Monday, January 4, 2021
As a staunch Trump ally, former Attorney General Bill Barr will be remembered for a lot of things. His role in the redaction, and then subsequent disclosure, of the Mueller report and his interventions in cases involving Trump associates spring to mind. However, perhaps his legacy will be something entirely different, with wider ramifications for citizens across the globe, far beyond the Washington political bubble.
Under Barr’s watch, the US Department of Justice (DoJ) initiated a major lawsuit against Google in October for alleged violations of US competition law. Announcing the action, Barr said this was “a monumental case both for the Department of Justice and for the American people.”
The DoJ’s case has been taken in conjunction with 11 state Attorneys General (including the likes of Florida, Georgia and Texas). It is a civil antitrust lawsuit which alleges that Google has unlawfully maintained monopolies through anticompetitive practices in the search and search advertising markets.
The significance of the DoJ’s action cannot be underestimated. Google is one of the wealthiest corporations on the planet with a market value of over US$1 trillion. In announcing the action, Barr threw down the gauntlet to Google saying the “lawsuit strikes at the heart of Google’s grip over the internet for millions of American consumers, advertisers, small businesses and entrepreneurs beholden to an unlawful monopolist.” He compared the lawsuit with the historic antitrust actions taken against AT&T in 1974 and Microsoft in 1998.
Barr’s references to AT&T and Microsoft are significant. This is the first time that the US has initiated court action against a major tech company since Microsoft in the late 90s. While Microsoft was able to cut a deal that left its business intact, the same cannot be said for AT&T. The Bell System of companies, led by the Bell Telephone Company and later by AT&T, had dominated telephone services in the USA for over a century before it was broken up in the early 1980s as a direct consequence of the DoJ’s actions.
Could a similar fate befall Google? That is the great unknown at this stage. The DoJ has stated that “nothing is off the table”. But the litigation is likely to drag on for years at a minimum. A settlement may, ultimately, suit all parties. That’s unlikely to lead to a break-up of Google, though divestments of specific business functions cannot be ruled out. It is too early to tell how the chips will fall.
The action does, however, mark a turning of the tide against the US tech titans which, up until now, had seen antitrust action concentrated in Europe. The early years of the Trump administration were set against a backdrop of global trade wars and increasingly protectionist policies. The Google lawsuit reflects a clear departure from those days, in a direction that is only likely to continue under president-elect Joe Biden. Indeed, early December saw further lawsuits filed by the Federal Trade Commission (FTC) and over forty states against Facebook. These proceedings accuse Facebook of buying up rivals to suppress competition. DoJ and FTC investigations into Amazon and Apple are also ongoing, reflecting the growing bipartisan support in the US for action against Big Tech.
Here in Europe, antitrust action against Google has become a regular feature of Margrethe Vestager’s tenure as European Commissioner for Competition. Indeed, in the last 3 years fines totalling over €8 billion have been levied on Google by the European Commission. This included a record EU fine of €4.34 billion in July 2018 in connection with how Google had used the Android operating system to illegally “cement its dominant position in general internet search.”
Commissioner Vestager had to defend herself against accusations of bias in this context. President Trump reportedly told Jean-Claude Juncker, the then European Commission President, that “Your tax lady really hates the US”, in a reference to Commissioner Vestager at the G7 summit in Canada in June 2018. This followed decisions against Google as well as the Apple and Amazon State aid decisions and Facebook’s fine arising out of its acquisition of WhatsApp. Indeed, President Trump tried to make matters political after the EU’s July 2018 fine of Google. Highlighting the perceived chasm between US and EU regulatory approaches at that time, he tweeted:
“I told you so! The European Union just slapped a Five Billion Dollar fine on one of our great companies, Google. They truly have taken advantage of the U.S., but not for long!”
However, Commissioner Vestager was arguably just getting started in her battle with the dominance of Big Tech back in the summer of 2018. Her position was further cemented last year following her re-appointment under the leadership of European Commission President Ursula von der Leyden. In addition to retaining her competition portfolio, Commissioner Vestager became one of the Commission’s three Executive Vice Presidents, with responsibility for “A Europe Fit for the Digital Age.” This has helped the EU forge ahead in the digital world, with the clear goal of aiming to protect consumers.
The EU is currently working on two packages of legislation – the Digital Markets Act and the Digital Services Act – which will profoundly influence how the internet is regulated in Europe. The Digital Markets Act (DMA), in particular, is aimed at digital “gatekeepers”. These are platforms that have a significant impact on the EU’s internal market, serving as an important gateway for businesses to reach their customers. For this, read the likes of Google, Amazon, Facebook and Apple.
The European Commission has made it clear that the gatekeeper role is not focussed on any particular business size but on objective criteria. However, it is telling that the DoJ’s US lawsuit specifically refers to Google as “the gatekeeper of the Internet.”
The DMA now seeks to prohibit gatekeepers from engaging in a number of practices which the Commission considers to be “clearly unfair”. These are wide-ranging and draw inspiration from previous competition law decisions and investigations of the European Commission.
Importantly, the legislation has teeth. The proposed sanctions for non-compliance include fines of up to 10% of the gatekeeper’s worldwide turnover. For recurrent infringers, the legislation suggests potential remedies including divesture of certain business divisions (i.e., break-up of the gatekeeper). This is unusual from a legal perspective and highlights the real political concern that the Commission has regarding the power of the tech titans.
Just what the proposed EU rules mean for Ireland Inc. is difficult to say. Studies have shown that forced divestures do not tend to adversely impact on stock prices, and we are still some way away from that being on the table for Google. Ireland has cemented its position as a major digital hub in recent years. Issues such as proposed changes to taxation for the digital sector are likely a more pressing concern.
What is clear, however, is that competition law has finally caught up with technology in the 21st century, whether that be on this side of the Atlantic or the other. Data is the new oil, and it is now apparent that regulatory authorities globally want to ensure that they do not allow the perpetuation of dominance by a handful of companies to the detriment of competition and consumer choice.
Article featured in the Irish Examiner, 29 December 2020.