Wednesday, June 26, 2019
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When is a big company too big?
In July, the European Commission fined Google a record- breaking $5 billion for violating EU antitrust rules.
It said Google had abused its power in the mobile phone market with Android devices.
It wasn’t the first time Google faced an antitrust fine, and it might not be the last.
Let’s start by trying to understand what a monopoly is. The dictionary says it’s…
In other words, it’s the only seller in a market.
We’ve seen plenty of famous monopolies throughout history,
from Standard Oil in the 1890s to Microsoft in the 1980s.
There are a few common things that happen when there’s a monopoly,
barriers to enter a market, a lack of competition, unfair advantages, control over prices and, often, regulation.
Here’s what happened with Standard Oil Trust in the nineteenth century.
Around 1880, the company controlled roughly 90% of U.S. oil production.
It bought out smaller companies and had nearly total control over prices for consumers.
This worried regulators.
By 1911 the Supreme Court decided Standard Oil had to be broken up in a landmark antitrust ruling.
So is Google a modern-day monopoly like Standard Oil?
The European Commission thinks so, at least in certain parts of its business.
Here’s where Google got in trouble with its Android operating system.
Android runs more than 80% of the world’s mobile devices like smartphones today.
EU regulators said Google forced these device makers to pre-install Google apps like Search and Chrome,
making it more difficult for competing apps to gain traction.
The EU ordered Google to unbundle its apps from Android devices, which it recently agreed to do.
This wasn’t the only time the EU hit Google for breaking antitrust rules.
In 2017, regulators fined the company $2.7 billion for abusing its dominance in the search market.
Google’s search engine has around 90% of market share in Europe.
The European Commission said the company abused its dominance in the search market
by giving its comparison shopping service an illegal advantage over rivals.
Let’s say I was looking for a new pair of headphones.
Google’s comparison shopping service listed a bunch of options at the top of the page.
It was much more likely I’d click on those top results, generating revenue for Google
and not a rival comparison shopping service further down the page.
Yelp, for example, has complained to the EU that Google unfairly promotes its own search results,
making it less likely users will click on other listings and reviews.
The risk is that Google is stifling innovation and competition.
One thing to note is that it’s not illegal just to be a monopoly here in the EU.
It’s when monopolies abuse their power at the expense of consumers that they can start to get in trouble.
Here’s where it gets tricky with Google.
It says it actually helps consumers by having a dominant position in the market.
CEO Sundar Pichai argues Android’s operating system creates
more choices for consumers at an affordable price.
This where Google’s monopoly is a little bit different than historical examples like Standard Oil.
Unlike oil, the services that Google provides are mostly free.
It can be hard to see how Google’s dominance is harming consumers
when many of us can’t imagine life without Google Maps or Search, apps that are free.
So far the European Union has taken a lead when it comes to regulating big tech.
The full EU fines are still a small portion of Google’s overall revenue.
But if more regulators start trust-busting, the bills could add up.


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