Google wrings hands over EU fine, but does not need “distraction”

Every big tech company seems to go through it – IBM, Intel, Microsoft – the European Commission anti-trust actions based around abuse of dominant position. Now it’s Google’s turn. The €2.42 billion fine, is fairly small by Google’s revenue and profits, but huge in terms of regulatory fines. The advice to Google should be to take it on the chin and cozy up to the European Commission and sort out a change in practice as quickly as it can. The EU simply doesn’t lose these cases on appeal although lawyers always say, “you can appeal,” but that’s just so they make even more money.

The first thing to understand is that Google may believe, because of the language of the European Commission, that this is an accusation. It is not, it is a guilty verdict. It is one of the only courts in the world which sits, quietly collects its own evidence, hears that evidence, decides if the party is guilty and then and only then involves them. It is asking for mitigation, and the company’s thoughts on how this market might operate more fairly.

The trouble with large US businesses, especially those which came to power during a Republican regime, is that they have, up until now, been allowed to do whatever the hell they wanted. Suddenly as they become dominant on the global stage and all the rules change.

It is fine to bully a rival, but when you have won a sizeable chunk of a market, and it could be as little as 33% or as much as 65%, you are now in a precarious position, you are approaching dominance and your morals have to change. Most multinationals cannot make that change without help and the European Commission has helped a number of them. Companies cannot collude to fix market prices, they cannot give everyone a rebate as long as they don’t use the competition, they cannot tie one product in which they are dominant, to a market in which they are not, they cannot launch products which affect the market, but which don’t yet exist, and they cannot create a software backdoor which slows down a device when rival software runs on it.

These may seem like little more than misdemeanors to the incumbent US “deal making” president, and to a non-dominant player, they are. But they distort markets once one player is bigger than everyone else.

It’s a matter of culture. IBM brought in the feared “business practices” division, once it bumped into first the Justice Department and then the European Union’s DG4. It went around checking that IBM was not cheating or bullying in any deal it closed. Culture is hard to fathom though. Anyone brought up on the IBM culture prior to the European Commission case would still invent paper products that were “just around the corner” to unhook a sale, and felt it was simply a “tough” sales tactic. Many of them were fired for it.

Microsoft had to put up with a software expert coming on board, who had access to source code, who got to say what Microsoft could and could not do in a single monolithic block of code. Microsoft tried to say that the browser was built into the operating system and could not be removed from a Windows device. It was silly really, since anyone who had written code knew this not to be true, but Microsoft argued that in a court of law.

There is a tendency for US firms to think that the European Commission is gullible, easy to fool and can be “got around.” And this leads them to waste their time on appeals to the European General Court (which used to be known weirdly as the Court of First Instance when it actually was the court of last resort).

The Google case is for preferring in searches its own comparison shopping site. Now this is sloppy. Everyone else other than Google has to spend a fortune on SEO tools and staff to get to anywhere in marketing, especially search marketing. It charges companies to be at the head of search marketing. But Google think’s it is fine to “give” that benefit to itself for free. “After all, it is our search engine.”

It’s like saying “It’s our chip design,” if you are Intel, why should we let anyone else compete with it; or it is our operating system, why should we let another browser work on it; or it’s our mainframe, why should we let any other peripherals attach to it. Think about it “It’s our search engine, why should we search other people’s products as well as our own?” As we said, sloppy, obvious and easy to prove.

The investigation has been going since 2010 and denying a charge which is true is just dumb. Google should have just apologized and changed its search results in the first weeks. It has instead done 5 years of damage. The best way for Google to appeal against the fine is to say, “You’re right, we will fix it, and because we are being so helpful, is there any chance you might drop the fine a bit?”

The EU fine is based on violations found in 13 countries since 2008 when Google comparison shopping first started in Europe. It must now stop doing it within 90 days or face additional penalties. A culture that increased an illegal activity over a period of five years, will find it hard to stop in just 90 days.

We are often told that Google is a really smart company, made up of really bright people. It is odd that smart people, when operating together in a large enterprise, both behave collectively stupidly, and are collectively in denial about it.

Google could kill any other business by tainting search results, and in our own video territory, imagine if you were Sky and whenever a film on your OTT TV service was searched for, Netflix came up just ahead of it, with the same video? It would seem very odd for a company with 20 million homes as customers.

The Commission is still investigating the role it played in promoting Android and its AdSense platform. What this does it is make companies defensive, and forces management time to be wasted worrying about how to hide these “misdemeanors,” instead of simply eliminating them and inventing something new.