
Google’s Internal Response to Imminent E.U. Charges - virtuabhi
http://recode.net/2015/04/14/here-is-googles-internal-response-to-the-imminent-e-u-charges-memo/
======
pja
It ought to have been transparently obvious to Google execs from when Google
became utterly dominant in the web search space that the risk of anti-trust
violations was very high and if they wanted to avoid being censured they
needed to consistently take the high road & avoid using that dominance to
force entry into other fields at the expense of competitors. It has always
looked to me that Google was consistently stepping over that line in search &
advertising often enough that they were inviting anti-trust suits.

The agreements they force phone vendors to sign up to if they want to ship
Google Play services with Android phones also stink to high heaven & are an
anti-trust suit waiting to explode in Google’s face - that self-imposed banana
skin appears to be next on the EU commission’s agenda.

Google can afford to pay any fine the EU is likely to impose of course. The
greater cost may be in exec time & loss of face, plus the generalised malaise
that seems to go along with losing an anti-trust suit.

~~~
bla2
Compare Android with iOS. Android is open-source but if you want to ship any
Google apps, the company making these apps makes you sign an agreement that
forces you to ship a certain set of their apps. iOS is closed source, and you
just plain can't use it on your hardware at all. How is Android worse?

~~~
drited
That's a straw-man argument. He didn't say Android was worse than iOS. He said
Google was abusing its dominant position to expand into new markets.

------
vidarh
It's fascinating that their memo dismisses their search position so easily,
but focuses on graphs for shopping and travel that shows them in a weak
position in those areas, as either the memo is hiding their real arguments
(which might not be unreasonable - given its audience and the odds it would
leak), or they have not thought this through.

What the graphs show is that there are a number of strong competitors in the
shopping space, which may create a strong public interest in ensuring Google
is not being allowed to use it's perceived search monopoly position to muscle
into the space and limit competition by giving itself better positions in
results.

If the EU Commission finds that Google has a sufficient near monopoly on
_search_ and that their practices with respect to expanding their reach in
shopping is anti-competitive, then Google's current weak position in shopping
is entirely irrelevant unless they're hoping to show that being given such a
prominent position in their search results does not give a business any
advantages (their ad sales people ought to start hyperventilating if Google
makes that argument).

And in fact the existence of a healthy, competitive eco-system in shopping
would make any anti-competitive behaviour by a powerful monopolist far more
damaging and important to curtail in the eyes of the EU Commission. It should
not be something you'd want to draw attention to.

A much better argument would be to highlight far more the breadth of niche
search engines, and how e.g. searches on Amazon and Ebay and others should
_also_ be included in any assessment of search market share, and that this
would show that Google's market power is not as great as it would seem if you
only look at "general purpose" search engines.

~~~
7952
Google are not actually selling things, merely offering search of retailers
(who pay for the priveledge). From the consumers point of you I think this is
distinctly different from what Amazon do. On the Google I see they only push
Google Shopping through ads and don't appear to alter normal search results. I
suppose that they could have an advantage in terms of ads over competitors,
but that is the benefit they are selling to retailers so it isn't that
different to any other ads. IMHO it actually increases competition by
surfacing alternatives to Amazon that would otherwise be the first result.

~~~
vidarh
The competitors that are allegedly being hurt by their preferential treatment
here are not selling things either - they are comparison shopping sites.

It is not the consumers this anti-trust action is intended to protect, but
those competitors of Google Shopping. The presumption of a lot of anti-trust
law is that protecting competition is in the long term public interest that
outweigh short term impact on consumers. Some anti-trust actions are motivated
by direct consumer interest, but most is motivated by preventing anti-
competitive practices by a monopolist from harming competitors.

If competitors of Google Shopping are treated fairly in terms of search
results, and can buy the same kind of position that Google Shopping can (I
don't think they can), then there would be no issue.

My point in terms of Amazon is not that Amazon search isn't different to
Google - clearly they are, though they too have paid third party results on
their pages.

My point is that _to Google_ it's their search dominance they need to
downplay, not the relatively market position of Google Shopping. Giving their
own business preferential treatment is perfectly legal if they're not in a
monopoly position. The moment they're found to have a monopoly position, a lot
of forms of preferential treatment becomes illegal anti-competitive practices.

