The Aftermath Of EU’s Record $5 Billion Penalty On Google, And What It Means Moving Forward

Left: European Union flags [Shutterstock- jorisvo] Right: Google headquarters [Shutterstock - achinthamb]

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Eric Lieberman Managing Editor
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The European Union’s antitrust arm hit Google with a record $5 billion fine Wednesday for allegedly violating competition rules, leaving tech policy experts, U.S. officials, general observers, and the company itself wondering what it means for the future of competition globally.

Google is charged with essentially forcing phone manufacturers to pre-install the Google Chrome browser and its popular search app if users want to access the Play Store, which offers all other apps. Also, the EU’s competition watchdog said Google paid certain phone makers and mobile network operators to pre-install its search app exclusively, while preventing them from selling phones that run non-approved Android-like operating systems.

“So far, the Android business model has meant that we haven’t had to charge phone makers for our technology, or depend on a tightly controlled distribution model,” Google CEO Sundar Pichai wrote in a blog post defending his company’s set up. “But we are concerned that today’s decision will upset the careful balance that we have struck with Android, and that it sends a troubling signal in favor of proprietary systems over open platforms.”

In the press conference announcing the substantial monetary penalty — which broke the record previously held by Google for another anti-competition violation — EU Competition Commissioner Margrethe Vestager swore she “very much liked” the U.S., apparently trying to eschew concerns that she is unduly targeting American companies, according to Reuters. Perhaps it was a direct response to reported comments from President Donald Trump, who allegedly told the president of the European Commission — the governing body of the EU — during the G7 summit, “your tax lady, she hates the U.S.”

Even with leaders that unabashedly supported his political opponents, Trump seems to see it as predatory behavior against an American corporation.

“I told you so!” he tweeted Thursday. “The European Union just slapped a Five Billion Dollar fine on one of our great companies, Google. They truly have taken advantage of the U.S., but not for long!” (RELATED: Why Is Alphabet CEO Eric Schmidt Technically Serving In The Department Of Defense?)

In recent years, Europe has struggled to build tech companies and industries that can compete with the formidable Silicon Valley, leading to some suspicions that the EU is trying to level the playing field, or at least give their domestic firms a leg up.

“This may go down in history as the stupidest antitrust suit of all time. Google’s open source model has enabled a fiercely competitive ecosystem of device manufacturers offering superb, if less sexy, products at a fraction of the cost of Apple’s ultra-premium product,” Berin Szóka, president of the think tank TechFreedom, said in a statement. “For all her technocratic polish and lofty rhetoric, Vestager is channeling the same populist whirlwind driving President Trump’s own protectionist demagoguery.” (TechFreedom is listed as one of many organizations that receive contributions from Google.)

Such decisions from the EU regarding antitrust are usually met with more widespread pushback from Democrats and Republicans alike. But the current state of affairs, in which tech companies are no longer lauded across the board (for the most part), seems to have ushered in a new era of tech skepticism, despite the jobs and economic boost they create, as well as the services and products they offer. (RELATED: There’s A Newfound Hatred Of Silicon Valley)

The Open Markets Institute praised the move, as did a number of lawmakers and public officials on both sides of the aisle.

Democratic Sen. Amy Klobuchar and others even called on the Federal Trade Commission, America’s competition watchdog, to step in and investigate.

But the FTC doesn’t see it the same way as its counterpart in Europe.

“Once [the EU] find that a company is dominant, as I understand it, that imposes on the company kind of a fairness obligation, irrespective of what the effect on the consumer,” FTC Commissioner Joseph Simons reportedly said. “Our antitrust regime requires that there be a harm to consumer welfare, to the consumer. So the two tests are a little bit different.”

The Antitrust Division of the Department of Justice said it has reviewed the European Commission’s press release, but did not comment on potential action.

“We … look forward to analyzing the Commission’s decision carefully when it becomes available,” the DOJ spokesman told The Daily Caller News Foundation.

Republican Sens. Orin Hatch and Mike Lee of Utah both view the EU’s decision as partial treatment.

“The EU has a history of engaging in regulatory, tax and competition actions and proposals that disproportionately hit U.S. tech companies,” Hatch said in a statement. “This decision calls into question whether these actions are anything more than a series of discriminatory revenue grabs.”

Like Simons, Lee cited the “consumer welfare standard” in which U.S. antitrust agencies “analyze business practices based on the consumer welfare standard” and don’t base such decisions on punishing “successful rivals” of certain competitors — in this case Apple.

Antitrust issues are one of those rare policy debates that don’t cut cleanly across party lines. After all, the far-right Breitbart said “Trump is wrong about Google,” agreeing with aforementioned lawmakers like Klobuchar, Blumenthal and others.

Bloomberg’s editorial board described it as a “misfire.”

Of course, it’s not the first time Europe has clamped down on U.S. tech companies. (RELATED: Europe Vs. Silicon Valley: How The Continent Is Responding To Big Tech’s Growing Power)

But with an ongoing third investigation (aside from the most recent two in roughly the last year) into Google’s AdSense advertising service and if it obstructs rivals in a different way, another massive fine could be imminent.

As a humongous and deep-pocketed company, Google itself may be able to sustain such hits. However, it signals that the nuances of deciding what is vibrant competition is changing for a massive market. The precedence Google is steadily establishing and expanding may make companies looking to operate abroad and serve those around the world take a second look.

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