Among other things – Google and Microsoft share a legacy of battling antitrust cases. Instead of doing the legal equivalent of the ostrich act, Google should recognize the signs and strategically change course.
With the European Commission handing down an exemplary fine on Google, the search giant’s clash with antitrust enforcers in the EU has similarities with Microsoft’s decade long regulatory battle, a legacy that Alphabet could do well if it bear that in mind as it considers its response, said lawyers and fund managers.
After hearing scores of complaints from rivals, the European Commission awarded Google a record $2.73 billion fine for favouring its shopping service over its peers. The Commission orders states that Google should treat the services of its rivals the same way it treats its own products.
“When I saw this yesterday, it absolutely rang a bell,” said Georg Berrisch, a partner at Baker Botts who advised Microsoft in its EU regulatory dispute while at another law firm.
In 20014, the European Commission had awarded a fine of 497 million euro on Microsoft and had ordered it to take steps to boost software competition. When Microsoft failed to comply with the order, it was again fined 899 million euros. In total, along with several other litigations with the European Commission, Microsoft paid more than 2.2 billion euros in fines.
In 2011, during a senate hearing, Eric Schmidt, Alphabet Executive Chairman in an oblique reference to Microsoft, said, “We get it. By that I mean, we get the lessons of our corporate predecessors.”
And yet Google has much to learn, said Stephen Kinsella who works at Sidley Austin, a law firm.
“Years ago Google said they wouldn’t make the mistakes that Microsoft did. Instead they made all of them and came up with a few of their own. The public statements yesterday show they still don’t get it,” said Kinsella.
Following EU’s findings that it had abused its dominant position, Google said it was considering an appeal and looked forward to continuing to make its case.
“The real danger for Google is to enter into a prolonged battle with the Commission on whether what it has done is sufficient to comply with its decision. It could be quite expensive for Google in the end. This is not the end of the story,” said Berrisch.
On Wednesday, the European Commission published a tender for a 5-year contract for 10 million euros, for technical expertise to assist it with the case. Incidentally, the contract can be renewed.
“The real concern is whether the Commission will manage to force Google to change its business model, its algorithms in a way that could be detrimental to the business,” said Wesley Lebeau, fund manager at CPR Asset Management, an Amundi company.
He went on to add, “Search engine is still about 60 percent of Alphabet’s valuation so that is a big deal, even though the drivers for future growth are YouTube and all the Alphabet companies — Waymo, NEST, Verily”.
Although tech giant have benefited from the public perception that they bring benefits to society, said Freddie Lait, founder at Latitude Investment Management.
“But there is a small chance that, if the shine wears off and you have more of these terrorist videos…and the fine is a huge fine, which sent a message to consumers that there’s been wrongdoing. If the shine comes off, the claws are out from regulators and governments to try and get their pound of flesh out of all of the big tech companies,” said Lait.