Google and the EU Antitrust Law
Introduction
The antitrust laws are a set of rules and regulations tailored to promoting a competitive economy by prohibiting strategies that restrain or are more likely to put restraints on competition and restrict the forms of permissible market structure. The laws prohibit any false acquisition or preservation of monopoly powers. In the EU Competition law, Article 102 of the Treaty on the Functioning of the European Union (TFEU) has prohibited abusive, unilateral conduct by dominant companies. The demonstration of abuse of dominance will be proven through the existence of three elements: market definition, dominance, and abuse. Artistrust within the EU has been gaining significance since the laws continue to infiltrate daily business practices, and also, the EU is continually enlarging t0 enhance the importance of EU law. The laws extensively affect the medium and large organizations together with public authorities. While the antitrust laws in the United States focus on consumer protection, the focus in Europe is on preserving competition.
Notably, Google being an important technological giant within the digital markets, would have its operations attract the EU Commission to investigate its practices in Europe (Toma, 2017). The Commission questioned whether the company’s business practices were at odds with the EU’s competitive regime. In both Google Search and Google Android, the Commission did find the company for the illegal abuse of dominance in online markets (Lu, 20190. While Google presents numerous benefits among other large digital platforms, the company has gained significant control of consumer information that confers market power. This prompts the development of competition-related concerns and even concerns in consumer protection and privacy.
The EU Commission frequently considers whether Google is itself a monopolizer, cuts off the upstart, specializes in its search engines to expand its internet empire. The competition authorities’ decisions will undoubtedly shape the digital market’s future (Pasquale, 2013). Therefore, failure to implement strong actions, then centrifugal tendencies will increase their dominance on the internet, and innovation will concentrate a number of large companies able to promote new services on a less-level playing arena (Pasquale, 2013). Antitrust laws need to increase in power and scope so that the digital marketers do not experience the domination of monopolistic trusts. In this modern economy, large companies such as Google should not exploit their market domination and make it the natural price of innovation.
Overview of Google, LLC.
Google LLC is an American search engine company founded in 1998 by Sergey Brin and Larry Page. Over 70% of global online search requests are handled by Google, thus making it a fundamental part of most internet users’ experiences. For Google, the 21st century has seen it grow from strength to strength by introducing various products and services that consumers wholesomely accepted. These included multilingualism, Google Search Appliance providing more services, the addition of the cost per click pricing in its Adwords, Google Labs, Google AdSense, Google Apps, Google Scholar, and Google Grants (McFadden, 2020). Google AdSense would allow advertisers to connect seamlessly with a vast network of websites. Through an algorithm, AdSense would match adverts to websites. This became a boost to advertisers, and the blogging movement exploded in popularity. Over time, Google has been enjoying strong financial results that have helped it invest back into the company to bring in new products and services while improving the existing ones.
Legal Issues and Regulatory Environment Surrounding Google Antitrust Issue with EU Antitrust Law.
In the European Union, Google has always raised concerns about it being an economic agent damaging the competitive process due to allegations placed by the British Site Foundem. The latter filed a complaint in November 2009 indicating that Google was exploiting its dominance in the European mark to the detriment of other competitors and consumers 9Karakas, 2018). To date, Google Search is argued to account for an estimated 95% of the search market. Hence, the European Commission would begin a formal investigation against Google of whether the company was promoting its services and depriving other companies of business opportunities. In its attempts to settle the case in February 2014, the company made some concessions to the EU 9Karakas, 2018). it agreed to provide more prominence to rival websites by displaying results from three competitors whenever it has promoted the specialized search services. It also agreed to have search results labeled from their services more distinctly. The company would also lift any restrictions preventing advertisers from moving their campaigns to the search engines with competing entities.
In reference to this comparison shopping matter, the Commission concluded that Google favored its comparison shopping service “Google Shopping.” It had systematically positioned and prominently displayed its service in the general search results pages regardless of their merits. Its service shopping did not have the system of penalties cooled to its service, which was applied to other comparison shopping services based on defined parameters. This stem could lead to the competition having lower ranks on the general search results page. As per the Commission’s antitrust assessment, these actions hindered rival comparison shopping services and an adverse impact on users and consumer rights since the consumers did not see the most relevant results to their requests. However, Google would indicate that their dominance arises from innovative products and services, and they are not abusing the market.
