Google still claimed to be blocking search rivals on Android, despite Europe’s antitrust action

Mobile licensing changes made by Google this fall, when it tweaked terms for OEMs wanting to license its Android smartphone platform on devices destined for the European market, don’t appear to be offering succour to search rivals — despite being triggered by an antitrust ruling intended to reset the competitive playing field. The European Commission […]

Mobile licensing changes made by Google this fall, when it tweaked terms for OEMs wanting to license its Android smartphone platform on devices destined for the European market, don’t appear to be offering succour to search rivals — despite being triggered by an antitrust ruling intended to reset the competitive playing field.

The European Commission found the search giant guilty of anti-competitive practices related to its Android platform this summer, slapping the company with a $5BN fine.

The decision required Google cease practices judged to be illegally skewing the market and do so within 90 days.

It was the second such major EC antitrust finding against Google, after last year’s Google Shopping ruling, when the company was warned that having been found dominant in search it had a “special responsibility” to avoid breaching antitrust rules in any market it plays in.

Google disputes the Commission’s findings of competitive abuse in both cases, and has lodged legal appeals.

But the nature of competition law demands action in the meanwhile, given the threat of punitive penalties for any continued breach. So in October Google responded to the Commission’s Android ruling by updating its regional compatibility agreement to provide a route for OEMs to unbundle key services from the Android OS — rather than requiring its suite of Google apps be pre-loaded for devices to get the Play Store.

However it also incorporated licensing fees for some unbundled configurations (e.g. Android + Play Store). At the same time it said it would not charge any fee to include search or Chrome. And it said it was offering incentives for OEMs to place its eponymous, market dominating search engine (and/or browser) prominently on their devices — despite one of the behaviors the Commission judged illegal being payments Google had made to certain large manufacturers and mobile carriers to exclusively pre-install Google Search.

The Commission did not prescribe specific remedies for the anticompetitive behaviours it pegged to Android — saying it’s “Google’s sole responsibility to make sure that it changes its conduct in a way that brings the infringements to an effective end”.

Though it warned it would closely monitor the company’s conduct, noting that any finding of continued non-compliance would risk fresh fines — of up to 5% of the average daily turnover of Alphabet for each day of non-compliance.

The key word there is “effective” — in terms of what the Commission is watching for.

Meanwhile Google’s dominant position in search naturally makes it the smartphone consumer’s go-to choice — which in turn means there’s a natural incentive for device makers not to ditch Google as the search default. At least for mainstream devices.

But Google’s new European licensing terms for Android appear to be piling additional pressure on OEMs not to switch even for more experimental and/or regional device launches, according to privacy-focused search engine Qwant.

Pay to install

Its experience suggests Google’s initial ‘remedy’ — far from delivering an “effective end” to the competitive infringements the Commission found — is actively steering OEMs away from search alternatives and rival companies.

Qwant, a French startup, launched its non-tracking search offering back in 2013, and has been on a growth tear on its home turf in recent months — winning over high profile users in the public sector as concern has risen about Silicon Valley’s intrusive grip on user data.

The French National Assembly and the French Ministry of the Armed Forces Minister announced this fall they’d switch to Qwant instead of Google as their default.

Of course the startup is still a minnow compared to Google. But it’s growing: Qwant tracks queries rather than users (given it doesn’t track people), and it says it generated 2.6BN queries in 2016; which grew to 9BN last year; and is now on track to end this year with around 18BN queries.

“So if we think about it that means that last year we were three days of Google; this year six days of Google — not so bad!” says co-founder Eric Leandri.

“In France we have now more than 6% of the market,” he continues. “In Germany something like 2%. And we are still growing. We do growth of 20% by month for the last four months. The growth in our revenue is two digit too, by month.”

Earlier this year it had been hoping to make additional regional marketshare gains by securing a deal to be pre-loaded on Android smartphones destined for European markets. A spokesman tells us it has a framework agreement with Huawei. (The Chinese Android OEM is second only to Samsung in global marketshare terms, according to analysts.)

The Commission’s antitrust ruling opened the door to this possibility, given it banned Google from prohibiting OEMs from launching non-Google approved Android forks. So after the ruling things were looking good for Qwant, with the startup on the cusp of securing a device deal for a few European countries, as Leandri tells it. 

