Thursday, July 19, 2018

EU's $5 billion fine on Google may not be in the consumers' interest

The European Union (EU) has just slapped a huge $5-billion anti-trust fine on Google for automatically bundling its own browser and search app on phones that use its Android operating system (i.e. the vast majority of phones in the world, an estimated 2 billion of them).
Donald Trump is furious, but then Donald Trump is always furious, and nobody really cares about that. Google, though, is definitely miffed, especially given that this is the second record-breaking fine the European Commission, the regulatory body of the EU, has served Google with this year - the previous one concerned Google's practice of highlighting its own comparison shopping links within its own search results, which sounds pretty reasonable to me, but with which the European Commission also saw fit to take issue - and it intends to contest this latest decision, just as it did the previous one. The EU decision only applies to European phones, but the ruling could affect how Google bundles its apps elsewhere was well. The company has just 90 days to implement the required changes.
Margarethe Vestager, the EU's competition chief argues that bundling its own apps with the Android operating system gives Google an unfair advantage, and in a way it does, because hardly anyone bothers installing competing apps in place of Chrome and Google Search and other preinstalled apps like Play Store and Google Maps (known as "status quo bias"). And why would they? They are still the best on the market, even if they do support Google's ravenous appetite for advertising revenue. It seems to me that, when you buy an Android phone, you know what the deal is (wall-to-wall Google), just as you know what the deal is when you buy an iPhone. If anyone really objects to Google's quest for world domination, they are welcome to download alternative apps under the current system.
I just wonder whether Ms. Vestager bothered to ask consumers whether they actually cared. Certainly, if the ruling means that Google will start charging for its operating system or its apps (or both), I'm pretty sure where the consumers' loyalties will lie. I know where mine do, and I too will be miffed if an EU legal ruling affects the ease and seamleasness of Google's systems and apps on MY phone.
There's also a good argument to be made that Europe's competition commission under Ms. Vestager is not actually as objective and impartial as it needs to be in a system where it represents judge, jury and executioner. The commission is politically appointed and under pressure from large European tech companies to take a protectionist approach (although Ms. Vestager insists that she is not doing so). And shouldn't the bottom line be whether the consumer suffers from the practice. I don't see too much suffering.

$5 billion is about 2 week's revenue for Google, so it's no surprise that the company just shrugged off the fine (while continuing to contest it on principle).
A couple of weeks later, Alphabet Inc (Google's parent company) announced it beat quarterly profit estimates as advertising sales continue to soar, and its share price took a nifty little up-tick.

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