14 December 2017
Imran Ali

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Imran Ali - Answer Digital

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Google antitrust fine - No Lessons Learned

27 June 2017  |  5809 views  |  0

Today, Google has been slapped with a record-breaking €2.4bn fine by European regulators for abusing its dominant position in the world of online shopping.

The European Commission said that the search engine has 90 days to end the misconduct. If it does not, it faces penalty payments of up to 5 per cent of the average daily worldwide turnover of Alphabet, which is Google's parent company.

Why has it comes to this? Why did Google not learn the lessons of the past? There have been plenty to learn from.

It was not so long ago when another company that dominates its market was fined for abusing its position. In March 2013, Microsoft was fined €561m by the European commission for failing to give users a choice of web browser when they logged into Windows computers in Europe between May 2011 and July 2012 – breaking a binding commitment it had made in 2009.

And the list goes on:

Intel was fined €1.06bn in 2009 for abusing its dominant position in the market between 2002 and 2007, when it was believed to have excluded competitor Advanced Micro Devices AMD from the market for x86 central processing units.

Telefonica was fined €152m in 2007 for overcharging competitors for wholesale broadband access in Spain.

In 2015, Philips, Lite-On, their joint venture Philips & Lite-On Digital Solutions, Hitachi-LG Data Storage, Toshiba Samsung Storage Technology, Sony, Sony Optiarc and Quanta Storage were fined €116m after they formed a cartel to avoid competition.

Closer to the world financial services, the banks have not escaped fines for their abuse of market position either. According to Boston Consulting Group, in total financial institutions have paid $321 billion in fines related to the 2007/2008 crisis. Those fines aren't strictly in the same category as the antitrust fines mentioned above, but they are as a result of institutions that dominate their market causing unfair and undue harm to consumers.

So, what are the lessons that Google should have learned?

Well, firstly, they should have realised that once they became the dominant player in their market they would always be susceptible to close scrutiny. This should have caused them to be more careful in everything they did and how they conducted themselves.

Secondly, Google should have realised that being the dominant player brings a unique set of responsibilities. There is nothing wrong with the capitalist framework where competition breeds better companies that provide superior services to customers. However, when one company dominates the market then the rules change somewhat. The company at the top of the tree, in fact occupying most of the tree, needs to actively encourage competition.

Now that sounds quite contradictory. A company that has worked hard to become number one now has to try hard to help others beat it? Well, yes. Because having just a single provider in any market results in less choice, less services, and higher prices for customers. So the customer loses, which is never good. 

So when Google found itself in the top spot, just as Microsoft did, and Intel, and the international banks, they had a responsibility to ensure the customer still got a good range of choice and price. The fact that they didn't showed they tended towards maintaining their own strong position at the expense of the customer, and were duly punished with large fines.

I hope companies will learn from Google, and the others. No company should be punished for being successful. But all companies must recognise that they became successful because of their customers and the one thing they should not forget when they become number one, is who helped get them there.

Google fine TagsRisk & regulationInnovation

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I co-head the Finance Sector at Answer Digital. We provide software development services, as well as end to end project management and solution design. We help clients deliver solutions to meet their...

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