Google Is Smarter Than The EU -- It Ran The Numbers

You never need a good reason to watch a Coen brothers film but Google could have saved itself an awful lot of bother by listening to the end of Burn After Reading. After a hilarious sequence of events has seen everyone either shot or fleeing the country, the CIA superior, played by JK Simmons asks his junior officer what they'd learned from the fiasco before offering his own observation. The CIA had at least learned "not to do it again," even though neither officer had a clue what they'd actually done.

Google is in a far more privileged position. It knows exactly what it's done in both of the European Commission anti-competition cases against it. What's more, it knows what it has done because it's similar to the Microsoft case which saw the Seattle giant forced to pay a near half billion Euro fine in 2004. It too had to be less restrictive in its licensing practices and couldn't insist its software was pre-installed and set up as the default. 

It's hard not to think Google must be dumb, isn't it? You'd have thought it had noted that, although it took six years in that case for the original complaint to lead to a massive fine, the European Commission gets you in the end. It's a little like a Roman catapult that takes a long time to wind up but it's payload is not a pleasant thing to be on the end of when the tension is finally released.

Readers of this column will know that I think the American tech giants have misread the feeling in Europe and particularly of the new European Parliament which has expressly told the Commission, its executive arm, to take firmer action against Google. We're almost moving to a position where politicians are saying if you're not going to pay our taxes, we'll find a reason to fine you instead. I'm now wondering whether they have instead read the mood perfectly but have simply done the maths.

Going back to those giants, Facebook is on firmer ground because the main complaints leveled against it regard privacy. Just like copyright, this is a notoriously difficult area to get a European-wide ruling on because laws and common practices can vary from one country to another. Instead of facing the European Commission, Facebook will instead find itself fighting individual fires here and there in member states. It's the same for Google around copyright issues that have plagued it for the past couple of years.

No, the EU is all about business, or at least it was when it was set up, and so the area where it can deliver the biggest, most concerted punch on the nose to a tax-dodging US tech giant is competition law. It is so obvious that it beggars belief that Google would just carry on ploughing its way to a huge fine. Surely it would smell the proverbial coffee and change its ways?

So there are two options here. Google is either incredibly dumb or fantastically clever. The dumb argument is the one that first strikes you but then, if you stop to think, what's the worst that could happen? Let's just imagine it eventually gets fined a tenth of its annual turnover, and remember this is a few year's down the line and we have no idea how much it may get fined this year for its search charge not relating to Android. Some people have another word for losing a tenth of your annual turnover -- tax. In fact, it's normally more than that but if you dodge tax, then 10% once or, worse case scenario twice as a charge for monopolistic abuses doesn't seem too bad, does it?

You only have to look around Europe to see that Android is the dominant player and an entire generation is now used to searching via Google. The very worst case scenario is that this will cost Google way less than it should've realistically paid in tax. So, the EU ends up looking strong for fining the naughty tech giant and Google gets to pay way less than it should have if it didn't aggressively avoid tax. Only, at the same time, it gets to dominate the European smartphone market. They say in poker there's a fool round every table and if you don't know who it is, it's probably you. 

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