Business Thinkers Are Wrong On Google, The EU Is Right

Google appears to be on the cusp of a massive fine from the European Commission, and likely given instructions on better behaviour in the future. That much is pretty clear from the noises coming out of Brussels. What is not so clear is how people feel about this -- and ultimately, whether they believe a U.S. tech giant is being rightly brought to heel or wrongly lined up as the latest tall poppy the EU wants to cut down.

It was very interesting to read what a former Sunday "Times" colleague Matthew Lynn had to say about the issue in The Telegraph. I would be the last person in the world to disagree with Matthew, who is one of the country's finest business writers. However, with Google, I would take issue with some of the points in his otherwise persuasive argument. The basis of the blog is that the EU likes nothing better than to pick on a huge American tech giant and cut it down to size. He probably has a point here. However, if you go beyond a macroeconomics level and become involved in the nitty gritty of the case, Google really does have a lot to answer for.

Yes, it is a hothouse of innovation which is to be applauded, although you may question how much of its success is created and how much is simply spent on buying exciting start-ups. Ultimately, both approaches encourage and award innovation, so it might be a case of splitting hairs. And yes, it's also true that Google has given companies access to markets and customers they would never have had otherwise, and so has created untold business opportunities. 

The problem is, it cannot get away from the fact that it also uses its dominance to place its own companies ahead of rivals. It really is that simple. Web users can't help but notice that Google Shopping results often appear in a box where other online shopping services never show up. It's the same for travel and personal finance queries. The box that appears, often with a text box for more details to be typed into, appears to be reserved for Google services.

Don't get me wrong -- the boxes are incredibly useful, particularly when they give Wiki style immediate answers to queries. The thing is, when they're providing direct links to buy products and services, then having those boxes is clearly anti-competitive when you consider that Google owns 90% of the European search market. It would be a little like a department store selling a bunch of concessions on each floor, as they do, and then making customers walk through their own stand at the front door where they can buy what they need without going any further. 

The moment Google entered ecommerce it was always going to be in competition with the companies that are trying to get to the top of its listings, either by clever SEO work or paying to be promoted to the top of the page -- usually both. To leapfrog the SEO work and to offer a rival to the paid listing which others don't have access to just stinks. The complainants against Google aren't so much about the boxes the search giant has created -- they simply want them to offer a level playing field where access to them is open to all, albeit almost certainly for a fee, just like paid search.

The crazy thing is, the activity is clearly anti-competitive, and Google has had the past few years to remedy the situation. The easiest step would have been to make the shopping or ecommerce-style boxes open to all to bid to appear in, precisely in the same way that paid search works and in complete accordance with what its complainants were suggesting. 

Instead, one of two things has happened. In scenario one, Google has mistakenly believed the EU didn't mean business and would likely to discuss the issue rather than act on it -- Microsoft and Intel prove that although it can take time the EU does eventually act on its anti-competition complaints. In the second scenario, Google makes so much money from being what the EU may come to see as anti-competitive that it has taken a business decision to carry on until fined and hope the fine isn't for more money than they've been making by promoting their own services. 

Either way, it's not looking good for Google, and when the seemingly inevitable fine does land on its lap it will actually have very few friends to moan to because it has totally misread the mood music in the EU. Sure, it's getting a huge slap for anti-competitive behaviour, but read the comments from the public and you'll see the reason why EU citizens are angry with it -- tax avoidance. Pure and simple. Anti-competitive behaviour will get it a fine, making huge profits in the EU and using clever accountants to avoid paying the levels of taxation we would normally expect to pay on our businesses, will ensure they have no shoulders to cry on.

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