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Trump Administration Implications for Google Antitrust in EU, US & Markets
Submitted by Scott Cleland on Fri, 2017-04-07 16:14
Most of what we have learned in the five months since the election indicates that the Trump Administration is not going to be Google’s antitrust advocate and protector like the Obama Administration effectively was from 2013-2016, in de facto shutting down any real U.S. antitrust scrutiny of Google, and in turn implicitly discouraging antitrust enforcement of Google in the EU and around the world.
This antitrust enforcement sea change has three big picture implications: for the EU, for the U.S., and for markets.
First, finalization of EU’s three major antitrust cases against Google -- search discrimination, android tying, and online advertising exclusions – aren’t likely to be interrupted by transatlantic strife over Google.
Thus, the EU remains very likely to finalize its search bias case against Google, most likely in June or July of this year.
That means Google will be officially ruled a search monopoly that has abused its dominance, ending its ability to publicly deny it’s a monopoly and that it has done nothing wrong. It will also face a large fine, but much more importantly, the EU remedy most likely will impose a nondiscrimination principle requiring Google to treat competitors search results the same way they treat Google’s.
What many don’t appreciate about an EU mandated nondiscrimination remedy is that in the EU, the legal burden of proof will flip, from DGComp having to prove Google search anticompetitively discriminated against a competitor, to Google having to prove it did not. It also will make it dramatically easier for private antitrust lawsuits to succeed against Google in the EU.
Second, the Trump Administration is not going to continue the Obama Administration’s de facto stand down order on Google antitrust enforcement.
Rather than Google complainants understanding they should not bother taking Google antitrust complaints to the 2013-2016 Obama FTC/DOJ that did not want to hear them, the FTC/DOJ will return to a pre-2013 normal antitrust state, and be open to hearing and investigating evidence-driven complaints that allege prosecutable illegal antitrust behaviors by Google.
And given that Google has generated a lot of evidence and that some charges against Google are easier to prosecute than others, Google is unlikely to traverse the U.S. antitrust landscape unscathed in the next four years, like it has the last four.
Third, from a market perspective, over the last four years Google has masterfully managed public perception of its antitrust risk overhang. Tellingly, Google’s stock is: up 120% since the FTC shut down all Google investigations at the very beginning of 2013; and up 55% since the EU filed its first formal Google statement of objections in April 2015.
If past is prologue with Google, the market won’t believe Google’s antitrust risk is real until it officially happens (most likely in the EU in June/July 2016).
Overall in the EU, in the U.S., and in the markets, the next four years are very likely to be very different for Google antitrust than the last four years have been.
What have we learned from Trump/OSTP/Thiel/Delrahim that support these conclusions?
President Trump: First, President Trump in his inaugural address January 20th said: “…We will seek friendship and goodwill with the nations of the world – but we do so with the understanding that it is the right of all nations to put their own interests first. We do not seek to impose our way of life on anyone, but rather to let it shine as an example for everyone to follow.”
This is in stark contrast to how President Obama last February characterized his position on foreign law enforcement to Re/code: “In defense of Google and Facebook, sometimes the European response here is more commercially driven than anything else. … sometimes their vendors — their service providers who, you know, can’t compete with ours — are essentially trying to set up some roadblocks for our companies to operate effectively there.”
This is relevant because the FTC’s justified the chaoticclosure of its search bias antitrust investigation, by explaining: “The evidence did not demonstrate that Google’s actions in this area [search bias] stifled competition in violation of U.S. law.” [Bold added.]
Remember the FTC Staff Report concluded: “Google has strengthened its monopolies over search and search advertising through anticompetitive means, and has forestalled competitors ability to challenge those monopolies, and this will have lasting negative effects on consumer welfare.”
EU law and process are very different than the U.S. law that the FTC discussed; it has a lower dominance threshold, and a much more streamlined antitrust legal process. And Google’s market share is higher in the EU, 90+% vs. 80% in the U.S.
The EU’s different law and process is hard for the U.S. to criticize in the Google case because Google was given an extraordinary three formal chances to propose an acceptable settlement over a period of two years. And since the EU DGComp has filed statements of objections, tentative indictments, in search, Android-mobile, and advertising, Google has been afforded every extension of time and due process accommodation to bolster the strength of its appeal.
Knowing that Google’s legal strategy is to find and win on appeal on a technicality, DGComp has been hyper-vigilant to avoid technical mistakes in its case or due process, because it knows that in recent relevant EU antitrust history, only one DGComp case has been overturned on appeal.
In addition, the EC’s Vice President for Competition, Margrethe Vestager, publicly has proven adept and fair, providing none of the public unforced-errors that her predecessors made that sullied the legitimacy of their rulings.
Even if the Trump Administration were pre-disposed to come to Google’s public defense, which this analysis indicates they aren’t, Ms. Vestager has given the Trump Administration little to criticize, substantively, process-wise, and politically.
Add to this, the chorus of current industry complaints about Google for fake news, brand names boycotting YouTube for showing brand-damaging ads, and having minimal third party metric accountability, and Google’s proverbial “we are the victims” anthem it plays during antitrust actions, is unlikely to garner much sympathy with the new Trump Administration.
White House OSTP: Second, the institutional locus of Google’s exceptional influence in the Obama White House, Office of Science and Technology Policy (OSTP), is currently largely defunct per NYT reporting: “Scores of departures by scientists and Silicon Valley technology experts who advised President Trump’s predecessor have all but wiped out the larger White House Office of Science and Technology Policy.”
President Obama expanded the White House OSTP staff 160% above President Bush’s OSTP staff levels. Trump Administration sources indicate the Trump OSTP will be a shadow of its former Bush/Obama-self, going forward.
