Google's War With The EU

Recently, we saw that Google GOOG has once again been charged with breaching the EU's antitrust regulations.

In this article, I want to examine this in more detail and answer four questions that are pertinent for investors in Google and in other major global corporations.

These four questions are firstly-;

  1. What exactly are these antitrust regulations?
  2. What are the differences between the EU vs the US regimes and are we likely to see a gradual convergence in global antitrust regulations?
  3. Do these regulations pursue a legitimate legal aim or are they a penalty for a superior business model?
  4. Finally, what does this mean for investors in Google and what trends can we extrapolate from this to create some forward looking guidance for investors.

While each of these questions can easily be studied as a PhD thesis, I will like to boil the pertinent facts down to provide the most relevant guidance particularly for Google investors.

I will also highlight that this will not be the last case in this area or in the area of privacy and it is likely that divergent rules on privacy and competition in the major economic regions is likely to drive the company to split the company into individual companies with a tailor made legal regime for each jurisdiction.

This will also apply to other tech giants like Microsoft MSFT, Apple AAPL, Amazon AMZN and Facebook FB. This outcome is the most likely because it will be at least one decade before governments around the world will be able to agree on a global digital framework that will address these very issues and until then, it will create a global multi layered digital marketplace

The European Competition Commission has always been very bold and robust on what it believes is its duty as a competition watchdog.

In the past, it has gone after global companies like Microsoft, Apple, GE and most recently Google.

Nevertheless, it has opened up accusations that its divergence from US antitrust regulations is because it is a weapon used by the European Commission to weaken US companies in Europe in favour of European companies which ultimately will weaken global progress in this sphere.

Let us begin with a timeline about the EU Commission's battle with Google.

This five and a half years battle started in 2010 when the European commission alleged that Google had breached competition law by abusing its dominant position through using its search engine to push users towards its own services and reduced the visibility of competing websites.

This was based on complaints by a number of other companies including Foundem a British price comparison site, eJustice which is a French legal search tool and Ciao a German Microsoft owned price comparison site and eventually Microsoft Bing also added its own complaints.

In 2012, Google agreed to clearly differentiate its services from natural search results, further it agreed to display links to three other rival services and address allegations that it stole restaurant and travel reviews by allowing sites to opt out of Google searches.

The Commission invited comments and as a result, it emerged that many were not satisfied including TripAdvisor and Expedia who also added their own complaints.

Google made two settlement offers that were knocked back by the European Commission.

In 2014, some of Google's offers of settlement were accepted by the Commission but this did not satisfy the complainants who argue that they were not consulted before the settlement was agreed.

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