EU stands alone against US digital major's market dominance
THE FIVE MOST VALUABLE companies in the world today are all digital businesses from the west coast of the USA: Apple, Google, Microsoft, Facebook and Amazon.
And in a recent book Move Fast and Break Things, Jonathan Taplin argues that all of these companies have grown by ruthlessly dominating their respective high growth markets and that in the case of three of them, Google, Facebook and Amazon, they have become outright monopolies. Facebook owns 77 per cent of mobile social traffic, Amazon has a 75 per cent share of the e-book market, and Google has an 88 per cent share in search advertising.
You might expect regulators and competition authorities to challenge such dominance, but so far the online world seems to work by different rules.
The book’s title comes from remarks attributed to Mark Zuckerberg and it explains the policies that these companies have adopted as they have grown exponentially. As well as building its own community of over 2 billion users, Facebook has also been allowed to acquire WhatsApp (1 billion), Messenger (900 million), and Instagram (400 million). It's dominance of social media is overwhelming.
And not only does Google completely own the search advertising market, it also owns Doubleclick which dominates the serving of adverts on third party publishers and other websites, and YouTube, the leading video platform, on which it also runs paid adverts. Not to mention the commercial opportunities which arise from being the world’s leading provider of online maps, and its ownership of Android, the leading operating system for five out of the world’s six smartphones.
So, how is Google able to get away with all these monopolistic practices? Well, part of the reason may lie with the number of ‘revolving door’ posts between Google and senior government officials. According to Taplin, last year, the US chief technology officer and one of her deputies, the White House chief digital officer, a senior FCC official, the director of the US Digital Service, and the director of the US patent office, were all ex-Google executives.
There have been fifty-three revolving door moves between Google and the White House, and nine moves between Google or its lobbyists and the FCC - nominally responsible for regulating most of their activities. Google has also made major contributions to the political campaigns of both Republican and Democratic congressmen and senators, and while Eric Schmidt was helping Hillary Clinton’s campaign, Larry Page was advising Republicans (Congressman) Paul Ryan and (Senator) Mitch McConnell - their bets being placed evenly across the board.
They also lobby hard in Europe, spending €4.25m last year alone, as well as further millions spent in attempting to influence national Governments. So it is to the credit of the EU that it has fined Google €2.4Bn for anti-competitive practices in the display of their search results - the largest fine ever imposed by the EU.
Intriguingly, back in March 2015, the Wall Street Journal reported a leak from the US FCC that its officials recommended prosecuting Google for this very practice, but in a highly unusual manner, it was apparently overruled by their commissioners - who says lobbying and campaign contributions don’t pay off.
And the EU isn't finished - they are also investigating Google’s dominance in mobile operating systems and its anti-competitive position in online advertising. Further huge fines are expected soon.
In today’s world, we probably can't expect Trump’s ‘America First’ US to challenge these companies, so thank goodness we have the EU to hold them to account.
And that's something you don't hear often.