Can regulators rein in Google's excesses?
The ruling against Google in a case of anti-competitive practices, filed by the US Department of Justice, reveals the extent to which Google will attempt to thwart legislators.
Court documents show that it encouraged employees working on Android device manufacturer revenue sharing contracts to carbon copy Google’s legal team. This led to thousands of faux privileged materials initially being withheld. Describing this practice, judge Amit P Mehta said: “Any company that puts the onus on its employees to identify and preserve relevant evidence does so at its own peril. Google avoided sanctions in this case. It may not be so lucky in the next one.”
This latest ruling follows on from a number of spates the search engine giant has had with regulators over the seven years. In 2017, the European Commission fined Google €2.42bn for abusing its dominance as a search engine by giving illegal advantages to its own comparison shopping service. It also fined Google €4.34bn in 2018 for imposing illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general internet search.
The Commission is currently looking at whether Google breached European Union antitrust rules by distorting competition in the advertising technology industry (adtech).
In the UK, the Competition and Markets Authority (CMA) worked with Google to ensure the introduction of its Privacy Sandbox did not have a detrimental effect on third-party cookies, which Google had previously attempted to block. But these are small wins for the regulators.
However, the DoJ case represents a major blow for Google, which, according to court doucuments, worked out that it would be cheaper to pay Apple billions to have Google Search as the default in Safari, than lose out on a massive revenue stream if Apple users did not see Google Search as their default search engine.
The free market
The fact that Google paid Apple around $20bn, which in 2021, represented 17.5% of Apple’s operating profit, shows how a company with a market capitalisations of over $1.5tr can influence another major business, with a market cap of £2.5tr. It’s the rules of the free market and with these dominant tech giants, money talks.
Alphabet, the parent company of Google, is likely to appeal. But whatever remedy is imposed by the court, ratings agency Moody’s believes that it will have little impact.
As of 30 June, Alphabet held about $101bn in cash and short investments. Moody’s expects the company to generate more than $7bn in free cash flow this year, climbing to $88bn by year-end 2025. With the company in such a dominant position, what hope is there for regulators to curb its excesses?