In April 2015, the EU Commission conveyed a Statement of Objections to Google indicating its investigations on whether the company had entered into any anti-competitive agreements or abused a potentially dominant position. In this second investigation, its handling of mobile devices on Android was questioned (Karakas, 2018). Typically, the manufacturers have signed contractual agreements with Google to get the right to have Google applications installed on their devices. The Commission held that the company was infringing the EU antitrust laws by mandating or incentivizing the devices’ manufacturers to exclusively pre-install its applications and unlawfully hinder the development and market access of competing operating systems and applications or services (Karakas, 2018). Also, the Commission indicated that Google was young particular applications and services in Android devices with other Google applications, these actions from Google were hindrances to the development of innovation and the access to markets for the competing mobile OSs and applications or services hence a violation of Articles 101 and 102 of the TFEU.
From the above two cases, it is possible to see different concepts of antitrust laws, including abuse, having barriers to market entry, and subsequently, monopolization (Anno, 2016). European courts have not distinctively defined the concept of abuse of dominant power. Still, the ECJ adopts the abuse approach defined in the Hoffmann-La Roche & Co. AG v. Commission, 85/76 (ECJ. 1979). It is an objective concept that relates to being in a dominant position and influencing the market structure to weaken competition. The European Commission’s view on the abuse concept is any anti-competitive business conduct of a business firm focused on maintaining or increasing its position, which was the complaints laid against Google (Anno, 2016).
In relation to the market share, an entity being a monopoly relies on the strong presumption that it has reached a particular level. As per the AKZO Chemie BV v Commission, 62/86 (ECJ. 1991) case, the court indicated that a firm with a market share of 50% or more indicates a rebuttable presumption of market power. In the Hoffman case, the ECJ ruled that 75% market share was clear proof of a dominant position Anno, 2016). In the Hilti AG v. Commission, 30/89 (CFI. 1991), the European Court stated that considerable shares need to be considered to be proof of a dominant position. This applies when the market share is ranging from 70% to 80%. As of 2020, Google’s market share continues to grow even after calling to have them implement the antitrust remedies three years ago (Brunoli, 2020). This remedy was to have Google allow competitors to bid for advertising spaces at the top of the search page hence directing traffic to their sites.
Ethical dilemma and Respective Frameworks
An ethical dilemma is when a party is presented with a specific situation that requires a decision in two distinct courses of action. Google is facing an ethical dilemma when achieving maximal profits for their shareholders while adhering to the antitrust laws. Generally, antitrust regulations seek to protect the less-dominant business rivals and protect consumers. For Google, it entails ensuring that their products and services do not in any way hamper level competition for competitors providing similar products and services yet using Google Search services to market themselves. To this effect, Google faces the ethical dilemma of getting maximal profits while ensuring that they do not implement strategies that restrain the competitive process from making economic activities less efficient.
The ethical frameworks that Google could consider in dealing with its ethical dilemma. The first ethical framework is the consequentialist theory, where discovering the ethical course of action relies on the results. Before deciding, the results are considered pragmatically (Ohio University, 2020). The desired outcome is selected then the framework reveals the potential actions that will aid to reach that point. Regarding Google’s ethical dilemma, this approach would mean the company identifying what they want from their ethical dilemma and implementing the strategies to reach them there. Mostly, the organization would work to ensure that the majority benefits since it’s about maximizing the positive effects while minimizing the unfavorable effects to others (Ohio University, 2020). Considering that Google is the minority, in this case, it will work to benefit the latter in the face of competing rivals. Nonetheless, this will be taking a massive risk of compromising the happiness of the minority.
The second ethical framework is the social contract framework, which entails people living together within a society according to the agreement set up, which depicts both moral and political behavior rules (Ethics Unwrapped, 2021). The social contract can either be explicit or implicit. An explicit social contract example is a country’s constitution, while an implicit social contract example is the choice of raising one’s hand while in class to speak. According to Philosopher Stuart Rachels, morality is the set of rules that govern conduct that rational persons accept on the condition that other parties accept them. In this case, Google accepting to work within the European region would mean that they live as per their social contract, which is the European Law (Ethics Unwrapped, 2021). The social contract framework is preferred because Google venturing into a business environment should prompt it to act like the rules guiding them. These are the rules which rational individuals governing the region accepted to govern them.
Other Legal Issues Relating to Google’s Operations.
Privacy is a significant legal issue facing Google, with many concerns being raised about how they ensure its users’ privacy as they use the company’s products, services, or processes (Trautman, 2018). In relation to the collection, utilization, disclosure, or security of personal information and other matters that should remain confidential, there will be concerns about privacy-related mechanisms’ effectiveness. Any failure in systems or strategies will easily compromise the privacy and security of the fundamental assets. This is a considerable risk as the users risk losing essential information that could be used maliciously. In contrast, the company risks reputational damage while dealing with the litigation cases that will arise.
