Yahoo Finance The US has a good record on fighting monopolies. Now it's Google's turn
Sundar Pichai, chief executive of Alphabet, Google’s parent company, is a mild-mannered software engineer who is not good at games of verbal fisticuffs with US politicians. He received a drubbing last month during the “big tech” congressional hearing.
Pichai can, however, summon lawyers and lobbyists galore as soon as the game gets more serious, which it definitely has. The US Department of Justice (DoJ) last week launched a huge and historic antitrust case against Google, accusing the tech company of abusing its position to maintain an illegal monopoly over internet searches and search advertising.
In response, Kent Walker, Google’s chief lawyer, published an indignant blogpost that signalled how the firm will fight this. Google will claim it – and not the DoJ – is on the side of the American people and, by extension, people across the world.
“People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives,” wrote Walker. “This lawsuit would do nothing to help consumers. To the contrary, it would artificially prop up lower-quality search alternatives, raise phone prices, and make it harder for people to get the search services they want to use”.
This argument has superficial appeal. Google doesn’t charge users and can’t stop them using rivals’ products. In a neat touch, Walker included instructions on how to load Microsoft’s Bing search engine on an Android phone.
As for those multibillion payments to Apple to get Google pre-loaded on iPhones and iPads – one of the DoJ’s main complaints – Walker said they are like the promotional fees a cereal brand might pay a supermarket to stock its products at eye level. Other search engines are free to negotiate space on the digital shelf or home screen, he argued, and this is how software has always been distributed.
Convinced? You shouldn’t be. There are four reasons, at least, why the DoJ is right to fight this case. First, a product that is free (or free at the point of use) can still cause harm to consumers. The process is just indirect. An overly dominant search engine can, for example, raise its prices to advertisers, who then recoup the extra expense by charging more for hotels, flights, electronic gadgets, books, insurance, and so on.
Second, Google’s cereal comparison doesn’t work. A key point about a dominant search engine is that it can gather more data to enhance the offer and thereby achieve greater competitive clout. It has a self-reinforcing aspect that doesn’t apply in the non-data world of cornflakes and Coco Pops.
Third, most users don’t change their default settings. Yes, it’s technically simple to do, but most people don’t. That is why Google is happy to pay Apple a fortune every year for default status – it can be extremely confident of a return on that investment, knowing no rival can match its spending power.
Fourth, there is the deep problem of Google’s sheer size and effective control of 80% of the search market. How could new ideas and approaches ever get a look-in?
“If we let Google continue its anti-competitive ways, we will lose the next wave of innovators and Americans may never get to benefit from the ‘next Google’,” said William Barr, the US attorney-general.
In that final respect, this case is similar to celebrated antitrust challenges of the past – Standard Oil, AT&T and Microsoft. It’s about confronting corporate power when it becomes the gatekeeper to an industry, the lawsuit’s description of Google’s position in search.
Pichai’s usual plea on that point is that “Google’s continued success is not guaranteed”. And that can be rubbished for a simple reason: it is easy to see how the gates would clang shut on any competitor that became truly threatening.
Good luck to the DoJ – this is an important 21st-century case.
Johnson’s plans for British industry are full of wind
Next week, Boris Johnson is expected to deliver a 10-point plan outlining the government’s green industrial strategy before it publishes a long-delayed energy white paper, possibly in November. A fresh strategy paper is a chance for the PM to persuade the electorate that while his character may not be well suited to fighting a pandemic, he knows how to strike an upbeat note when the subject turns to major building projects.
It might have taken him six years as London mayor before he could see cycle superhighways being built across London, but they did happen, and they played a part in transforming the infrastructure of the capital. When he wanted a cable car across the Thames, it arrived and worked, to many people’s amazement.
Unfortunately what you cannot say is that any of the prime minister’s achievements so far are glued together as part of a strategy. They can at best be described as ad hoc, and sit alongside schemes that detract from the central message, if that message is about the climate emergency and carbon emissions.
At this year’s Conservative party conference, Johnson said a green industrial revolution would repair the economy following the pandemic. This month, he repeated a pledge that every home in the UK would be powered by wind energy within 10 years, at a cost of £160bn.
These are laudable aims and show Johnson has been gathering his thoughts. But the manufacturing industry that might have played a big part in building wind turbines was destroyed by previous Tory governments. Now Johnson wants to add a no-deal or limited-deal Brexit that will undermine the rest of the UK’s industrial base.
Britain needs a strategy in many areas. Let’s hope the PM has coordinated a plan across all departments that can rightfully be called a green industrial strategy.
The ticket king’s bid for Viagogo could be about to stall
The $4bn (£3bn) takeover of ticket resale website StubHub by its rival Viagogo had already been dubbed the “worst deal in history”, having been finalised weeks before the pandemic shut down live events indefinitely.
Viagogo boss Eric Baker founded both firms and his dream is to preside as ticket king over a reunited empire. Perhaps blinded by that ambition, he dismissed Covid-19 as a flash in the pan and pressed on with the deal, spending some of his own considerable resources – together with those of financial backers including the mega-rich Waltons, the family behind Walmart.
As ill-timed as the takeover looked a few weeks ago, it looks even worse now that the UK competition watchdog has signalled its intention to block it. The CMA understandably balked at the idea of a tie-up that would give the combined company 90% of the UK ticket resale market.
What now for Viagogo? It’s main target in buying StubHub is the US market, where its rival dominates. Yet the British regulator threatens to scupper everything. If Baker offers to shut down StubHub UK, Viagogo would hoover up its rival’s business anyway, creating a monopoly via a different route. The CMA surely could not allow that. A partial sale of StubHub, a web-based company whose strength is its platform, is impractical to the point of impossibility.
The CMA may ultimately force Viagogo to sell StubHub, appointing a divestiture trustee to seek a buyer. That trustee would have no obligation to recoup Baker’s $4bn.
That’s not the most remarkable thing, though. Part of the CMA’s remit will be, unwittingly, to look out for the interests of professional resellers, the touts who dominate resale listings. As the Observer has shown, many “resellers” use the same methods that saw super-touts Peter Hunter and David Smith jailed last year for fraud. So the CMA may find itself accidentally defending the interests of fraudsters who make a living scamming the public. It seems anything is possible in 2020.
