel.

If Google fails in this, it will be liable to further ongoing fines of 5% of its daily worldwide turnover, backdated to the start of the noncompliance. Last year Alphabet, Google's parent company, reported a €80 billion turnover. This would divide down to a proposed fine of almost €11 million per day.

Don't think this is all. Euro Competition vultures are sizing up Google for its Android operating system as well as its fabulous Google Maps application.

Free the spirit
The Internet is one of the most profound inventions of the twentieth century. Its rationale, distasteful to authoritarian despots, is that it is free from government interference. The World Wide Web cannot be partisan, but it can be a medium of liberation.

However much huffing and puffing Margrethe Vestager engages in, there can be no justification for one country or grouping dictating to another how to conduct its business. The best it can do is erect artificial barriers to trade.

Her threats and fines are merely money making measures akin to those so called safety cameras, flashing their way into motorists' wallets.