They can beat this in two ways: By convincing the EU or EU courts that they do
not have a search monopoly, or convincing the EU that they are not giving
Google Shopping preferential treatment. The latter I think would be extremely
hard given how Google Shopping results are positioned.

The way they can _not_ beat this is by talking about how there's a lot of
competition in comparison shopping. If anything, that gives the EU Commission
a stronger reason to act on allegations of anti-competitive behaviour, as it
means there are Google competitors that may be harmed by any anti-competitive
behaviour that might be occurring.

------
blfr
Those graphs are so sad. It's all American companies competing among
themselves: Twitter, Bing, DuckDuckGo... Even on our home turf, even with
natural advantage (not so much in search but definitely in shopping), local
competition is at the bottom, far behind Amazon and Ebay.

And this doesn't seem to worry anyone here. We continue to tack on more
regulation, tax rules detrimental to small businesses in their complexity, and
now surveillance that would make Obama blush[1]. Oh, but we will show these
evil monopolists with this formal complaint.

[1]
[https://news.ycombinator.com/item?id=9379299](https://news.ycombinator.com/item?id=9379299)

~~~
woodpanel
Agree. The european problem: non-entreprenurial culture resulting in startup-
prohibiting red tape. Two factors where the US beats Europe. Now combine that
advantage the Americans have with the economics of scale of Software: It eats
the world.

Part of that cake: Pretty much any non-downtown store in Europe.

~~~
_delirium
In some places red tape is a big issue, but I don't think it's the whole
story. Starting a small business in Denmark nowadays is extremely streamlined:
you can do the entire registration process for the Danish equivalent of an LLC
online, and your business is registered within a day or so. It's so easy that
it's become common for people to start a company even for small-scale side-
business stuff. It's also fairly easy to hire and fire people (one prong of
the "flexicurity" policy [1]).

I think a big problem has been the economics of scale you mention, because
Europe has not really functioned as a common market. One part is language.
This is changing a bit (at least here), and most Danish tech startups now make
their products English-first, or even English-only, which greatly increases
the odds of international adoption. Some is more cultural, though; we don't
read French or Italian or German media, and nobody else reads Danish media, so
things that get a "buzz" in one country travel fairly slowly cross-border,
while American media spreads quickly. Probably a lot more factors of this
sort.

One issue of incentives, though, is that it can still be in many cases an
individually rational choice to target a more "provincial" market. If you're a
Danish startup and identify a Danish-specific underserved market, you have
less potential for growth, but may have higher probability of at least modest
success, due to much less competition. So even if it's better for Europe as a
whole for startups to target a broad, international market, it might be
rational for individual startup founders to target smaller, country-specific
markets. American startup founders to a large extent lack this choice, because
there are not many tech market niches which are, say, Tennessee-specific.

[1]
[https://en.wikipedia.org/wiki/Flexicurity](https://en.wikipedia.org/wiki/Flexicurity)

~~~
woodpanel
Got to agree! Good points you made. I think Red Tape is a symptom of the
culture.

The language barrier keeps economics of scale from coming into effect for
founders. The abundance of investment capital is an important factor. If that
factor increases you become less dependant from factors like "knowing the
right people" and "got to having a superb idea".

Building upon your "provincial market" statement: Couldn't it be said, that
those country-specific niches will lure the entrepreneurial folk into building
dead-end, non-scalable products? :)

~~~
_delirium
On the last point, I think that's a risk, but the dead-end can still be big
enough to make a small company quite wealthy. For example one of the more
successful niche-tech companies in Denmark makes a portal that many Danish
doctor's offices use. They did a good job really digging into how their market
worked and what it wanted, so it's very customized to the way Danish
healthcare works. Although it has some benefits for patients too (if a doctor
uses this portal, patients can book appointments online, etc.), the real
selling point has been that they identified what administrative work produces
a lot of the per-office overhead at small offices, and offload much of that,
so the doctor saves more in administrative salaries than they pay for the
PaaS. They also have a fairly "high-touch" sales process to convince doctors
that their product really will help them out. This company is probably not
going to grow outside of Denmark, but it makes a lot of money in Denmark
(comparatively speaking), and its market is so specialized that it's somewhat
protected from external competitors.

