Google results in the cartel community
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There are advantages to being a global company. There is a lot of money to be made abroad. But the largest U.S. tech companies are realizing that there is also a downside: any country you make money in is a country that might be trying to regulate you.
It’s hard to keep track of all of the technology-related antitrust actions around the world, in part because it’s not always worth paying close attention to. In Europe, where the world’s most aggressive regulators have long lived, Google alone was fined $ 2.7 billion in 2017, fined $ 5 billion in 2018, and fined $ 1.7 billion in 2019 . Those sums would be devastating for most companies, but they’re little more than rounding errors for a company that had sales of $ 61.9 billion last quarter.
Abroad, however, is increasingly going beyond the fines. Instead, they are forcing tech companies to change the way they do business. In February Australia passed a law giving news publishers the right to negotiate payments from dominant internet platforms – practically Facebook and Google. In August, South Korea became the first country to pass a law forcing Apple and Google to open their mobile app stores to alternative payment systems, threatening to get a grip on the 30 percent commission they charge developers . And in a potentially far-reaching case, Google will soon have to respond to the Turkish competition authority’s request that it no longer favor its own properties in local search results.
The consequences of cases like these can extend well beyond the boundaries of the country that imposes the new rule and lead to natural experiments that regulators in other countries could emulate. The fact that Google and Facebook, for example, have endorsed Australia’s Code of Media Negotiation could accelerate similar efforts in other countries, including Taiwan, Canada and even the US. Luther Lowe, who as Senior Vice President of Public Policy at Yelp has spent more than a decade promoting antitrust measures against Google, approves of this phenomenon as “Remedy Creep.”
In other cases, companies forced to change their business model overseas may decide to adopt the change globally before being forced to do so. After an investigation by the Japanese Fair Trade Commission was settled, Apple decided to globally implement the solution, which enables audio, video and reading apps, on their own websites to accept payments.
“Sometimes it’s the market that drives it: companies decide it’s too expensive to develop different compliance strategies in different markets,” said Anu Bradford, professor of international and antitrust law at Columbia University. “Or sometimes in anticipation of a copycat settlement: they know it’s out there and they won’t wait for the Russians or Turks to do their own case.”
While it doesn’t have quite the same media coverage as Australia and South Korea, the case in Turkey could be the biggest deal. That’s because Google sums up its power as the gatekeeper for most internet traffic.
In this case, the so-called local search is involved, for example when you are looking for “restaurants near me” or “hardware store”. This is a huge category of search traffic – almost half of all Google searches, according to some analysts. Critics and competitors of Google have long complained that Google is wrongly using its dominance to direct local search results to its own offers, even if this is perhaps not the most helpful result. Think about it, if you search for “Chinese restaurant” on Google, you will likely see a widget at the top of the results page that Google calls OneBox. It has a section from Google Maps and some Google reviews of Chinese restaurants in your area. You have to scroll down to find the best organic results that could come from Yelp or TripAdvisor.
This dynamic has annoyed Google critics and competitors for years. One of those damaged competitors, Yelp, initiated the case in Turkey by filing a complaint with the country’s competition authority. Google argues that its local search results are designed to be as helpful to users as possible, rather than to populate its own bottom line. However, Turkish regulators disagreed and concluded that Google “has violated Article 6 of the Turkish Competition Act by abusing its dominant position in the general search market to promote its local search and accommodation price comparison services, that his competitors are excluded ”. (I am quoting a translation by a Turkish lawyer.) In April they fined about $ 36 million. That’s less than the average Google earned every two hours in 2020. While the fine was trivial, the rest of the decision wasn’t. The authority issued a preliminary ruling calling on Google to develop a way of displaying local search results that would not favor its competitors.
The case is currently pending. The competition authority has yet to issue a “reasoned opinion” detailing its conclusions. Then Google has the option to submit its proposal to comply with the judgment. It is up to the competition authority to decide whether this proposal is good enough or not.
This is not Google’s first rodeo in Ankara. In 2018, the competition authority made a similar decision on Google Shopping and determined that Google privileges itself over other comparison portals. This followed an analogous case of the European Union, but with one important difference: in this case, the EU accepted Google’s solution even though its competitors found it inadequate. The Turkish authorities did not do this. That gave Google a choice: come back with a solution that regulators would accept, or unplug Google Shopping in Turkey. The company opted for the latter option and simply closed its price comparison module in the country.
Google could do the same thing in the current case. But the stakes would be much higher. Local search accounts for a much larger proportion of the total search cake, and Turkey, with a population of 85 million people, is a big place. Giving up local search would take away a frequently used function in a large market. This means that the company has a greater incentive to propose a solution that the competition authority won’t reject. But that in turn harbors a complementary risk: every solution that is adopted in Turkey could be demanded elsewhere.
“If you’re one of those global dominant companies, the downside is that if either of these jurisdictions becomes a true example of an antitrust remedy, there is a huge knock-on-the-top risk of having a knock-on effect,” said Yelp’s Luther Lowe. “Because suddenly Amy Klobuchar can hold up her smartphone in a senate hearing where Sundar Pichai testifies and says, ‘Mr. Pichai, I just activated my Turkish VPN and it seems Turkish consumers are getting a better deal than Minnesota consumers. ‘”
What could that look like? Google has not published any suggested workarounds; Emily Clarke, a spokeswoman, said the company was waiting for the full opinion to be published before it could figure out what its legal obligations are. Yelp argues that anyone who wins the organic search results should also get the right to the API power of the OneBox results, as Google’s proprietary algorithm has already ranked them as the most relevant result. In other words, if a search is going to a Google Maps result in the OneBox, but the first link at the bottom is Yelp, then Yelp should fill the OneBox instead – meaning you would see Yelp reviews first, not Google Ratings while trying to figure out where to have dinner.
Such a change, if widely adopted, could dramatically change the flow of much of the Internet traffic. As analyst Rand Fishkin found in 2019, more than 50 percent of Google searches end without the user clicking on another website. Part of this is because, as the markup documented last year, Google’s own properties, or “direct answers”, make up well over half of the first page a user sees when searching on a mobile phone.
“If that jurisdiction forces them to behave in an interoperable and non-discriminatory manner, it is essentially undoing Google’s original mechanism as a kind of hub,” Lowe said. “You’re just getting a huge deluge of traffic to third-party services.”
It’s easy to see why a company like Yelp wants a leap into the top billing. The question is whether the Turkish regulators will force Google to give it to them – and if so, Google will join in or send Turkish users back to the original 10 blue links. Either way, the consequences are unlikely to be confined to Turkey’s borders. US tech companies took over the world. Now the world wants to take it back.
This story originally appeared on wired.com.