Permission-less innovation? Not in Europe!

EPA/OLIVIER HOSLET

Google Shopping logos on a phone as European Commissioner for Competition Margrethe Vestager (R) speaks during a press conference on an Antitrust case against Google Shopping in Brussels, Belgium, 27 June 2017.

Permission-less innovation? Not in Europe!


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European Commission has fined Google north of 2 billion Euros, allegedly for not allowing fair competition of web based price comparison services. The ruling is based on three false assumptions: first, that Google is a monopoly, second, that market leadership can be challenged by governments, and, thirdly that Google is in the Web page search business.

Demonstration of power

Google is not the first US tech company against which the EU’s legal or tax muscle is being flexed. And it is probably not the last either. The fact remains that the US is providing a more favourable environment, not only for innovation but also for the growth and expansion of companies such as IBM, Microsoft, Apple, Google, Facebook, Uber and the like.

The EU fined Microsoft, taxed Apple, is processing charges against Uber and has just fined Google. As if that would make the business environment easier for their imaginary European competitors. As if the no 1. US tech giant is the obvious target of the current EU commissioner for competition to prove his or her power, to remind the public of the existence of Brussels and to demonstrates that Brussels is trying to protect European citizens against hostile multinationals.

Going after the US tech giants responds in the most convincing way to the worries that “some international tech companies are now more powerful than the governments”. No, they are not. In Brussels they can fine them, tax them, or make them filter out fake news that we do not like. This is the message. It is, in fact, a sad message for free market economy, innovation and freedom of speech.

Google is not a monopoly

Some justice warriors would claim it is OK to go after Google because it has a monopoly. Technically this is not entirely correct. It has a huge market share, but there is nothing natural about it. Those of us who were early adopters of the Web remember the 1990s when Yahoo had the monopoly on Web search. Yahoo was the first big Web company. It was outinnovated by Altavista in the mid-1990s. And where are these companies today? Yahoo is struggling and Altavista is nowhere.

Microsoft had a huge market share with Web browsers at some point and the EC felt it should intervene. But it was the innovation of Google and Firefox that destroyed it, not EU legislation. Similarly, IBM had a near monopoly on computer is 1980s and the PCs destroyed that. Microsoft had a “monopoly” on operating systems, but Android, iOS, OS-X and Linux successfully challenged that. Apple has a dominant position in tablet and smartphones for a few years but then the competition caught up.

Google looked like a dominant Web company some ten years ago, but then Facebook grew to its mighty rival both in messaging, video, news and search. In the past I was using Google almost exclusively to find stuff. Now I am increasingly searching in the context of Twitter and Facebook.

In the tech industry in particularl, the innovation on one hand and open markets on the other, have been making sure that no company has been able to abuse its power and stick at the top of the charts for long. It may be sad that in history of these dominant IT players since mid-1980s – IBM, Apple, Microsoft, Yahoo, Apple-again, Google and Facebook – there are no European companies, but the commission should look at policies shaping the business environment to change that. Slapping a fine on whoever is the mightiest at the moment will not help.

Flashback

In the mid 1990s I have written a search engine for finding free software on FTP archives. The service was quite popular and it was doing something that search engines of the time – Yahoo and Altavista were not doing. Today I search for software using Google. Sometimes it points me to the site that grew out of my search engine – CNET.com – sometimes it does not. There is nothing legal procedures can do about it – Google became better at finding shareware. Specialized search engines are not worth the trouble. Bad luck.

Which brings us to the matter at hand – Google’s alleged unfair treatment of price comparison websites.

Google is information service not web search service

The key misconception is that Google is in Web search business. It is in the business of providing its users information that they need. Indeed, fifteen years ago this was mostly about finding a web page that could provide a user with whatever information she wants. Using Google search one would learn where is the information required, one would then click through to that website and read the information itself on that webpage.

This is how things worked in the days of Yahoo and AltaVista. But since then Google innovated and increasingly started providing not the link to where is information but the information itself.

The examples are numerous. You can ask Google how much is one dollar in euros and it will display the result, not route you to a site of the bank that does the conversion; you can ask it for a translation of the word “fine” into German and it will translate, not route you to a site that does translation. You can ask it for a definition of a word and it will display the definition; ask it how to travel to that beach resort and will give you instructions via google maps or flight ticket merchants.

This is valuable for the customer. If google would not be doing it, someone else would. In fact, there are services like Amazon Alexa or Apple Siri that answer such questions and speak them out to you. This trend will continue because the internet is not a series of Web pages to be “found” by a search engine but a repository of information and knowledge that people need.

When I shop for, say a tablet, it is convenient that Google displays where and at what price I can get it. It compiles the prices from various stores it is indexing for web searching anyway and presents me with a link to that stores. The store gets the traffic, I get a good price, it is convenient.

Google takes different approaches as to where to get information to display from. Definitions, for example, come from Wikipedia and various dictionaries. Wikipedia gets a link at the top of the page and is probably interested in allowing Google to do so. But I can’t imagine a court fining Google for displaying a definition of Wikipedia and not of Encyclopedia Britannica. It is their free choice.

Below the information itself – about word definitions, travel options, stock prices etc. on Figures 1-5 – Google is still displaying links to related websites. If Google was deliberately putting competing price comparison sites lower, not displaying their ads at the top etc. this would indeed be wrongdoing to be prosecuted and fined. But it should be proven that Google was indeed tweaking its page rank algorithm to the disadvantage of some particular Websites. This does not seem to be the case.

Conclusion

The issue is that information searching has evolved from web page search to information delivery. Google is providing information to its users and increasingly this information are not links to Web pages but information itself. If Websites do not want Google to have their information, they can prevent that with the robots.txt convention. Last time I checked Google honors that. And Google should be limited to fair use of information from other Webpages and not display so much indexed information that it would reduce the traffic of the Websites where the information was from.

If the EC wants to limit Google to displaying links to Web pages it should say so. In that case, the essence would be limiting innovation in information delivery services and not limiting monopolies. There was a period towards the end of the dark ages that the courts tried to limit innovation and in the 19th century when the luddites tried the same. It did not work for long.

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