The EU’s Google fine should have been imposed a long time ago, but it comes better late than never. Meanwhile, the Trump administration continues to side with monopolies, leading to worse outcomes for US consumers, says former financial regulator Bill Black
GREG WILPERT: It’s The Real News Network, and I’m Greg Wilpert.
The EU slapped a $5 billion fine on Google this week for having abused its power with the Android smartphone operating system. Google requires phone producers to bundle their Android software with a preinstalled set of Google applications, making Google the default search engine, and the Google store the default online store. The EU gave Google 90 days to end this behavior, which violates Europe’s antitrust laws. If Google or its parent company Alphabet fail to comply, they will be leveled with an additional 5 percent of their daily revenues for every day that they remain in violation of the law. Here is the announcement that European Competition Commissioner Margarethe Vestager made this week.
MARGARETHE VESTAGER: Today the commission has decided to fine Google $4.34 billion euros for breaching EU antitrust rules. Google has engaged in illegal practices to cement its dominant market position in Internet search. It must put an effective end to this contact within 90 days, or face penalty payments.
GREG WILPERT: President Donald Trump responded to the fine, tweeting: I told you so. The European Union just slapped a $5 billion fine on one of our great companies, Google. They truly have taken advantage of the U.S., but not for long.
Joining me now to discuss the Google antitrust fine is Bill Black. Bill is a white collar criminologist, former financial regulator, and Associate Professor of Economics and Law at the University of Missouri Kansas City. He’s also the author of the book The Best Way to Rob a Bank Is to Own One. Thanks for joining us again, Bill.
BILL BLACK: Thank you.
GREG WILPERT: So, Bill, we interviewed you on The Real News last week, or this week, I mean, about Trump calling the EU a foe. You said at the time that the economists who convinced Trump to think this way is Peter Navarro. Now Trump is saying I told you so, and pointing to the EU levying a fine on a U.S.-based company, Google. Is the EU acting as a foe after all? What do you think?
BILL BLACK: Well, no. This took crazy to Trumpian levels. What the EU is doing, of course, is what the United States should be doing; saying that you can’t violate the antitrust laws. That’s bad for everybody. All the consumers, tens of millions of which are Americans. But because the, under Trump, elites actually extended a long-term degradation of antitrust enforcement in the United States, he’s ignored the fact- remember, this is illegal conduct against the consumer. That’s what the government’s supposed to be protecting us against. So no, the EU is not at war with us. It is protecting us. It is our U.S. government, Trump, which is refusing to enforce the law, refusing to protect us. So I don’t know what he thought he told us. So you know, it’s just what we’ve been telling you so, that Trump is in the corner of the monopolists against the American people.
GREG WILPERT: So $5 billion is actually a record fine, and comes on the heels of a similar decision last year when the EU fined Google for about half that amount. However, Google’s revenues for 2017 were $110 billion. Was it worth it for Google to violate the antitrust laws of the EU? And considering how big their revenues are, will the fine be enough to make them stop? What do you think?
BILL BLACK: Well, the fine isn’t really the key thing. It’s really the order to change the conduct. So ideally you would have wanted the order to not allow Google to have ever done these things. In other words, something over a decade ago. And in particular, you wouldn’t have wanted some of the mergers to go through.
But I must tell you, the Trump administration official in charge of antitrust has publicly stated that he wants to encourage the big electronic tech companies to gobble up the smaller ones, saying it will produce great efficiencies, and using as his classic example Google’s acquisition of YouTube. Which was, it should have never been permitted on these grounds. So antitrust enforcement against really large monopolies in the United States has largely ceased, unless, of course, your name as Bezos, and you also own the Washington Post, and The Washington Post is critical of Trump; and therefore we attempt to stop mergers of your other company which has nothing to do with the Washington Post.
So aside from that political abuse of power, antitrust enforcement in the monopoly context has pretty much ceased in the United States. But it’s alive and kind of well in the European Union, and is really the only hope of American consumers. So it’s exactly the opposite of Trump’s tweet.
GREG WILPERT: Let’s dig a little bit into what actually this is about. That is, how exactly did Google abuse its power? And why isn’t Apple, for example, fined as well, since their phones also have the default apps and the App Store?
BILL BLACK: So, the key thing is in that the Android system is absolutely dominant on a global basis. Eighty percent of smart phones use the Android system, and that is Google’s parent company Alphabet that has that system. So it’s akin to back, now 18 years ago, when the Justice Department brought a successful antitrust action against Microsoft because it dominated the operating system with Windows and leverage that monopoly power to say, well, you have to do the following other things, you have to buy are other products.
So super short, the antitrust laws do not say that monopoly power itself is unlawful, because you could have gotten a monopoly position just by having a superior product. But they do say you can’t then abuse that monopoly power to extend that power, to be able to sell more things at a higher price in other fields. And that’s exactly what the Justice Department successfully proved against Microsoft. Had a deposition of Bill Gates in which they absolutely humiliated himl he thought he was so smart, and such. But the Justice Department lawyers tore him apart. They won their case. They got an order from the judge that they were going to break up Microsoft. But then the judge did something stupid in talking to the press, which gave them excuse to change judges. And the new Bush administration largely gave away the remedy. And of course, Microsoft was never split up.
So even as recently as 18 years ago in the United States, the courts said this kind of action where you use a monopoly and an operating system, and extend it into [inaudible] is a violation of U.S. antitrust laws. Well, European antitrust laws are similar, and indeed [inaudible] greater extent the United States. And by the way, that’s quite rational, as a legal and economic matter. So they’re even better law for the antitrust enforcers. And while, as I explained, antitrust enforcement has largely died in the United States against monopoly, not necessarily against cartels. The same is not true in the European Union.
BILL BLACK: So Bill, just for clarity for our viewers, what would you say are the consequences of a failure to enforce antitrust law? What will be the long-term consequences of that?
BILL BLACK: In a monopoly context you get poorer service and higher prices, and you get unbelievably dominant companies that are wealthy enough to corrupt the political process and maintain their monopolies. If you control the operating system, you can do like Google Android actually does. They literally give away the operating system free, but they use it to extend their monopoly power into things like ad revenues. And that’s where the real money is. Google, for example, is estimated to get 40 percent of the total market for online ads. And it has similar dominance in other fields, such as YouTube.
GREG WILPERT: OK. We’re going to have to leave it there for now. I was speaking to Bill Black, Associate Professor of Economics and Law at the University of Missouri Kansas City. Thanks, Bill, for having joined us today.
BILL BLACK: Thank you.
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