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Will Google go the way of Microsoft?

, October 26, 2020, 0 Comments

google-marketexpress-inAn unprecedented lawsuit against Google has echoes of past efforts to rein in tech giants like Microsoft and Apple. Attempts to enforce antitrust laws have left some players in the dust, while others are fighting back.

The antitrust lawsuit brought this week by the US Department of Justice (DOJ) against Alphabet Inc.’s Google is an unprecedented challenge to the dominance of global technology giants.

The suit — which alleges the firm has gained a monopoly by unlawfully paying phone manufacturers to make Google Chrome the default browser on mobile phones — is likely just the beginning. Earlier this month, a report from the US House Judiciary Committee called for vast changes to US antitrust law after concluding that Google and fellow US tech giants Apple, Amazon, and Facebook were abusing their market dominance. More suits against Google are also expected.

The tech crackdown has gained momentum in Europe as well. On Wednesday, the European Parliament overwhelmingly backed plans to develop the “Digital Services Act,” legislation that seeks to significantly rein in tech giant’s power in the EU.

The landmark lawsuit against Google is the latest in years of mounting government attempts to enforce antitrust laws against digital firms that once were scrappy start-ups but have rapidly developed into global powers with the potential to stifle competition and innovation.

DOJ vs. Microsoft

In this groundbreaking 1998 case, the DOJ accused computer and software firm Microsoft of making it difficult for PC manufacturers and users to use web browsers other than Microsoft’s Internet Explorer, which came pre-installed on all Microsoft computers. The DOJ argued that Microsoft’s “bundling” of its web browser software with its operating system was the source of the company’s wild success — and that the move amounted to an unlawful monopolization, according to US antitrust law established in 1890.

Microsoft said that the two products belonged together. The company went on to win an appeal on the ruling, which would have required Microsoft to break up its business into two separate entities, one for software and one for operating systems.

In the end, the DOJ opted for a settlement with Microsoft that kept the company intact, with the tech company instead agreeing to share details of its computing interfaces with competitors.

Following the lawsuit, Microsoft ultimately fell behind other tech companies, fumbling the transition to mobile and losing to Google in the race for web browser dominance. The DOJ’s new case against Google draws directly from the Microsoft case, but with a narrower focus that could have a better chance of winning against appeal.

EU vs. Microsoft

The EU followed through with a Microsoft lawsuit of its own in 2004, fining the American firm nearly half a billion euros for abusing its “near monopoly” status to crush the competition in markets for digital media players and low-end servers.

Microsoft was ordered to make several changes, including offering a version of Windows without its digital media player. The EU antitrust authority also required Microsoft to share its interface code with rival companies, so that competitors could ensure “full interoperability” with the Windows operating system.

EU vs. Apple

In July 2020, Apple successfully appealed a 2016 antitrust ruling from the European Commission that had ordered Apple to reimburse Ireland for €13 billion ($15 billion) in back taxes. The Commission had argued that the attractive tax rate offered to Apple by Ireland, the iPhone maker’s European base, amounted to illegal state aid, in the form of a “sweetheart deal” that gave Apple preferential treatment. The case centered on Irish tax legislation that the Commission argued had artificially reduced Apple’s tax rate, at times as low as 0.005%, for over two decades.

“The Commission was wrong to declare” that Apple “had been granted a selective economic advantage,” the General Court of the European Union said in the appeal verdict.

EU antitrust chief Margrethe Vestager filed a cross-appeal in September 2020, saying the Luxembourg-based court had “made a number of errors of law” in its decision. The Danish politician said the ongoing case is important for closing tax loopholes for multinational companies and ensuring transparency.

EU vs. Google

The DOJ isn’t the first to take on the world’s most popular search engine. The EU has ruled against the internet giant for breaching antitrust rules three times since 2017. The European Commission has fined Google a combined €8.25 billion: for illegally boosting its comparison shopping service over competitors, for imposing illegal restrictions that ensured the use of the Google search engine on Android devices and, most recently, for illegal agreements with third-party websites that prevented Google rivals from placing their search advertisements there.

Google has appealed all three rulings. A verdict is expected next year.

The EU is also mulling over whether Google’s plan to buy fitness tracker Fitbit would violate antitrust law. Critics have raised concerns the deal would jeopardize competition as well as data privacy, providing Google with access to mountains of health and wellness data. A ruling is expected in January 2021.