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Home / Technology / Europe has just hit Google with a record $ 5 billion fine. Expect a fireworks display.

Europe has just hit Google with a record $ 5 billion fine. Expect a fireworks display.



The European Commission, which manages antitrust policy in the European Union, has Google just hit a record fine of 4.34 billion euros (5 billion dollars). This punishment is to punish Google for how it has structured the market for its operating system. Here's what you need to know.

The massive fine is for "tying" the operating system to specific applications

Android is the operating system used by most smartphones that are not manufactured by Apple. It's essentially an open-source operating system that allows phone manufacturers to modify it in a number of ways. For example, the popular Samsung mobile phones run on Android, but use a "skin" and various Samsung applications to differentiate them from competitors' products.

The E.U. has imposed a fine on Google because the operating system has been linked too closely to the Google search service. For example, if phone manufacturers want to have access to the Google App Store, they must agree to pre-install the Google Search app and Google browser application (Chrome), which should plug into Google's business model. People with smartphones want to download apps. Phone manufacturers can set up their own app stores, but that would be expensive and less attractive to consumers as the app makers are unlikely to bother. For example, Amazon has set up its own app store for users who use its Fire devices (which have an Android-based operating system), but the selection of apps is much smaller than Google's own app store (Full Disclosure: Jeffrey P Bezos, which owns Amazon, also owns the Washington Post, and Google has paid exclusively to manufacturers and telephone network operators for the installation of Google Search (ie, no other search options available than pre-installed apps) and makes it harder for manufacturers to add devices Operating on other Android devices like Amazon's.

Even for a company as big as Google, the penalty is a big deal – it accounts for nearly 40 percent of revenue, and for Google it is perhaps even more worrying, that the decision, if confirmed, will significantly prevent Google from participating in these practices and may Unfortunately, his business model in Europe is damaging.

Antitrust law is different in Europe and the US

European antitrust law differs from US antitrust law in two important ways in two important ways. First, the European Commission can better define the agenda. In the US, antitrust authorities must rely on courts, and their power to convince judges that an act is justified is limited. They can reach negotiated agreements with the objectives of antitrust lawsuits – but these agreements are made in the shadow of court decisions (and the beliefs of the two sides about how the courts could have ultimately ruled). In the EU, on the other hand, the European Commission itself can take antitrust decisions. These judgments can then be challenged by the target before the European Court of Justice. This means that in the US, negotiations between the regulator and potential antitrust violators are overshadowing what the courts could do, while in the EU, negotiations between the regulator and potential infringers set the agenda for the court. [19659009] Second, US antitrust law focuses primarily on consumer harm, which typically involves higher prices. EU. Antitrust law also takes account of the damage suffered by competitors. Here, the basic intuition is that competitive markets lead to more innovation and lower prices. However, if competitors are driven out of business by a monopolist, innovation will suffer, even if prices do not change. This means that E.U. In general, regulators are more willing to aggressively govern companies like Google (which was fined $ billions in 2017 for a separate antitrust case).

E.U. and US approaches to competition law are beginning to differ

It is difficult to predict how the US will respond to European action. The US Federal Chancellery Chairman said that the US will carefully study the verdict. On the one hand, the current government is much more skeptical about E.U. Market regulation as previous administrations. On the other hand, Google has far fewer friends in the current government than under Obama.

It can be said that the US and E.U. Antitrust approaches are increasingly moving in very different directions. Once upon a time, the US seemed prepared to conduct large-scale investigations of technology companies. In the 1990s, however, a similarly extensive antitrust investigation by Microsoft (which was also accused of binding its browser too much to its operating system) ended in disorder. This is not only a product of administrative preferences, but also of changes in judges' reasoning (many of them were influenced by the "law and economy" approach, which is rather skeptical of antitrust activities), as the recent decision has shown & T-Time Warner Fusion.

EU and antitrust authorities in the US, who were informally coordinated. In the future they will collide more and more frequently. The US Supreme Court ruling this month in a case involving American Express has far-reaching implications for antitrust lawsuits against companies like Google in the future. It contains a chain of reasoning that will make antitrust cases against companies like Google, which operate different markets for advertisers and consumers, very difficult. Many types of antitrust proceedings seem to be off the agenda, unless the Supreme Court changes to the end.

The E.U. is likely to become increasingly aggressive. In recent years, European civil servants, politicians and civil society actors have become increasingly skeptical of large US e-commerce companies and are increasingly willing to take regulatory action that aligns them with the European understanding of the functioning of markets. Antitrust policy, privacy policy and policy on online content rules are increasingly seen as tools that can be applied to the same general objectives and not to different (and possibly conflicting) policy approaches. The combination of US timidity and E.U. Aggressive antitrust law and related issues are bound to lead to increased transatlantic conflict in the coming years.


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