This is hugely relevant to the relative change in status of Google’s political power in Washington.
Three top White House OSTP tech staff were former Google executives who previously worked for Mr. Schmidt at Google: US Chief Technology Officer, Megan Smith,Deputy U.S. Chief Technology Officer for intellectual property & privacy,Alexander Macgillvray, and Administrator of the U.S. Digital Service,Mikey Dickerson.
In addition, a year ago, Mr. Schmidt poached President Obama’s Deputy National Security Advisor, Caroline Atkinson, who worked for National Security Advisor Susan Rice, to lead Google’s Global Public Policy team based in Washington.
This is a particularly interesting juxtaposition, given Google’s exceptional past influence in the Obama White House/OSTP, and NYT reporting characterizing the Trump OSTP very differently, in that no one “still working in the science and technology office regularly participates in Mr. Trump’s daily briefings, as they did for President Barack Obama.”
Google no longer has eyes and ears at the highest levels of the White House; and OSTP is no longer Google’s eastern headquarters.
Peter Thiel: Most observers appreciate that, Peter Thiel, Paypal co-founder, businessman, investor and the leading tech representative on the Executive Committee of the Trump Transition, is a well-appreciated influential advisor to the Trump Administration on tech and antitrust matters.
What many may not appreciate is he is one of the rare tech billionaires that’s not a computer scientist by training, but academically and professionally trained as a high-powered legal mind who went to Stanford Law School, clerked for a Federal Appeals Court Judge, and was hired at the beginning of his career by one of the most prestigious international law firms in the world, Sullivan and Cromwell.
With that under-appreciated legal background in mind, consider Mr. Thiel’s early and consistent public views of Google’s search monopoly, before becoming Presidential Candidate Trump’s highest profile, high-tech endorser and supporter.
In July 2012, which happened to be the height of the FTC’s search and Android investigation of Google, Mr. Thiel debated Google Chairman Eric Schmidt at a Fortune event and said: (per video here at 7:00)
“There are obviously individual companies that do quite well, especially world class monopolies like Google has in search.” (The Fortune moderator interjected “a legal monopoly.”) “They are legal as long as they don’t try and tie in and oppress other companies by extending their monopoly power unfairly. It’s quite legal to have a monopoly as long as you don’t abuse it.” Later in the one-on-one public debate, Mr. Thiel needled Mr. Schmidt: “I think you do a fantastic job as Google’s minister of propaganda.”
In September 2014, 20 months after the FTC shut down all its Google antitrust investigations, Mr. Thiel said this on Bloomberg TV when asked if any one company is likely to remain dominant longer than others:
“If I had to pick one, I’d tend to think Google is on an incredible arc. Their core search monopoly is very powerful and they are trying to extend it into all these other areas. I’d say Google is the one to watch.”
On March 8, 2017, in a CNBC piece entitled “Peter Thiel explained why Google makes such a big deal out of everything but its search business” CNBC quoted something Mr. Thiel said recently at a conference:
“…if you have a search company in Silicon Valley that I will not name, if you were to go around to CEOs saying, 'We have a bigger share of the market and higher profit margins than Microsoft ever had in the 1990s,' you wouldn't do that...You don't even talk about search. You say, 'We are a technology company with an enormous space called technology, and we're competing with Apple on smartphones, and we're competing on self-driving cars, and there's competition in everything we're doing except this one thing called search, and we never talk about that.”
Apparently, Google’s misdirection doesn’t fool Mr. Thiel.
Makan Delrahim: As I explained in my previous Google piece, “Google Antitrust Implications of Makan Delrahim as DOJ Antitrust Chief”, Mr. Delrahim is a traditional Republican antitrust enforcer who has the institutional trust, clout, and authority to take the Google antitrust investigation lead away from the FTC -- if he wants to do it.
If he wants DOJ to take the lead on Google antitrust issues, what would be the most logical baseline from which Mr. Delrahim would start?
Since, Mr. Delrahim served in the W. Bush DOJ Antitrust Division, and was a colleague with, and worked for, the last Republican antitrust chief, Tom Barnett, one would logically start with the precedent of Mr. Barnett’s latest and best antitrust analysis and thinking on Google.
Many have forgotten that the day after President Obama won the 2008 election, the W. Bush DOJ announced that Google and Yahoo abandoned their proposed advertising agreement in response to a threatened DOJ “antitrust lawsuit” that would have alleged the agreement would have harmed “competition in the markets for Internet search advertising and Internet search syndication.” In that announcement, the DOJ also indicated it considered and rejected Google attempts to settle the matter to mitigate the DOJ’s concerns.
AmLawDaily reported at the time that: “The never-filed government complaint would have charged that the agreement violated Sections 1 and 2 of the Sherman Act” and "It would have ended up also alleging that Google had a monopoly and that [the advertising pact] would have furthered their monopoly,"
It would be logical for Mr. Delrahim to have an open mind toward investigating Google for antitrust violations, if the evidence warranted it, especially given that Google warranted the strictest possible threatened antitrust action, a rare Sherman 1 & 2 antitrust case, eight years ago from W. Bush DOJ antitrust chief Tom Barnett.
Given this Google antitrust precedent and predicate from the W. Bush DOJ Antitrust Division, (and also the like-minded Obama-Varney DOJ Antitrust Division actions, that agreed with, and built upon the Barnett 2008 Google antitrust precedent), it is logical to assume a Trump-Delrahim DOJ Antitrust Division would start from the consistent fact supported antitrust views and baseline of the W.Bush-Barnett and Obama-Varney DOJ Antitrust Divisions, and not the subsequent Obama-Hesse-Baer-Hesse Google-antitrust baseline of “ move along folks, nothing to see here.”
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.