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EU’s Google Antitrust Deal Beats FTC, But Still Doesn’t Do Enough

4:26 pm in Uncategorized by Consumer Watchdog

European Union

Details of Google’s proposed settlement with the European Union to avoid antitrust charges have been leaking out of Brussels over the weekend. And while EU competition authorities appear to have accomplished more that the gentle tap on the wrist meted out by the U.S. Federal Trade Commission, the deal as so far revealed doesn’t do enough to end Google’s anti-competitive practices.

The provisions of the EU agreement still have to be publicly released, but based on what’s emerged so far, here’s the good news: Unlike the deal with the FTC, which wasn’t even a consent agreement, the EU is demanding that the settlement would be legally binding for five years. A third party would ensure compliance and Google would face fines of 10 percent of its global annual sales if it fails to keep its promises.
The bad news is that instead of requiring Google to change its algorithm and treat all services the same, the deal will apparently allow Google to continue favoring its own services in search results so long as it labels them as its own.

Google essentially has been using its dominant position as gatekeeper of the Internet to unfairly promote its own service at the expense of competitors and consumers. In Europe it has about 90 percent of the search market. In the U.S. it’s around 70 percent. About all this agreement appears to do is require Google to be transparent about the way it unfairly abuses its market position.

Indeed, labeling could actually leave the impression with some consumers that the Google-branded result was a better one, rather than one that received a better position because Google had its thumb on the scale.

Another problem with the deal is that it doesn’t seem to do anything to rectify the damage to the market that Google has already wreaked. I’d have thought some sort of disgorgement of the Internet giant’s ill-gotten gains would have been appropriate.

John SimpsonThe next step in the EU process is for the Google deal to be “market tested.” The competition authorities will make the settlement public and receive comments on whether it solves the problems or not. I suppose it’s possible there may ultimately be stronger sanctions than currently appear to be the case in what’s been leaked or that the authorities will do more after the “market testing,” but frankly I doubt it.

Bottom line: Google has had its wings clipped a little bit. Google will be legally bound to follow labeling rules in Europe for five years and have a third-party enforcer to ensure that happens. It also means that European search results will look different than in the U.S. unless Google decides to take the same approach here or someone forces the company to do so. That could happen. Several state attorneys general led by the Texas attorney general have an open antitrust probe. I’d hope that they would settle for nothing less than what the Europeans got.

And further down the road? Fairsearch Europe has recently filed another antitrust complaint with the EU accusing Google of using Android software “as a deceptive way to build advantages for key Google apps in 70 percent of the smartphones shipped today.” Now that mobile is becoming more important than the wired Internet, Google is flexing its muscles there. The more things change, the more they stay the same…

Posted by John M. Simpson, head of Consumer Watchdog’s Privacy Project. Follow Consumer Watchdog on Facebook and Twitter.

Google May Face More Fines for Privacy Violations in Europe

3:32 pm in Uncategorized by Consumer Watchdog

Serial privacy violator Google may face fines in the millions of dollars in Europe as six countries Tuesday opened formal investigations into how Google combined its privacy and data policies last year without bothering to seek users’ consent.

The actions by France, Britain, Germany, the Netherlands, Italy and Spain came as Google refused to make changes in privacy policies requested by a group of European data protection authorities.

For the Internet giant, such fines are rapidly becoming a cost of doing business — and a rather trivial one at that. As the Associated Press pointed out, the French privacy watchdog CNIL can fine a company a maximum of 300,000 euros ($385,000). Based on a projected revenue of $61 billion this year, it earns 300,000 euros in about three minutes. The Brits could impose a fine of up to 500,000 pounds ($750,000).

Maybe with this constant drip, drip of privacy violations Google executives will come to their senses and realize the company runs the risk of losing users’ trust with a seriously negative impact on business.  For now that doesn’t seem to be the case.  “Our privacy policy respects European law and allows us to create simpler, more effective services,” said Google spokesman Al Verney after the investigations were announced.

In other words Google knows what’s right and it’s whatever the company decides to do. After all, their motto is “Don’t be evil,” so how could anything they do be wrong?

Let’s review what’s happened.  A year ago Google announced that it would combine data and privacy policies across its many services.  Google said this would make the user experience simpler and more intuitive.  Google didn’t  point out that it would make the data gathered about users more valuable and fatten its bottom line.  Those digital dossiers it compiles about us is how we are sold to Google’s advertisers.  Remember you’re Google’s product, not it’s customer.

Noting that Google didn’t ask permission before combing users’ information, Europe’s Data Commissioners launched a joint investigation, led by France.  In October they said the new policy is a “high risk” to privacy, but didn’t declare it illegal. They gave Google until February to make changes.  Responding with its usual arrogant manner, Google refused.

