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The Growing EC-Google Settlement Scandal – An Open Letter to European Commissioners
Submitted by Scott Cleland on Mon, 2014-03-31 08:58
Dear European Commission Official,
The more the European Commission learns about the proposed EC-Google competition settlement, the less sense it makes, and the more scandalous it appears.
Never has the European Commission been presented with such a controversial, perverse, and unreasonable competition settlement to approve. This is not how the EC’s law enforcement process is supposed to work.
Everyone knows that a worthy settlement is a true compromise, where most parties gain something they need, and on balance support it as a reasonable net gain from the status quo. It is telling that virtually no one but Google is supporting this settlement outcome publicly or coming to Google’s defense. That fact should scream that this proposed settlement is not what it is represented to be.
Sadly, this particular process and settlement has devolved into an indefensible and perverse spectacle that has brought unwelcome attention and ridicule to a critical EC law enforcement process that must be beyond reproach.
The reason the European Commission has yet to disapprove a DGComp proposed settlement, is that the European Commission has never been presented with a toxic settlement that is so perversely: anti-consumer; un-European; worse than the status quo; pro-dominance; tolerant of dominance abuses; and ineffective in achieving its main priority – “quick resolution.”
Please consider these obvious facts.
Perversely Anti-Consumer: The settlement claims to benefit consumers, but obviously raises prices for European consumers by showing them auction-based search results -- which by design have demonstrably higher product prices than either the status quo, or unbiased search results.
Moreover, if the settlement’s consumer-benefit claims were true, why have all consumer groups consistently, vehemently, and increasingly opposed this settlement as harmful to consumers?
Perversely Un-European: By design, this EC-Google settlement mimics the American FTC’s January 2013 decision to not bring a law enforcement case against Google in return for Google commitments to change some of its business practices as long as Google did not have to admit any wrongdoing or be subject to any penalty.
It also closely follows and co-enforces American law where dominance is not illegal and where antitrust violations are determined by balancing whether or not the behavior in question net benefits or harms consumers and innovation.
This American approach explains why the DGComp abruptly stopped investigating any additional Google’s search-related abuses going forward, and only pursued settlement negotiations, not law enforcement against Google. It also explains why DGComp has resisted including data protection as a consumer-harm in its competition review, because the U.S. FTC/DOJ decided a decade ago to no longer make privacy an antitrust issue in order to promote American Internet advertising models.
Perversely, this settlement neither enforces EU law nor respects EU competition or data protection interests.
Under Article 102 of the Treaty on the Functioning of the European Union, >39.7% market share is the threshold to be considered dominant, and dominance in the EU is illegal. (DGComp concluded Google’s market share is 90+% in web search.) Moreover, under Article 102, dominant firms have “a special responsibility to not allow its conduct to impair competition on the common market,” i.e. not abuse their dominance. (DGComp also concluded Google abused their dominance in four ways.)
Most perverse is that this settlement runs completely counter to current obvious European consensus on these matters. The European parliament -- after enduring immense lobbying pressure by Google and U.S. tech interests to not update European data protection law for the first time since 1995 – recently voted overwhelmingly (621-10) for much stronger EU data protection laws. It also overwhelmingly backed a resolution (544-78) calling for a suspension of the U.S.-EU data protection “safe harbor” that allows Google and U.S. firms to “self-certify” they are compliant with EU law.
Given that Google achieved its market dominance in web search and search advertising in significant part by flouting EU data protection law and ignoring EU data protection authorities, any European Commission support for the privacy-hostile, proposed EC-Google settlement, would fly in the face of Europe’s clear strong political consensus for increased EC law enforcement to protect European consumers from harm.
Adding insult to injury, this perversely-weak settlement is the functional equivalent of a “search safe harbor” because it effectively would allow Google to “self-certify” that they are in compliance, because Google does not have to comply with what the proposed settlement monitor says.
Simply, this settlement serves Google’s and America’s interests by disserving Europeans’ interests.
Perversely Worse Than Status Quo: Never has a high-profile settlement been so obviously bad that all complainants (26) argue the settlement is perversely worse than the status quo.
Rather than providing any competitive relief or opportunity, it actually would accelerate competitors’ demise by reducing the number of potential competitors to three and then driving those Google-approved potential competitors’ costs up by perversely forcing them to pay Google for the opportunity to compete against Google.
