Tuesday, July 4, 2017

(The Big Disrupt) Google: Why Google's future In Europe Is About Get Expensive

With the news of Google being slapped with a record 2.4 billion fine, it caps an end of a saga that really isn't over just yet. Google were found last week to be guilty of abusing their dominant market position in search to promote its Google shopping service over its competitors

This really should send shivers down the spine of other tech giants such as Facebook, Apple and Amazon who habitually use their dominant position in one market to bolster a service in other. Indeed, one of the reasons why Google, Facebook, Apple and Amazon are so feared is because they can use their dominance one or more markets along with a large war chest to bury even their most strident competitors into submission. 

The last decade or so has produced one case study after another of US tech companies beating their competitors to a pulp whether its Apple taking over the smartwatch market in a matter of months or Facebook using its dominant position in social media to copy snapchat out of existence as the self-titled camera company currently hovers just above its original IPO price 

With this in mind, it's little surprise that Walmart, a highly profitable company that represents 14% of the $700 billion grocery market, has 4,692 stores and a world class distribution network took a big hit on Wall Street when Amazon, barely a blip in the marketplace, made headlines for buying Whole Foods, which only has 466 stores and a 1.2% share of the market 

In any other case, Walmart would have nothing to worry about but since Amazon enjoys a dominant position in more than one marketplace and has one of best loyalty programs ever in Amazon primeit can quickly hoover up market share offering its other services (for a time at least) free to entice prime subscribers to shop at Whole Foods online or click and collect in store.  

In short, Google, Facebook, Apple and Amazon pose a threat to competition in any market they enter and no one knows this more than the EU. While the 2.4 billion fine isn't exactly going to bring Google to its knees, the EU has been sniffing round Google's mobile open source OS Android accusing the Mountain View based company of forcing manufactures to load its apps over competitors which should concern Google as it may have a better case however, not much has happened since last year.        
In truth, Google and other US based tech giants run the risk breaking EU antitrust law as it focuses on the anti-competitive behaviour of dominant companies that effect the it actual competitors as opposed to the American tradition of protecting consumers from the use of  the dominant firms market power. 

While Google dominance in the search and mobile OS markets has been probed by the Federal Trade Commission in the past, it has largely come out of its battles with the FTC unscathed as the FTC has been unable to prove that Google's dominance negatively impacts consumers given most of Google's products and services are either free or priced competitively in the markets it operates in.  

What this means is that the FTC can't punish Google for using its dominance in one or more markets to bolster a service in another even if that service itself becomes a dominant player so long as it provides net benefits to the end consumer.  

However, antitrust in Europe is a different monster entirely and Google in particular could end up cutting more checks than it bargained for as the EU legal process is nowhere near as litigious as its American counterpart and Google has a lot of powerful enemies, Oracle, Microsoft and Newscorp among them, who are more than willing provide evidence against the company through the EU's complaints driven system. 

In sum, Google may be 2.4 billion pounds lighter but with the EU looking to bring Silicon Valley behemoths like it to heel and its bevy of rivals all too willing to help, fines in the billions could become business as usual. 

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