Commentary

Is Google Innocent, Or Just Trying To Cut An EU Deal?

It was always the most likely outcome. Google yesterday filed an appeal against its record €2.4bn fine for breaking antitrust laws. The money will still have to be paid, only it will sit in a bank account untouched until the verdict on the appeal is known. Experts are warning that could yet take another couple of years, adding a considerable delay to a case that dates back to 2010. 

Google is not without some support. A column in today's Telegraph claims that the EU is effectively harassing US tech giants by raising a record fine against Google, fining Facebook €110m for misleading regulators about sharing WhatsApp data and demanding €13bn in back tax from Apple. It has to be said, however, that this comes from the newspaper that is taking a rather tiresome pro-Brexit and anti-EU stance at the moment. Nearly everything the paper puts out is attacking Brussels in one form or another. For a newspaper revered for the breadth and depth of its coverage, the anti-EU fixation appears myopic, it certainly must be stifling for writers with a wider range of opinions they are eager to share. 

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So let's get down to it. Facebook said it wouldn't use WhatsApp data, in order to smooth over regulatory approval of the deal. It did and still does. The fine was less than one percent of the purchase price and some might argue that is a price worth paying. A half a percent excess on the original purchase price that could probably be written off as a fib or "admin error" (it depends whom you believe) is arguably good business.

As for Apple -- I'm no tax expert, but using Dublin as a springboard to do business in the EU and pay very low single-digit percentages in the form of corporation tax can hardly leave Apple wondering why it's been asked to pay €13bn in back tax. Sure Dublin's not actually asking for the money. Why would the Irish rock the boat when they get Apple's EU taxes in return for providing a rather cosy tax arrangement that avoids the tech giant coughing up far larger sums where they actually conduct business. It's highly beneficial to both parties.

Google -- come on, guys. From the moment you started competing against your own advertisers you were always on, what we Brits call, a sticky wicket. Prioritising your own services above those of other advertisers in boxes that you could only be included if you were a Google service or using Google Shopping -- that's just not cricket.

It can't have come as a major surprise to Google that it lost its case because the law is clear. Google may argue that it is its service and it should be able to do what it wants with it; this is the audience it created, it is Google's to serve and make money from. It may sound like it has a point, but the law is that once you are a monopoly in the EU, you can't use that position to restrict customer choice or to hurt rival providers.

It is hard to see how Google doesn't think it broke the law. The appeal must simply be a delaying tactic to get the fine reduced, and the tech giant can take some solace from the highest European court suggesting that Intel's billion euro fine, for bullying computer makes into buying its chips, needs to be reviewed. 

The problem for the tech giants is that the EU has grown tired of huge organisations that do all they can to (somehow legally) avoid much of their tax obligations and think applying a misunderstanding of EU law to excuse anti-competitive behaviour in the name of growth delivering shareholder value will suffice.

The Telegraph is an ally for the moment -- but friends are thin on the ground for companies that accept an EU that welcomes them to do business but then tries to ride roughshod over local laws. Google's appeal must be based on a belief that it can't do any worse than the record fine it already has, and if sentiment changes over the next couple of years, it just might find that two billion euros fine being whittled down.

But I can't imagine that Google thinks it will be overturned. It's hard to imagine the tech giant is anything other than guilty, it's just the size of the fine that might now be up for discussion.

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