John Simpson

“Regulators in six states have begun the process of looking at penalties, and each must now act based on national law,” Isabelle Falque-Pierrotin, CNIL’s president, told Bloomberg News. “We have put in place a countdown for Google now. Promises to change will no longer be enough.”

Technically the six data authorities could block Google from operating in their respective countries, but I doubt that will happen.  I fear this is the most likely outcome: Simply put, Google is arrogant.  They have become a serial privacy violator and see the relatively minuscule fines they have faced as a mere cost of doing business. They violate your privacy, say it was a mistake, claim they care about privacy, occasionally pay a token fine and carry on with business as usual until the next violation when they cycle begins anew.

Maybe the Europeans can break the cycle, but I’m not optimistic

John M. Simpson is director of Consumer Watchdog’s Privacy Project. Follow Consumer Watchdog online on Facebook and Twitter.

Europe’s Antitrust Chief Talks Tough On Google

1:07 pm in Uncategorized by Consumer Watchdog

European Union

Google may have only received a tap on the wrist from the Federal Trade Commission when the agency closed the U.S. antitrust investigation without taking action against the Internet giant for skewing search results to favor its services, but it’s looking increasingly likely that Google will face strong action on the other side of the Atlantic.

The Financial Times reports that Google will have to change the way it presents search results or face antitrust charges for “diverting traffic.” Competition Commissioner Joaquin Almunia told the newspaper:

“We are still investigating, but my conviction is [Google] are diverting traffic. They are monetizing this kind of business, the strong position they have in the general search market and this is not only a dominant position, I think – I fear – there is an abuse of this dominant position.”

Almunia has told Google that it must make changes to address European concerns or that it will face a formal statement of objections. Late last year he warned that Google would have to offer remedies this month.

I think you can take Almunia’s strong statements Thursday to The Financial Times as a sign that the European Commission is serious. While he says he’d prefer a settlement, European law gives the antitrust enforcer a huge stick. After filing a formal statement of objections, the Commission can impose a fine amounting to 10 percent of Google’s revenue or about $4 billion. That’s almost as effective to getting executives attention as sending them to the slammer. Unlike the FTC, the European Commission doesn’t have to make its case in Court. It can simply impose the fine.

As The Financial Times headline read on one story about the situation, “EU Antitrust Chief Holds All the Aces.” Almunia hinted that the antitrust settlement may play out differently in Europe because the law is different. It’s also true that the Internet giant’s dominance in search is even greater in Europe at 90 percent of the market than the 70 percent share it commands in the United States.

And there is still a strong possibility of meaningful action in the United States. Texas Attorney General Greg Abbott is actively pursing a case. His staff has appropriately worked to obtain key Google documents that Google tried to claim were privileged and did not need to be turned over in response to Civil Investigative Demands. From all appearances the FTC staff was nowhere near as diligent in its investigation.

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Posted by John M. Simpson. John is a leading voice on technological privacy and stem cell research issues. His investigations this year of Google’s online privacy practices and book publishing agreements triggered intense media scrutiny and federal interest in the online giant’s business practices. His critique of patents on human embryonic stem cells has been key to expanding the ability of American scientists to conduct stem cell research. He has ensured that California’s taxpayer-funded stem cell research will lead to broadly accessible and affordable medicine and not just government-subsidized profiteering. Prior to joining Consumer Watchdog in 2005, he was executive editor of Tribune Media Services International, a syndication company. Before that, he was deputy editor of USA Today and editor of its international edition. Simpson taught journalism a Dublin City University in Ireland, and consulted for The Irish Times and The Gleaner in Jamaica. He served as president of the World Editors Forum. He holds a B.A. in philosophy from Harpur College of SUNY Binghamton and was a Gannett Fellow at the Center for Asian and Pacific Studies at the University of Hawaii. He has an M.A. in Communication Management from USC’s Annenberg School for Communication.

Google Antitrust Deal In Europe Would Impact U.S.

1:39 pm in Uncategorized by Consumer Watchdog

Google — facing the possibility of a penalty of around $4 billion — is trying to cut a deal with European antitrust regulators that would settle the regulators’ objections without having to pay a fine.

It’s not certain that an agreement can be reached, but if one is, it will have a direct impact on the United States. Joaquin Almunia, EU competition commissioner, said that any concessions the Internet giant offers to resolve the EU’s antitrust concerns would be applied worldwide.

“We will look for worldwide solutions; it will not be very useful to get European-wide solutions,” he said.

