Europe has good reasons to fear Google

By Vlad Savov

November 28, 2014

With great power comes great scrutiny

What the European Parliament is proposing sounds like Ayn Rand’s worst nightmare. Let’s take Google, one of the best and most cohesive set of web services we have, and fragment it into smaller businesses. Let’s introduce friction and bureaucracy between the various parts so that lesser companies with worse products can have a chance to compete. It feels like a classic case of over-regulation — penalizing a successful company for the crime of being better than everyone else — however its fundamental premise is not wrong: Googleis too powerful.

There’s no denying that Google has merited its current dominance in web search. The service that has grown into a verb is used all around the globe because it’s reliably accurate, up to date, and comprehensive. Google supplements the basic results from its search algorithms with advertising — its primary source of income — and links to its own related web services like Maps, News, and YouTube. For the vast majority of users, this cross-promotion of Google products is helpful: it expands the format of search results beyond a mere index of web links and does it with arguably the best services in each category (Google+ ignominiously excepted). Seen in isolation, Google’s efforts to keep users locked inside its ecosystem are scarcely objectionable, but their success has created undesirable market distortions that EU regulators are trying to correct.

ARE WE REALLY GETTING THE BEST OF THE WEB IF GOOGLE PRIORITIZES ITS SERVICES OVER OTHERS?

The primary point of contention between Europe and Google is the latter’s status as an internet gatekeeper. Google underplays this, but the company commands roughly 90 percent of all web searches in Europe, making it the starting point for almost everyone’s online queries. This works fine so long as Google can be trusted to maintain high quality and unbiased results, but what happens when the company’s "do no evil" mantra slips? Are we really getting the best the web can offer if Google is demoting competitor sites and promoting its own? It just so happens that right now the best on the web and the best from Google usually coincide, but the situation sours when the two diverge.

Adding Kelkoo and Shopzilla shopping searches where relevant — as Google hasproposed in previous negotiations — might not improve on Google’s own results, but it gives the user visibility on what alternatives exist. This is a direct means for disciplining Google to stay competitive: a failure to find and provide the best prices cannot be masked by the comparative anonymity of specialized search engines. Any regulatory action would start from this basic premise of ensuring equal opportunity to be seen for both Google and its rivals.

A search for hotels today sees Google’s algorithmic results pushed halfway down the page, relegated below the paid-for ads and Google’s own hotel search service (which earns Google commission if used to make a booking). To established companies likeBooking.com or Expedia, this means either paying to be seen at the top of the results or suffering a loss of business. The same is true of flights and, as commerce continues to move online, could be expanded to every type of transaction we make online.

GOOGLE ISN'T SO MUCH A VILLAIN AS A BIG CLUMSY GIANT

Alternatives like DuckDuckGo exist, but without proactive users who are keenly aware of Google’s shortcomings, there’s not much in the way of competitive pressure on the incumbent leader. A self-regulating market requires that people can switch suppliers regularly in response to the quality and price of service — like buying the freshest produce in a real market — but most Google users are stuck in the inertia of long-established habit. It would take some extraordinary incursion into our privacy or convenience to prompt us to make a change.

The European Union doesn’t perceive Google as a villain so much as a clumsy giant that’s having deleterious effects on other web businesses. As Europe’s authorities seek to builda single digital market — one that includes a strong commitment to net neutrality — they see Google’s ability to manipulate search results and give preference to its own services as an imbalance to be corrected. It wouldn’t matter if Google controlled a small segment of web searches, but the company is the de facto search engine for the entire continent. The latest vote from Europe doesn’t compel Google to do anything, but its suggestion of "unbundling" search from other commercial services is certainly the most aggressive language we’ve yet heard, as it would dramatically undermine the nexus of Google’s profitability.

TALK OF BREAKING UP THE COMPANY IS PREMATURE WHEN IT'S ACTIVELY NEGOTIATING

For its part, Google has been cooperative and at least acts like it wants to avoid a rerun of the protracted drama surrounding Microsoft’s bundling of Internet Explorer with the Windows operating system. Both cases involve a company dominant in one market using its position to ensure an advantage in another. After many years of wrangling, the solution for Microsoft was to offer a fair choice for the way that users get online, and a similar compromise is sought with Google now. It’s perhaps a sign of lesser patience in the newly appointed EU regime that we’d hear the nuclear language of suggesting Google should be broken up. That’s certainly not necessary. What’s needed is for the company’s unprecedented influence to be reined in so that its profits don’t come at a greater cost to others.

Unlike the Microsoft saga, an agreement between Europe and Google has been extremely close in the past and looks likely to come in the near future. It’s just a matter of deciding how many concessions Google will make to its competitors and how visible they will be. The Randian nightmare scenario of Google having to break up is unlikely to ever come to pass, but the company does need to change. If Google is to continue serving as the gateway through which most internet queries pass, it must be held to a standard of fairness that’s above and beyond that required of a private company.