European action will likely feed Trump’s paranoia.
The €2.4bn fine on Google by the European Commission for allegedly abusing its dominance in internet search services, may be the least of its worries.
The fine would be enough to sink most other companies, but it represents a small fraction of Google’s costs. It spends €16bn alone on research and development.
The real worry for Google is that it now has only 90 days to formally responded to the competition charges and show how it will cease the anti-competitive practices or face further penalty payments of up to 5% of Alphabet’s (parent company) daily worldwide turnover. This could lead to a further €12bn in fines.
How Google responds to these demands has been left to the company. The size of its European sales is not broken down but we do know that through its Irish operation which controls sales into most of Europe, Middle East and Africa, it recorded profits of €341m on revenues of €22.6bn.
However, Google has spent a lot of funds building its European search engine services and now has 92% of the EU internet search market. Microsoft’s Bing and Yahoo and others fight over the remaining crumbs. In the US, Google has an estimated one-third of the market. In the long term, Google would hope to turn this dominance in the European engine search market to expand its ad placement service AdSense and its mobile Android product. However, these Google services too are under scrutiny by the commission and could spell more trouble for the company.
Google’s AdSense, which is used to place advertisements on Google and third- party websites, is being investigated over concerns the company placed unfair restrictions on the ability of third-party websites to display search advertisements, according to the commission.
It also alleges Google abused its Android market dominance by placing restrictions on Android manufacturers and mobile network operators. At issue is that it uses its Android mobile operating system as a Trojan horse to promote its own products and services at the expense of rivals. Specifically, the complaint centres on its requirement to pre- install Google Search and its Chrome browser on devices.
Experts and some of the company’s competitors claim any changes would most likely require greater oversight of Google’s products, including a potential independent monitor over its search services in Europe, particularly its algorithms which are the key to the success of its search engine, to guarantee it continues to comply with the competition ruling.
Google’s dilemma will now take centre-stage as the tech giant fights doggedly to protect its crown jewel — it’s closely guarded search algorithm — from the prying eyes of regulators and competitors, but also show it to be compliant with the commission’s demands.
The commission’s heavy-handed anti-competition ruling against Google will ruffle the feathers of other US tech companies, including Apple, Facebook and Amazon. The EU’s attempts to regulate the internet market will feed US president Donald Trump’s paranoia that Brussels is unfairly targeting US companies. That European tech companies have mostly failed to keep pace with their US rivals should concern all Europeans.
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