Narrative: EU vs US Tech
Each narrative page (like this) has a page describing and evaluating the narrative, followed by all the posts on the site tagged with that narrative. Scroll down beyond the introduction to see the posts.
★ EU Fines Google €2.4bn ($2.7bn) Over Favoring Google Shopping in Search Results (Jun 27, 2017)
The EU has three open antitrust cases against Google, and has just announced its final decision in one of those cases, which concerns Google Shopping. Very briefly, EU law doesn’t punish dominance in a market per se, but does place limits on certain behavior by dominant companies, specifically those which give their other products and services an unfair advantage. The EU has concluded firstly that Google search is dominant in the EU, and secondly that Google abused that dominance by favoring its Google Shopping feature over other “comparison shopping services”. It has therefore set a €2.4 billion ($2.7bn) fine based on revenue from Google Shopping in 13 countries where it’s available since as long ago as 2008, with a threat to levy an additional 5% of Alphabet’s total revenue going forward if Google doesn’t comply with its directives within 90 days. Other than the fine, the directive says Google has to stop favoring Google Shopping over other comparison shopping services, presumably either by eliminating the Shopping box that appears at the top and merely allowing Google Shopping results to appear with the other blue links below, or by featuring every available comparison shopping service in that box at the top and letting users choose. Predictably, Google has said it feels the decision is wrong and may appeal.
On, then, to what this all means. Firstly, this is just the first in three separate cases, and I’ve previously written in depth about the one that concerns Android here and here. In its decision, the EU explicitly says that this case sets a precedent, which certainly suggests it’s likely to find and act similarly in the other two cases. Secondly, the fine is substantial, but ultimately not the biggest punishment for Google here. Rather, the most significant outcome is restrictions on promoting other Google services in search, which applies for today onto to Shopping but by implication would also affect other linked products that get prominent promotion in search results, whether Maps, News, or potentially other categories too. Put that together with the precedent point, and we’re very likely to see similar restrictions on bundling and promoting other services in Android and possibly other areas too. Thirdly, the decision is notable for a very European approach to defining markets, which I mentioned in one of those earlier pieces on Android: the EU tends to define markets in ways normal people probably wouldn’t, because that allows it to make findings that otherwise couldn’t be made. In this case, it’s defining Google Shopping as a comparison shopping service rather than just a more useful way to present shopping-related search results and/or ads, which is how Google sees them. Once you define Google Shopping in that way, then of course Google is unfairly promoting Google Shopping over other comparison shopping services – can you even name any others? Google’s own algorithm, which benefits only from being as good as possible, rarely ranks any others above the fourth page of organic search results, suggesting their limited relevance. But as long as the EU is determined to take that approach, I see very little Google can do to fight against this decision, because it’s based on a market definition the EU gets to decide on, and which Google is essentially powerless to change. Overall, this feels like something of a watershed moment in Google’s relationship with the EU – I think any appeal is very unlikely to succeed, and at most will push back the implementation of the decision and the forced unbending of Shopping from search. But there’s lots more to come here, and Google is going to end up operating very differently in the EU from the rest of the world as a result. See a recent case in Russia for a small sense of some of the possible implications of the Android case.
One quick note: I’ve used the term “EU” throughout for simplicity’s sake, but it’s worth noting that technically it’s a specific part of the EU organization, the European Commission, which is taking this action.
via Bloomberg (see also the EU announcement and Google’s blog post)
EU Reportedly Facing Possible Billion Euro Fine in First Chunk of EU Antitrust Case (Jun 16, 2017)
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EU Opens In-Depth Investigation into Qualcomm NXP Acquisition (Jun 9, 2017)
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EU Reports that US Internet Companies Have Improved Removal of Hate Speech (Jun 1, 2017)
Back in December, four big US Internet companies signed a voluntary code of conduct with the EU under which they agreed to improve and accelerate the removal of hate speech from their platforms. Now, the EU is reporting good progress on those goals, with twice as high a percent of offending content removed, and Facebook and Twitter removing substantially more content within the first 24 hours, while YouTube slipped a little in this regard for reasons that aren’t clear. As Facebook has discovered, policing content is an expensive and labor-intensive task at the best of times, but having external standards set like this raises the stakes even further. The big risk in the EU and specific European countries is that this moves from voluntary codes of conduct to actual laws with significant consequences for non-compliance, so the big US companies are wise to do what they can to play nicely to try to ward off such outcomes.
via Reuters
★ EU Fines Facebook 110m Euros Over Misleading WhatsApp Deal Info (May 18, 2017)
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★ European Firms Including Spotify Sign Letter to EU Asking for Action Against “Gatekeepers” (May 5, 2017)
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Amazon Settles with EU Over Anticompetitive E-Book Practices (May 4, 2017)
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Google Settles With Italy for $320m Over Unpaid Taxes (May 4, 2017)
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Apple files 14-point appeal against European Commission’s $14 billion tax edict – AppleInsider (Feb 21, 2017)
Long story short: Apple has filed its formal appeal of the EU’s action against Ireland regarding Apple’s tax treatment in the country, and it argues for the dismissal of all charges on the basis of a number of different points. That’s not surprising – Apple immediately after the ruling said it would appeal, so this is just that process rolling along. I’ve never been a huge fan of the ruling – it felt like judicial overreach and part of the ongoing spat between the EU and US on taxes and on competition between US and European tech companies rather than something based on actual legal merit. Nevertheless, as I admitted at the time, neither I nor the vast majority of other tech industry commentators are actually experts in EU tax law, and even admitted experts like the Irish authorities, Apple’s accountants and lawyers, and the European Commission’s investigators can actually agree on what the right answer is. We can state opinions all we want, but they don’t actually matter – this case will go to court and at some point a conclusion will be reached which all the parties will have to live with. A move to enable lower-tax repatriation in the US would certainly go some way to bolstering Apple’s case that it already pays adequate taxes in its home market on what it earns in Europe, but Apple has no direct control over that outcome either.
via AppleInsider (Apple’s filing here and some fairly Euro-skeptic analysis by Florian Mueller here)
Apple’s international iTunes business moves to Ireland on Feb. 5 – Apple Insider (Jan 27, 2017)
Interesting to see this move go ahead in the wake of the recent EU Ireland tax action. Ireland is obviously a big base for Apple in Europe, and this is mostly about moving the legal home of the iTunes business in Europe, rather than a big physical move. But it’s intriguing to see Apple double down on its presence – legal and physical – in Ireland with all the uncertainty over its tax status there. Apple is, of course, fighting the EU’s ruling with the help of the Irish government, but there’s obviously still a decent chance that things don’t go Apple’s way here.
via Apple’s international iTunes business moves to Ireland on Feb. 5