------
acqq
EU: "Google, you use your de facto search monopoly attempting to win new
monopolies."

Google: "But look, we still haven't destroyed all the competition. Why don't
you please wait until we do?"

~~~
spacemanmatt
Courts generally hear actual and not hypothetical controversies. If the
competition can't yet show harm, there isn't a crime yet.

~~~
dragonwriter
> Courts generally hear actual and not hypothetical controversies.

The relevant EU Commission is not a court, and this isn't an adversarial
proceeding between Google and competitors, even for all that Google
competitors lobbied the EU for action.

> If the competition can't yet show harm, there isn't a crime yet.

The issue here isn't crime, or something that competition has to show
anything, and plenty of crimes do, in fact, exist when harm cannot be shown,
anyway.

~~~
spacemanmatt
> The relevant EU Commission is not a court

True, but the principle is a common one. And it is adversarial in that the
Commission is prosecuting and Google is defending. This isn't a cooperative
investigation.

To the extent that courts do not try hypothetical controversies, they also
depend on actual proof and not unproven harm. How do you suppose a company
would be found guilty of about-to-violate-antitrust-laws?

~~~
dragonwriter
> True, but the principle is a common one.

Its actually not as common as you might think; the principle in the US legal
system that courts do not address hypothetical situations and issue advisory
rulings distinguishes courts in the US system from courts in many non-US
systems and many non-court adjudicative bodies (in the US and other systems.)

> And it is adversarial in that the Commission is prosecuting and Google is
> defending

Its more inquisitorial than adversarial, since there is not a separate
prosecuting entity from the adjudicating entity, but the key point was that it
wasn't between Google and its competitors, so its competition doesn't need to
show anything, contrary to the suggestion made that the competition needs to
show harm.

> To the extent that courts do not try hypothetical controversies, they also
> depend on actual proof and not unproven harm.

Only if the legal standard relevant to the controversy requires concrete
harms. A prosecutor doesn't, for instance, have to show any harm when
prosecuting attempted murder.

> How do you suppose a company would be found guilty of about-to-violate-
> antitrust-laws?

Antitrust laws very frequently prohibit conduct undertaken with the _intent_
of monopolizing an industry, though the degree of actual harm is often
relevant to the zeal with which antitrust authorities _prosecute_ offenses,
and the remedies imposed. Actual harm is often relevant in antitrust analysis,
but may not be essential for a violation to occur -- just as the case for many
other kinds of violations of law.

------
michaelt
If those graphs are supposed to show that Google Shopping is an unpopular
also-ran that users don't like or use, you have to wonder why they keep
putting it in a big box with pictures at the top of search listings, like
[http://imgur.com/N3aGIVy](http://imgur.com/N3aGIVy)

~~~
jacquesm
According to Google in the early days 'paid inclusion' was one of the original
sins, and Google would never stoop that low. I personally think that paid
inclusion is actually less evil than promoting your own crap products over the
legitimate listings.

~~~
pliny
Isn't promoting your own crap just dogfooding paid inclusions?

------
wslh
I applaud the EU not because I love regulations but because Google is tasting
its own medicine.

Any country or group of countries with a shared legislation can be seen as a
platform. Yes, like the software platforms we are discussing here in HN. You
must obey their rules. People who wants 100% market freedom forget that when
companies like Google has an incredible market share THEY ARE THE MARKET, and
they impose their own rules (imposing agreements, modifying and limiting APIs,
etc) just like the EU is doing now.

There is only one thing that leaves a bitter taste in my mouth, nobody is
innovating enough to really compete with Google in some important fronts such
as search. This can't be solved with regulations.

------
sschueller
Why is Apple not also in trouble?

The way safari runs on iOS compared to other browser is very similar to how
Microsoft shipped explorer with windows. Except windows did not prevent other
browser from using the full API and your app didn't have to go through a
approval process.

~~~
makeitsuckless
Didn't we already do this dance back in the Microsoft anti-trust days? Market
share makes all the difference.

That's the whole point of these rules, any company can do whatever they want
on their own platform _except_ when the become so dominant competition no
longer happens.

Please stop comparing _actions_ when it's _context_ that matters here.