Perversely Pro-Dominance -- by Pretending the Most Dominant Company Is Not Dominant: The EC investigation concluded “Google is dominant… in web search and search advertising… holding market shares in web search well above 90% in most European countries for several years now.” The settlement would effectively pardon Google’s illegal dominance for five years.
And after finding four abuses of dominance, the settlement would protect Google’s reputation by allowing Google to admit no wrong doing and to shut down the EU’s search investigation. It also would protect Google’s business by allowing it to illegally enjoy and extend its business dominance.
Perversely Tolerant of Dominance Abuses: This settlement legally affords Google a de facto and perverse, carte blanche to extend its dominance in “web search and search advertising” to divert competitors’ traffic at will, and to preference Google-owned content, products and services over all others in the 95% Google-dominated web search business.
Simply, this settlement would perversely bless Google as a de facto, EC-approved, unregulated, dominant, online-utility for the next five years.
On what legal, ethical, or logical basis is it reasonable for EU law enforcement to unilaterally absolve -- the largest, fasting-spreading, and most-abusive dominant firm in EU history, that has already abused its dominance in standard essential patents and is undergoing another preliminary investigation of widespread abuses of dominance in mobile via Android, and that has been a serial scofflaw of EU data protection, tax evasion, and intellectual property laws – of any responsibility for its wrongdoing, or liability for its illegal dominance or abuses? Such an outcome makes no legitimate sense.
This settlement has minimal deterrent value because there is no sanction or cost to its widespread-abuse of dominance in terms of a penalty, admission of wrongdoing, or meaningful behavioral remedies.
Perversely Ineffective in Achieving Its Main Priority -- “Quick Resolution” The purported core rationale for preferring a settlement over standard law enforcement was that it was faster. In May of 2012, the EC commenced its negotiations with Google based on the premise of “quick resolution.”
This purported “faster” process started 22 months ago with the stated belief “that these fast-moving markets would particularly benefit from a quick resolution of the competition issues identified. Restoring competition swiftly to the benefit of users at an early stage is always preferable to lengthy proceedings.”
Unfortunately, Google interpreted openness for settlement, as a reluctance to prosecute, so it slow-rolled, delayed, and abused the settlement process with deceptive proposals. Now the process has gone on for 22 months and is more months away from any “quick resolution.” The sad reality is that the EC could have approved and made operative a Google Statement of Objections faster than 22 months.
European Commissioners should ask themselves what other law enforcement official would judge it in the interests of justice and fairness to allow a serious serial offender, three opportunities to design their own remedies, especially after the first two proposals were proven in public market tests to be obviously deceptive and also destructive to competition. Only a compromised process could yield such a perverse law enforcement outcome.
In sum, this current embarrassing spectacle over the proposed EC-Google settlement is playing out like a modern-day version of Hans Christian Andersen’s famous fable, The Emperor’s New Clothes, where it takes child-like honesty to declare that the emperor is actually wearing no clothes at all.
The overwhelming evidence shows that: Google is dominant; it has abused its dominance; and its dominance is spreading rapidly throughout Europe’s economy, culture, and politics. This huge problem is not going away and can’t be ignored. If this European Commission does not enforce the law against those who brazenly seek to evade it, future European Commissions will have to clean up the mess.
The overwhelming evidence also shows that the proposed EC-Google settlement is perversely: anti-consumer; un-European; worse than the status quo; pro-dominance; tolerant of dominance abuses; and ineffective in achieving its main priority – “quick resolution.”
This perverse settlement is not how the EC’s law enforcement process is supposed to work. The many red flags expose a compromised process. A normal process with integrity would not produce such a perversely harmful, unfair, and counter-productive outcome. To the outside observer, it sadly appears to be the result of naïveté, incompetence, or corruption.
This is a watershed decision for the EU. It is neither a routine EU settlement decision nor a case properly handled outside ofArticle 102. This is about whether much of the EU’s sovereignty, economy, culture, and politics will be dominated by one foreign company that repeatedly abuses its dominance and operates as if it thinks it is above EU law.
The European Commissioners should reject the third proposed Google-EC settlement and vote to immediately enforce the Statement of Objections under EU Competition law under Article 102 of the Treaty on the Functioning of the European Union.
President, Precursor LLC, a research consultancy for Fortune 500 clients, some of which are Google competitors
McLean Virginia, USA