He blames Google’s licensing changes for putting the kibosh on a launch they’d been expecting to be able to announce in November. Early that month the startup pinged us to trail forthcoming news — of “a major partnership that will allow us to accelerate in the smartphone market” — only to go silent.

A few weeks later it got in touch again to say it had had to postpone the announcement.

“We are very near to one or two deals to be by default or in the list of search engines in some Android cell phone made by a very large Asian manufacturer… Just for Europe, and just for some countries in Europe but we are talking about 10 million or 20 million of cell phones,” says Leandri now.

“And when we have won the bid against Google in October then Google start to say that in Europe you have to pay $40 for Android. So now if you install Qwant you have to pay $40 and if you install Google they give you some cash.”

“Before it was impossible to bid against Google because Google was blocking everything. Now you can — but now the solution of Google is you have to pay $40 if you don’t install Google by default with Chrome just on the bar. You know the bar that is fixed on Android. And this is again an abuse of their dominant position,” he adds.

“Because if I want, for example, 10 million smartphones, the guy has to pay $400M to Google. Do you really think they will pay $400M to Google just to install Qwant?”

Google’s rebuttal of the Commission’s antitrust finding for Android has focused on claims that its approach of free licensing combined with a bundle of Google services has generally enabled competition to thrive in the mobile app ecosystem, as well as claiming lower prices are a “classic hallmark… of robust competition”.

Yet Qwant’s experience offers a clear counterpoint, underlining how challenging it remains to try to compete with Google’s core search business when the same company also dominates the smartphone market and can just throw the levers of Android’s licensing terms to configure how much ‘appetite’ OEMs have for investing in alternative search defaults (given tiny hardware profit margins in the Android space).

After Qwant won over Huawei to building a device with its search engine in prime position, Leandri says it was Google’s changes to the licensing terms for Android that threw a spanner in the works.

“After that pressure then the manufacturer doesn’t know how to react now,” he says, confirming he believes there’s currently no chance for the device to be launched. Not without further changes to how Android operates in the market — i.e. further regulatory intervention.

“So we will work a lot with the European Commission to stop that,” he adds. “But again, again my question is why Google goes that way?”

We reached out to Google to ask about the fees it would charge an OEM wanting to launch an Android device with Google Play but without Google search as the default in Europe.

We also asked how charging a fee for Android if OEMs don’t also bundle Google services can help increase competition, per the Commission’s intention.

At the time of writing Google had not responded to our questions.

We also reached out to Huawei for comment and will update this story with any response.

Even if Qwant and Huawei get their way, and European buyers in a handful of countries are able to choose to buy an Android device with a little search localization as its differentiating out-of-the-box twist, Leandri isn’t under any illusions that a majority of consumers will still switch back to Google of their own accord — given its dominance of search.

He reckons those who’d stick with a non-Google search choice might be as low as a third or 40%. 

But his point is that, as it stands, Qwant doesn’t even have the chance to try competing against the Google Goliath on its own terms. And he argues that’s simply not fair. 

“Google has billions to make advertisement to ask people to switch, right. And they can even do advertisement on the Play Store for zero because they control the Play Store. Why they don’t come back to a normal market where we are all on the same line and they just compete with advertisement, with pushing their products, with a better proposition of value. It’s crazy, it’s crazy!” he says.

“They have 95% of the market, and on that market they expect that if they don’t have the search by default there then they don’t do money with the Play Store. This is bullshit. They do billions of euros with the app on the Play Store each year. With the 30% that they take on the apps. So this is not true. This is not true, sorry.

“So right now this is our goal and my main work actually is just to obtain the right to have a fair competition — a simple, fair competition.”

“I don’t want to dismantle Google. I don’t want Google to be fined 10BN. I don’t care. The only thing I want is to have the right to have a fair competition,” he adds.

We asked the European Commission to respond to Qwant’s experience, and for an update on its monitoring of Google’s compliance with the Android antitrust ruling.

A spokeswoman declined to comment on an individual case but we understand the Commission has been sending questionnaires to market players as part of its compliance monitoring.

It’s clear the regulator’s intention with the Android decision was to expand consumer choice by creating opportunities for competition that didn’t exist before — including for rival search and browser providers to be able to compete on the merits with Google when it comes to pre-loading their products on Android devices.