~~~
spacemanmatt
I wonder that myself, sometimes. I think maybe it was a different generation
that actually paid any attention during the Microsoft trial days.

------
gggggggg
Is it just me or does that memo read like it was meant to be leaked. To the
point that it was not at all intended for internal.

~~~
gtirloni
There is no such thing as an internal memo anymore. Especially on matters
relevant to the public in general. It's a outdated practice of reporters to
call it "leaked" but these days it's just to draw some attention. It was
probably sent by their legal team themselves to send a message to the EU
commission.

~~~
smackfu
Well, no such thing as an internal all-hands memo. Sending something to
"everyone at Google" is basically the same as sending it in public.

------
makeitsuckless
Seems to me that Google suffers from the same cognitive dissonance that
plagued Microsoft in the past: it still sees itself as the small innovative
start-up, when in fact it has become the 800 pound gorilla that crushes the
competition.

------
kbwt
I don't think Google should be allowed to get away with clauses like this one
from their developer agreement:

    
    
      4.5 Non-Compete.
        You may not use the Market to distribute or make available any
        Product whose primary purpose is to facilitate the distribution
        of software applications and games for use on Android devices
        outside of the Market. 
    

See: [https://play.google.com/intl/ALL_us/about/developer-
distribu...](https://play.google.com/intl/ALL_us/about/developer-distribution-
agreement/archive.html)

~~~
spacemanmatt
Why not? Apple also won't let you go around their store for content sales in
apps.

------
pearjuice
I don't understand how an entity can force Google to change their algorithms.
They are a private company and with their own hard work they managed to get as
many clients as they currently have. So because so many people are using
Google as a search engine, they are now supposed to promote competitors of
their services because "so many people are using it"?

It's like saying "so many people are driving BMW, it's not fair for Audi, BMW
should include an Audi advertisement now and then. If they don't, they will
have to pay us a big fine!". Isn't Europe a free market?

------
wongarsu
>Mobile is changing everything — with the explosion of apps taking people
directly to the information they want. Today 7 out of every 8 minutes on
mobile devices is spent within apps.

How is that any different from people using websites directly? I don't see any
change here, except that now 1 out of 8 minutes is apparently spent away from
content?

>Apps that compete directly with Google such as [...] are easily available to
Android users

They forgot to mention how you are not allowed to distribute alternative app
stores over Google Play and can only be installed after changing the phone
settings.

~~~
ocdtrekkie
Yup. Google on Search: "Mobile is changing everything... please ignore the
fact that we control the mobile industry too."

------
Sven7
Increased competition? Seriously Google. The current count of European Search
Engines in your own memo is 0.

~~~
nostrebored
And is that a fault of Google or a terrible system for software innovation?
Google was created while students in a very successful university collaborated
with the means to actually make their vision a reality. Excluding GB, how many
schools in the EU fit that bill? I can think of ETH Zurich and that's it.

~~~
Sven7
The caliber of the schools don't matter anymore. Nobody is capable of
accumulating the quantities of data/processing power Google has access too. So
search innovation more or less just lies in their hands and hasn't really gone
anywhere beyond where they want it to go from lack of competition. Besides
ofcourse in China and Russia where local alternatives have the breathing room
to exist.

------
AlexMuir

        Today 7 out of every 8 minutes on mobile devices is spent within apps.
    

That's the most interesting thing here. I'm interpreting it as meaning only 1
out of 8 minutes is spent browsing the internet or using the native SMS app.

~~~
kgrin
I kind of wonder if they're counting "Chrome" as an app, and the 8th minute is
actually SMS + phone (quaint, I know). I'd believe it either way, to be sure.

------
WhitneyLand
In the software space, how much tangible benefit has antitrust actually
provided to consumers?

Microsoft's power was reduced more by market shifts, failure to adapt, and
unanticipated new tech than it was by monopoly sanctions.

I do believe absolute free markets are not practical, as evidenced by the fact
they mostly don't exist.

However, the minimum force principle applies. For every government constraint
on tech I thing it's fair to ask, is there no way the market can fix itself in
5 years? How many disruptive shifts will happen during that time?

Maybe government could help more by starting first with stronger patent
reform?

~~~
blumkvist
Microsoft's power was reduced because of a huge anti trust suite. It was later
won on appeal, but they got the cue.

