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Want some more? Europe’s still up for tech fight

Brussels is not about to halt its onslaught against America’s technology giants

The €2.32 billion fine slapped on Google this week by European competition enforcers is just the start of something much bigger and opens the door to years of further regulatory scrutiny of the company and other American technology groups.

The fine amounts to 23 days of net cashflow from operations for Google’s parent Alphabet, a ripple in what is otherwise a torrent of cash generation.

The company has 90 days to bring the Google Shopping algorithm at the centre of the case into line with what the European Commission considers to be fair or it will face a fine equivalent to 5 per cent of its daily global revenues, about $14 million.

Google is now awaiting the outcome of a potentially more damaging case, in which Europe’s competition authority is investigating how the company bundles other Google products with its Android mobile operating system.

Google generates at least 20 per cent of its advertising revenues from Android, in part because handset makers feel obliged to put its services front and centre on every device to get access to Google Play, the company’s app store. If the commission forces Google to unbundle Google Play from its mobile services, it could take a big hit to its Android revenues.

Margrethe Vestager, left, the European competition commissioner, is conducting a third investigation into Google’s search advertising practices and has made clear already that her preliminary findings are that the company has breached European antitrust rules in both these other cases.

Google is not the only technology company in Europe’s crosshairs. Ms Vestager is investigating Qualcomm, the smartphone chipmaker, on two fronts: for its $38 billion takeover of NXP Semiconductors, a rival, and for alleged predatory pricing. In May she fined Facebook €110 million for providing “incorrect or misleading” information in 2014 regarding its $20 billion acquisition of Whatsapp.

Aleksi Aaltonen, of Warwick Business School, said the rulings suggested that the commission was not happy with the way in which American companies had used their leverage in digital business to conquer further markets. He said: “I would not be surprised if the EU would take an increasingly strict approach.”

Yesterday Germany passed a law that would fine social media companies as much as $57 million if they did not delete illegal, racist or slanderous comments and posts within 24 hours.

Such actions could trigger an angry response across the Atlantic, yet many of the complaints against Google in the shopping case came from America. Indeed, this week seven US companies and industry groups signed an open letter to the European Union in support of the fine.

“We hope that your counterparts in the United States will use this as an opportunity to address similar anticompetitive conduct,” the letter, signed by Oracle, Yelp, Getty Images and News Corp, owner of The Times, said.

While it is true that Ms Vestager has acted decisively to bring an end to the Google shopping case, she denies any anti-US bias. In fact, Brussels’ 2004 ruling that Microsoft had abused its dominant market position in Windows and other markets is now seen by some as enabling the likes of Google to become so powerful in the first place by curtailing Microsoft’s expansion. That ruling resulted in fines of €2.2 billion. Europe’s €1.1 billion fine against Intel in 2009, for operating a system of rebates to PC makers using its chips, had a similar effect.

Ms Vestager’s stance reflects a sense on both sides of the Atlantic that a handful of giant American technology groups have reached a level of influence that even the big banks never attained and an equal determination that they should not become the next model for “too big to fail”.

“We congratulate you for being successful,” she said to Google last week, “but the applause stops when you stop competing on the merits.”

US will avoid another fine mess
Google is unlikely to face punishment for alleged competition infringements in the United States, despite this week’s record fine from the European Commission, technology industry watchers have said (James Dean writes).

Competition regulators in America need to provide more evidence that a dominant company has harmed consumers than those in Europe, where they need prove only that the company abused its dominant position, they said.

At the start of 2013, after examining alleged anticompetitive practices by Google for two years, the Federal Trade Commission closed its investigation without taking action.

Daniel Castro, of the Information Technology and Innovation Foundation, a think tank based in Washington, said that the FTC might re-examine its decision but it was unlikely to lead to a different result. “If the regulators can’t prove beyond doubt direct harm to consumers in the US, they can’t take action,” he said.

In 2013 the FTC said that Google’s display of its own content at or near the top of search rankings was “an improvement in the overall quality of Google’s search product”. The commission did not find evidence that Google had manipulated its search algorithms to unfairly disadvantage competitors.

However, documents that emerged two years later revealed that the FTC had come closer to filing a lawsuit against Google than had been thought.

An internal report from the agency’s competition bureau concluded that Google had used anticompetitive tactics and had abused its dominant position in ways that harmed consumers and rivals. It recommended that the commission bring a court case against Google challenging three of its practices, but not alleged search bias.

Last year American media reported that FTC officials were gathering information about Google over potential anti-competitive practices on its mobile platform. In December, consumer activists filed a complaint with the FTC alleging that a policy change by Google violated their privacy.