Tech Titans Penalizing Google is Pointless

The European Parliament’s non-binding resolution is a matter of politics, not good policy, writes Handelsblatt’s Frankfurt bureau chief.
Can Google co-founders Larry Page (l) and Sergey Brin expect pain in Europe?

The European Parliament’s symbolic vote last week to break up Google shifts debate over the tech giant’s search-engine dominance from policymakers to politicians. The non-binding resolution is a dangerous step, not only for the U.S. company, but also for the credibility of how Europe handles competition.

There were some strange arguments to be heard. Advocates of a break-up point to the U.S. spying scandal and possible links between American technology companies and the National Security Agency. Another reason, they say, is the argument that Google evades taxes in Europe by shifting its profits around the world.

But all that is not enough to indict Google for pursuing a monopoly. And there's something a bit fishy about the fact that one of the backers of the resolution, the CDU representative Andreas Schwab, is an advisor to law offices that represent other tech giants in court fights against Google.

Breaking up a company is one regulatory tool antitrust monitors can use in market economies. But it is a weapon of last resort and only justified when a company is a proven monopoly that hurts competition and consumers.

Is there justification in antitrust laws to punish Google for its power of innovation and the failure of its competitors? Hardly.

Even more importantly, this process must be independent. But last week’s symbolic resolution called the independence of European Union antitrust regulators into question. The new E.U. antitrust chief, Margrethe Vestager, is in charge of investigating Google’s dominance of the market. Now people will wonder whether her statements are made due to pressure from parliament.

In this way, E.U. politicians have done a great disservice to their most powerful regulatory authority. They raced  ahead of the antitrust commission’s investigation, which has been underway since 2010. And up to now, the antitrust monitors have not talked about breaking up Google. That is not surprising – because there is reasonable doubt that Google is such a dangerous monopoly that it can only be handled by using the strongest antitrust weapon available.

Google is the clear search-engine leader in Europe, where it controls up to 90 percent of the market in some E.U. countries. So by definition, a monopoly exists. But there’s a hitch: It was freely chosen by users. They made a decision on their own to use Google – and if Google is a service desired by consumers, it cannot be broken up in their name.

The issue of competition is more difficult. Google uses information about its users, collected over many years, to optimize search results. That's what made it market leader. Users have the option of searching using engines such as Bing, the Microsoft service, for example. But its results don't seem to have enticed masses of users away from its rival. Google’s head start and the data it has gathered present an obstacle for competitors, making market access harder for them.

On the other hand, when Google co-founders Sergey Brin and Larry Page started their company, there were already several successful search engines. Altavista, for instance, was one of the first search engines for finding full texts on the Internet. But none of these pioneers managed to keep up with Google technologically. Is there justification in antitrust laws to punish Google for its power of innovation and the failure of its competitors? Scarcely.

Then there’s the issue of competition regarding services such as Google Maps or product comparisons. Here the situation looks somewhat different. Questions are raised by the fact that an independent search is promised, but at the same time the company’s own services are presented to the user. In listing its own services, does Google put its rivals at a disadvantage?

The answers to such questions are in the jurisdiction of antitrust monitors and not the prerogative of politicians pursuing their own interests. They should instead concern themselves with how to compel Internet giants to become more transparent in collecting personal data. That would be regulatory policy to the advantage of the user.



Jens Koenen is Handelsblatt’s Frankfurt bureau chief and covers aviation and the IT industry. To contact him: [email protected].