So if the Commission’s monitoring efforts confirm instances where competition is being blocked, as appears the case here with Qwant, further interventions will surely follow.

Leandri also points out that Google made much the same arguments vis-a-vis ‘fair competition’ more than a decade ago — when it called for the then computing incumbent, Microsoft, not to stand in the way of Internet upstarts by bundling MSN search into its Internet Explorer web browser. 

“The market favors open choice for search, and companies should compete for users based on the quality of their search services,” said Marissa Mayer in 2006then Google’s vice president for search products. “We don’t think it’s right for Microsoft to just set the default to MSN. We believe users should choose.”

“I totally agree with what they say in 2006! Just exchange Microsoft for Google and that’s it!” he says now, adding: “We have to fight because there is not a lot of other way. But I stop fighting tomorrow as soon as I have a fair competition.

“I’m not waiting for the Commission to make the competition. Right now the percentage of growth that I have in France it’s not based on the Commission who has won or not. It’s based on our value proposition.”

Leandri is also president of the Open Internet Project, a European organization whose members lobby for regulatory action to rein in what they view as Google’s abusive dominance of digital markets, and which was also involved in the Google Shopping complaints — though he points out that in the Android case three of the five complainants are American. 

“We are the only European. So the problem is not only for a small startup in Europe. Who, y’know, complained because ‘Google is so cool’. And we are so dumb. And so ridiculous. But the problem is for Oracle, it’s for the Fair Search. It’s not for kids.”

“The problem is Facebook,” lawmakers from nine countries tell Zuckerberg’s accountability stand-in

A grand committee of international parliamentarians empty-chaired Mark Zuckerberg at a hearing earlier today, after the Facebook founder snubbed repeat invitations to face questions about malicious, abusive and improper uses of his social media platform — including the democracy-denting impacts of so-called ‘fake news’. The UK’s DCMS committee has been leading the charge to hold Facebook […]

A grand committee of international parliamentarians empty-chaired Mark Zuckerberg at a hearing earlier today, after the Facebook founder snubbed repeat invitations to face questions about malicious, abusive and improper uses of his social media platform — including the democracy-denting impacts of so-called ‘fake news’.

The UK’s DCMS committee has been leading the charge to hold Facebook to account for data misuse scandals and election interference — now joined in the effort by international lawmakers from around the world. But still not by Zuckerberg himself.

In all parliamentarians from nine countries were in the room to put awkward questions to Zuckerberg’s stand in, policy VP Richard Allan — including asking what Facebook is doing to stop WhatsApp being used as a vector to spread political disinformation in South America; why Facebook refused to remove a piece of highly inflammatory anti-Muslim hate speech in Sri Lanka until the country blocked access to its platform; how Facebook continues to track non-users in Belgium and how it justifies doing so under Europe’s tough new GDPR framework; and, more generally, why anyone should have any trust in anything the company says at this point — with company neck-deep in privacy and trust scandals.

The elected representatives were collectively speaking up for close to 450 million people across the UK, Argentina, Belgium, Brazil, Canada, France, Ireland, Latvia and Singapore. The most oft repeated question on their lips was why wasn’t Zuckerberg there?

Allan looked uncomfortable on his absentee boss’ behalf and spent the best part of three hours running the gamut of placative hand gestures as he talked about wanting to work with regulators to find “the right regulation” to rein in social media’s antisocial, anti-democratic impacts.

Canadian MP Bob Zimmer spoke for the room, cutting into another bit of Allan’s defensive pablum with: “Here we are again hearing another apology from Facebook — ‘look trust us, y’all regulate us etc but we really don’t have that much influence in the global scheme of things’. In this room we regulate over 400M people and to not have your CEO sit in that chair there is an offence to all of us in this room and really our citizens as well.”

“[Blackberry co-founder] Jim Balsille said, when I asked him on our committee, is our democracy at risk if we don’t change the laws in Canada to deal with surveillance capitalism?” Zimmer continued. “He said without a doubt. What do you think?” — which Allan took as a cue to ummm his way into another series of “we need tos”, and talk of “a number of problematic vectors” Facebook is trying to address with a number of “tools”.

The session was largely filled up such frustratingly reframed waffle, as Allan sought to deflect, defang and defuse the committee’s questions — leading it to accuse him more than once of repeating the ‘delay, deny, deflect’ tactics recently reported on by the New York Times.

