2016 could prove to be Google's worst regulatory year yet.
By summer's end, antitrust charges leveled against the search giant in Europe are expected by some to lead to a record-breaking $3.4 billion fine. And if the European Commission does drop the hammer, the reverberations will be felt far and wide, particularly in the United States, where an aggressive ruling in Brussels could embolden American officials to re-examine Google’s dominant market power.
Last year marked the first time regulators brought formal antitrust charges against Google. Margrethe Vestager, the competition commissioner for the European Union’s executive arm, accused the company of biasing its search results, favoring Google products, and squeezing out business rivals in violation of competition law. A separate investigation into Google’s search practices in the U.S. led by the Federal Trade Commission was ultimately dropped in 2013, but interest in resuming the case was recently rekindled by some members of Congress and state attorneys general.
While the European Commission can fine Google up to 10% of its most recent annual revenue, more than $7 billion, The Telegraph reported that the actual fine will likely be closer to $3 billion, which would set a record for the largest antitrust penalty in Europe. In combination with the smack of the staggering fine, Google may also be ordered to alter some of its practices in search — the core of its global business, and a fundamental aspect of how consumers interact with the company and the web.
“If the European Commission manages to uncover clear evidence of Google knocking out competitors to advance its own products and services, that would fuel focus on it here,” Frank Pasquale, a law professor at the University of Maryland, told BuzzFeed News.
In the U.S., the issues of fair competition amid record corporate profits are top of mind this election year. Pasquale pointed to simmering stateside chatter prompted in part by a recent White House directive requesting government agencies to review their economic policies to enhance marketplace competition. The executive order also instructed agencies to report “specific actions” they will take to ferret out market abuse and to “promote more competitive markets” to the president’s National Economic Council by mid-May.
In the months leading up to that executive order, Republican Sen. Orrin Hatch and Democrat Richard Blumenthal prodded the Federal Trade Commission to take another look at Google’s search practices. Meanwhile, the state attorneys general of Utah and the District of Columbia have asked FTC Chair Edith Ramirez to consider reopening the investigation against the company amid the European allegations and a lingering suspicion that search manipulation harms consumers.
While all five members of the FTC voted in 2013 to end the investigation of how Google displays its search results, following a 21-month probe, an internal report obtained by the Wall Street Journal last year indicated that staff within the FTC’s competition bureau believed that the agency should sue Google for breaking antitrust law.
FTC staff concluded that Google’s search and search advertising practices have "resulted—and will result—in real harm to consumers and to innovation in the online search and advertising markets.” The recommendations in the staff documents seemed to contradict the official conclusion of the FTC, which found that Google’s practices improved search for consumers and that “any negative impact on actual or perceived competitors was incidental to that purpose.”
Chair Ramirez has since dismissed the Journal report, doubling down on the decision that her agency had “no basis to proceed” against Google. “There was regretfully an inadvertent disclosure of internal documents,” she told the Senate earlier this year. “But what I can tell you is that our conclusion was in fact consistent with the recommendation that had been made by our bureau of competition staff.”
But critics of the FTC argue that the Obama administration has been soft on antitrust, even as colossal online platforms like Google, Amazon, Uber, and Facebook rise to monopoly-like power, amassing mountains of personal data and political clout along the way.
“It’s a shame that the U.S. appears to be outsourcing its antitrust enforcement of high-tech markets to Europe,” Luther Lowe, vice president of public policy at Yelp, told BuzzFeed News. Yelp is a complainant in Europe’s search case and alleges that Google engages in anticompetitive practices in the U.S.
But Herbert Hovenkamp, a law professor at the University of Iowa told BuzzFeed News that it’s hard to predict if a decision in Europe will lead to action in America since the full set of facts that European regulators are considering isn’t known to the public. Hovenkamp said that an adverse decision in Europe against Google could also reflect the different legal standards between the U.S. and E.U. Europeans place a larger emphasis on the harm that dominant firms can inflict on competitors, whereas the U.S. focuses on consumers, he said.
Other national governments, including Canada most recently, have ended antitrust investigations into Google's search practices after finding insufficient evidence of anticompetitive behavior.
What’s more clear to experts, however, is the likelihood that Europe’s regulatory scrutiny over Google will continue to grow. Last month, in another strong signal, the EU’s Vestager raised additional charges against the company concerning its Android operating system, which runs most of the world’s mobile devices.
European regulators accused Google of using its dominant position in the mobile market to suppress competitors in search. “We believe that Google's behavior denies consumers a wider choice of mobile apps and services and stands in the way of innovation by other players,” Vestager said. About 80% of all smart mobile devices in Europe run on Android, the European Commission said. Google commands 90% of the continent's market share in general internet search. In the U.S., an FTC inquiry into Google’s Android practices is ongoing.
Google declined comment.