One of the main complaints against Google is the way it unfairly favors its own properties ahead of competitors in search results. We documented that two years ago in our study, Traffic Report: How Google is Squeezing out Competitors and Muscling Into New Markets.

In May the Commission said it was concerned that Google was favoring its own services in search, copying material from websites of competitors without permission, shutting out advertising competition and placing restrictions on the portability of online search advertising campaigns from its platform AdWords to the platforms of competitors. Almunia told the company to offer changes or face a formal statement of objections with the risk of fines in the billions of dollars. In Europe antitrust penalties can be imposed before a court proceeding.

At the time I predicted that Google would not offer meaningful remedies. Despite my skepticism, the EU is saying that Google is apparently responding. The New York Times quoted Almunia from a news conference Wednesday:

“We were trying to clarify to them how these solutions should be established. They were exploring with us what kind of solutions we were asking for, and now we have enough clarifications so as to start the process of technical meetings.”

“They will try to solve it. And I have reasons to believe that they think it’s worth it.”

Funny how $4 billion concentrates the mind, isn’t it.

Reportedly, one of the things that moved the possibility of a settlement forward was that Google agreed that any concessions it makes on search will apply to all platforms including computers and mobile devices.

I’m sure the EU is acting in good faith. I have my doubts about Google. The real difficulty in accurately assessing the situation is the secrecy that surrounds the negotiations. We simply don’t know what Google has proposed and what the EU wants. When an antitrust case gets to this stage, it really all should be on the public record.

Here is what another critic said, as reported by The New York Times:

“For years, Google has said it deserves the benefit of the doubt,” said Jonathan Zuck, president of the Association for Competitive Technology, an industry group heavily financed by Microsoft. “Unfortunately, they’ve played us for fools every time.”

Mr. Zuck praised the commission’s “persistent work,” but said an “effective remedy” required an admission by Google of wrongdoing. “Without that understanding on the part of Google, it will never implement the kind of fundamental changes to its business practices that are necessary to curb these abuses,” he said.

I agree.

Besides the the European antitrust investigation, the Internet giant faces antitrust investigations by the U.S. Federal Trade Commission and several states. Antitrust officials in Korea, India and Brazil are also looking into Google’s business practices. A European deal could well serve as a blueprint for settlements with other authorities. The FTC and the EU have been in close touch about their investigations.

One difference is that the FTC’s probe includes an investigation into whether Google has abused its dominance of the Android operating system. The EU is not looking into that, but Almunia held out the possibility that it might.

Interestingly, in the semi-boilerplate language found in Google’s just-filed Form 10-Q, is a clear indication that the Internet giant finally gets that it is under scrutiny:

We are subject to increased regulatory scrutiny that may negatively impact our business.

The growth of our company and our expansion into a variety of new fields implicate a variety of new regulatory issues, and we have experienced increased regulatory scrutiny as we have grown. In particular, we are cooperating with the regulatory authorities in the United States and abroad, including the U.S. Federal Trade Commission (FTC), the European Commission (EC), and several state attorneys general in investigations they are conducting with respect to our business and its impact on competition. Legislators and regulators, including those conducting investigations in the U.S. and Europe, may make legal and regulatory changes, or interpret and apply existing laws, in ways that make our products and services less useful to our users, require us to incur substantial costs, expose us to unanticipated civil or criminal liability, or cause us to change our business practices. These changes or increased costs could negatively impact our business and results of operations in material ways.

I hope the Europeans extract meaningful concessions, though I remain skeptical that will happen. Google has a history of stonewalling and foot-dragging. The best solution would be to break Google into different companies devoted to different lines of business.
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John M. Simpson is a leading voice on technological privacy and stem cell research issues. His investigations this year of Google’s online privacy practices and book publishing agreements triggered intense media scrutiny and federal interest in the online giant’s business practices. His critique of patents on human embryonic stem cells has been key to expanding the ability of American scientists to conduct stem cell research. He has ensured that California’s taxpayer-funded stem cell research will lead to broadly accessible and affordable medicine and not just government-subsidized profiteering. Prior to joining Consumer Watchdog in 2005, he was executive editor of Tribune Media Services International, a syndication company. Before that, he was deputy editor of USA Today and editor of its international edition. Simpson taught journalism a Dublin City University in Ireland, and consulted for The Irish Times and The Gleaner in Jamaica. He served as president of the World Editors Forum. He holds a B.A. in philosophy from Harpur College of SUNY Binghamton and was a Gannett Fellow at the Center for Asian and Pacific Studies at the University of Hawaii. He has an M.A. in Communication Management from USC’s Annenberg School for Communication.