Regulatory authorities across distinct regions are continually establishing and devising data protection laws to ensure that consumer assets remain private. Also, these laws could be interpreted and applied differently in a manner that Google does not expect; hence could easily find themselves on the negative side of things. For instance, Europe’s recent legal developments have established compliance uncertainties concerning information transfer from Europe to the United States. Therefore, Google needs to ensure that they are constantly informed of the privacy concerns and the right ways to ensure that the information is protected.
The second legal issue is an increased liability from intellectual property claims. Google is continuously dealing with patent, copyright, and trademark infringement claims against some of their products, services, and technologies/ (Trautman, 2018). Third parties are always seeking broad injunctive reliefs against Goog;e as they file claims in the United States and foreign courts. As a company in the digital world consisting of the internet, technology, and media, other companies hold patents, copyrights, trademarks, and trade secrets. Litigation on allegations of any infringement of the IP rights is hence frequent. As Google continues to develop new products, services, and technologies, it should expect to be dealing with more IP claims.
The third legal issue is tax liabilities. Google is subject to tax rates and adopting any new tax legislation and additional tax liabilities. The company has been accused of avoiding paying taxes via complex intercompany licensing agreements and transfers to tax havens (Chew, 2016). It has also been accused of cutting taxes between 2007 and 2009 through a strategy that moved a huge chunk of its international profits through Ireland and the Netherlands to Bermuda. The company has hence been subject to regular reviews and audits by both local and international tax authorities. Their earnings could easily be affected by future income taxes in jurisdictions with high tax rates, and the opposite could also happen (Johnson, 2008).
Recommendations to Business Leaders and Management
An analysis of Google’s business operations illustrates how the business environment is a fundamental factor to whether a company succeeds or fails. From a legal perspective, each business is required to analyze the applicable legal laws that affect business operations. As a business leader, they need to be aware of legal issues that could arise from their operations and ensure that their strategies ensure they are adhering to the laws. Notably, each business environment has its laws with distinct objectives. As seen with the antitrust laws, while they are almost similar, the United States focuses on protecting consumers while Europe seeks to enhance competition. Therefore, the rulings will focus on these objectives.
Conclusion
As a big tech company, Google has its engagements under constant scrutiny on any violations they could. The EU commission has been particularly hard on the company’s operations in Europe as it is seen to be exploiting its dominant position in the digital market. This has led to Google having to pay massive fines for any respective violations. Therefore, other businesses need to learn that the legal conditions within a business environment make up a fundamental element in the strategies they implement.
References
Anno, C. (2016, September 6). EU and US antitrust: Converging approaches to monopolies? | Le Petit Juriste. Le petit juriste. https://www.lepetitjuriste.fr/eu-and-us-antitrust-converging-approaches-to-monopolies/
Brunoli, J. (2020, September 29). Google grows EU market share despite their antitrust “remedy.” Techzone Europe. https://www.techzine.eu/news/trends/50508/google-grows-eu-market-share-despite-their-anti-trust-remedy/
Chew, J. (2016, March 11). Here are some companies accused of dodging taxes in Europe. Fortune. https://fortune.com/2016/03/11/apple-google-taxes-eu/
Ethics Unwrapped. (2021, January 25). Social contract theory. https://ethicsunwrapped.utexas.edu/glossary/social-contract-theory#
Johnson, C. H. (2008). The Effective Tax Ratio and the Undertaxation of Intangible Investments. U of Texas Law, Law and Econ Research Paper, (135).
Karakas, C. (2018). Google Antitrust Proceedings: Digital Business and Competition.
Lu, E. (2019, August 5). Was the EU Commission correct to fine Google for abuse of a strong market position in online markets? New College of the Humanities. https://www.nchlondon.ac.uk/2019/07/26/elizabeth-lu-essay
McFadden, C. (2020, July 2). Almost everything you need to know about Google’s history. Interesting Engineering. https://interestingengineering.com/almost-everything-you-need-to-know-about-googles-history
Ohio University. (2020, February 7). Three frameworks for ethical decision-making. https://onlinemasters.ohio.edu/blog/3-frameworks-for-ethical-decision-making/
Pasquale, F. (2013). Paradoxes of digital antitrust: Why the FTC failed to explain its inaction on search bias. Harvard Journal of Law & Technology Occasional Paper Series, 17.
Toma, F. I. (2017). The Challenges of Digital Markets for EU Competition Law: The Case of Android. Available at SSRN 3092823.
Trautman, L. J. (2018). How Google Perceives Customer Privacy, Cyber, E-commerce, Political and Regulatory Compliance Risks. Wm. & Mary Bus. L. Rev., 10, 1.
