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Google-Russia Antitrust Deal Has Big Implications for EU Cases, Trump DOJ

There are potentially big implications for Google, complainants, and antitrust authorities around the world, from Google’s antitrust settlement with Russia’s Federal Antimonopoly Service (FAS)

FAS previously ruled officially, and was upheld by the Russian Supreme Court, that Google-Android illegally abused its dominance in forcing handset manufacturers to strongly preference Google search and other apps, as a contractual requirement to license Google’s official Android operating system.

In this settlement, Google agrees to a variety of significant Android/Chrome behavior changes that, if they work in practice as represented, will enable other search engines, like Yandex, and app developers to have significantly more competitive opportunities in Russia. The arbitration agreement is for six years and nine months and comes with a fine of ~$7.8m -- the equivalent of 46 minutes of Google’s annual revenues.

What Google gets in return, is big brand protection in that it can claim: a) the settlement was voluntary; b) there is now no more Russian official finding/legal precedent that Google is dominant or a monopoly, or has done anything wrong (even though it officially did before this superseding settlement); and c) a Google-Android antitrust settlement template that Google can shop to other countries, (that is friendly to Google in that Google knows this settlement won’t be as effective elsewhere, because other countries sans China and South Korea, do not have a material competitive mobile search offering to Google like Russia’s Yandex.)

Caution is warranted until Google’s volunteered remedies are fully tested, either before the settlement becomes effective, or when judged by compliance over time as it is implemented and maintained, because Google has a long sordid history of defying settlements in practice and for evading sovereign accountability.

What are the big implications for the EU-Google Search, Android and Advertising Cases?

This settlement should only reinforce the resolve of EC DGComp authorities to fully prosecute its three Google antitrust cases – addressing search discrimination, android tying, and online advertising exclusions.

That’s because this settlement implicitly proves Google knows full well that the specific contractual tying behaviors it that has long been doing systematically, are de facto abuses of monopoly power, and it knows full well what rough types of antitrust remedies may be necessary to begin to mitigate such abuses of monopoly power.

In addition, in the Russian-Google settlement, Google has implicitly acknowledged that its problematic Android OS contract tying behaviors, are effectively a form of implicit search and search advertising syndication agreements.

This is very important because implicit and explicit syndication agreements, mutually reinforce all three of the EU’s Google antitrust cases: search, mobile and advertising. These contractual Android tying behaviors helped Google extend its desktop search dominance into mobile search dominance, and the same for advertising, extending its dominance in desktop to mobile there as well.

This Russia-Google settlement is unlikely to heal EC DGComp’s nightmares of Google maximally gaming the Almunia EU DGComp antitrust process for years, with 3 proposed faux settlements that were massively successful delaying and distracting tactics, and that astonishingly, all would have prohibited the EC from investigating Google for five years in the future -- regardless of the facts or any newly discovered illegal behavior!

Since then, EC Vice President for Competition, Margrethe Vestager has proven committed to a long-term resolution of the Googleopoly problem through the normal prosecutorial antitrust processes, while Google continues to be in maximal delay mode and only interested in negotiated settlements, with a clear ending date, and no concession that it is a monopoly or that it has ever done anything wrong – that in turn, could be used to help private litigants against Google.

What are the big implications for the Trump DOJ?

One reason this Russia-Google settlement is a potential game changer in the U.S. is because it effectively may shift the main Google antitrust issue in the U.S. from specifically just search discrimination, an antitrust frame that is harder to prove in the U.S. due to different law/precedent in the U.S. than the EU (as the FTC concluded in 2013), to a Google antitrust frame of Google-Android tying its dominant free search to a free Android operating system.

The purpose of this Google-Android tying was to extend its ~70% desktop search/search advertising dominance to 90+% mobile search/search advertising dominance, which is an antitrust frame and case, which is exceptionally analogous to what DOJ argued when it successfully sued Microsoft in 1998 (background here & here).

A second reason this settlement potentially changes the Google antitrust game in the U.S., is that now Google has publicly “volunteered” to stop doing obviously illegal tying behaviors in Russia.

Given that public admission and concession, why should American handset manufacturers and carriers continue to suffer under these clear and implicitly-admitted, longstanding, Google monopolistic practices, and not enjoy similar remedial competitive choices in the U.S. market?

Oh, they can’t because there has been no U.S. antitrust cop on the Google beat since the FTC chaotically shut down all Google antitrust investigations in January of 2013, including its non-public, FTC-Android tying investigation without an FTC vote, when all the other FTC-Google investigations required an official vote to close.

When President Trump’s nominee to be Assistant Attorney General for Antitrust, Makan Delrahim, gets confirmed by the Senate in the coming weeks, it will be surprising if American firms that have been anticompetitively harmed by Google’s textbook illegal tying behaviors, eventually do not seek redress from the Delrahim DOJ Antitrust Division -- like they were comfortable seeking redress during the W. Bush, Tom Barnett DOJ Antitrust Division era, and also in the Obama, Christine Varney DOJ Antitrust Division era, which both are in stark contrast to the last four years of the Obama Administration, when complainants effectively learned that there was no U.S. antitrust cop on the Google beat willing to entertain complaints of anti-competitive behavior by Google from 2013-2016.

Conclusion:

While Google may have made the smart Google brand protection decision to settle with the Russian FAS, it may be a rare strategic mistake in their heretofore brilliant decade-long antitrust defense campaign globally.

That’s because it should bolster the EU’s resolve to prosecute and not settle because the remedy revelations of the Russia-Google settlement effectively strengthen the EU’s three antitrust cases because Google is implicitly admitting that its Android tying behaviors have reinforced its anticompetitive syndication agreements for search, Android, and search advertising.

In the U.S., it could become an action forcing event eventually, because Android-harmed American companies could expect enforcement of U.S. antitrust law based on similar facts and evidence to what has led to an EU Google Android Statement of Objections, and to Google’s offered and agreed to remedial concessions in its Russia settlement.

***

Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an internetization consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google and before the relevant House oversight subcommittee on Google’s privacy problems.    

 

Trump Administration Google Antitrust Series

Part 1: America’s Indefensible Media Concentration Double Standard [12-5-16]

Part 2: The Google-Facebook Online Ad Cartel is the Biggest Competition Problem [1-12-17]

Part 3: Twitter & Snap Evidence Confirm Goobook Ad Cartel Crushing Competition [2-15-17]

Part 4: Look What’s Happened Since the FTC Stopped Google Antitrust Enforcement [3-13-17]

Part 5: Google Antitrust Implications of Makan Delrahim as DOJ Antitrust Chief [3-28-17]

Part 6: Trump Administration Implications for Google Antitrust in EU, US & Markets [4-7-17]

Part 7: 6 Reasons Trump DOJ Will Take Lead from FTC in Google Antitrust Enforcement [4-13-17]

 

 

 

 

 

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