Allan claimed not — claiming to be there “acknowledging” problems. But that empty chair beside him sure looked awkward.

At the close, Canada’s Charlie Angus sought to sweep Facebook’s hot air away by accusing Allan of distracting with symptoms — to draw the regulatory eye away from the root cause of the problem which he sharply defined as Facebook itself.

“The problem we have with Facebook is there’s never accountability — so I would put it to you when we talk about regulation that perhaps the best regulation would be antitrust,” he said. “Because people who don’t like Facebook — oh they could go to WhatsApp . But oh we have some problems in South America, we have problems in Africa, we have to go back to Mr Zuckerberg who’s not here.

“My daughters could get off Facebook. But they’d go to Instagram . But that’s now controlled by Facebook. Perhaps the simplest form of regulation would be to break Facebook up — or treat it as a utility so that we could all then feel that when we talk about regulation we’re talking about allowing competition, counting metrics that are actually honest and true, and that Facebook has broken so much trust to allow you to simply gobble up every form of competition is probably not in the public interest.

“So when we’re talking about regulation would you be interested in asking your friend Mr Zuckerberg if we could have a discussion about antitrust?”

Allan’s reached for an “it depends upon the problem we’re trying to solve” reply.

“The problem is Facebook,” retorted Angus. “We’re talking about symptoms but the problem is the unprecedented economic control of every form of social discourse and communication. That it’s Facebook. That that is the problem that we need to address.”

Committee chair Damian Collins also gave short shrift to Allan’s attempt to muddily reframe this line of questioning — as regulators advocating “turning off the Internet” (instead of what Angus was actually advocating: A way to get “credible democratic responses from a corporation”) — by interjecting: “I think we would also distinguish between the Internet and Facebook to say they’re not necessarily the same thing.”

The room affirmed its accord with that.

At the start of the session Collins revealed the committee would not — at least for now — be publishing the cache of documents it dramatically seized this weekend from the founder of a startup that’s been suing Facebook since 2015, saying it was “not in a position to do that”.

Although at several points during the session DCMS committee members appeared to tease some new details derived from these documents, asking for example whether Facebook had ever made API decisions for developers contingent on them taking advertising on its platform.

Allan said it had not — and appeared to be attempting to suggest that the emails the committee might have been reading were the result of ‘normal’ internal business discussions about how to evolve Facebook’s original desktop-based business model for the mobile-first era.

Collins did detail one piece of new information that he categorically identified as having been sourced from the seized documents — and specifically from an internal email sent by a Facebook engineer, dating from October 2014 — describing this to be of significant public interest.

“An engineer at Facebook notified the company in October 2014 that entities with Russian IP addresses had been using a Pinterest API key to pull over 3BN data points a day through the ordered friends API,” he revealed, asking Allan whether “that reported to any external body at the time”.

The Facebook VP responded by characterizing the information contained in the seized documents as “partial”, on account of being sourced via a “hostile litigant”.

“I don’t want you to use this opportunity just to attack the litigant,” retorted Collins. “I want you to address the question… what internal process [Facebook] ran when this was reported to the company by an engineer? And did they notify external agencies of this activity? Because if Russian IP addresses were pulling down a huge amount of data from the platform — was that reported or was that just kept, as so often seems to be the case, just kept within the family and not talked about.”

“Any information you have seen that’s contained within that cache of emails is at best partial and at worst potentially misleading,” responded Allan.

“On the specific question of whether or not we believe, based on our subsequent investigations, that there was activity by Russians at that time I will come back to you.”

We reached out to Pinterest to ask whether Facebook ever informed it about such an abuse of its API key. At the time of writing it had not responded to our request for comment.

Facebook has poached the DoJ’s Silicon Valley antitrust chief

Facebook has recruited Kate Patchen, a veteran of the U.S. Department of Justice who led its antitrust office in Silicon Valley, to be a director and associate general counsel of litigation. Patchen takes up her post amid ongoing scandals and reputation crises for her new employer, joining Facebook this month, according to her LinkedIn profile. The […]

Facebook has recruited Kate Patchen, a veteran of the U.S. Department of Justice who led its antitrust office in Silicon Valley, to be a director and associate general counsel of litigation.

Patchen takes up her post amid ongoing scandals and reputation crises for her new employer, joining Facebook this month, according to her LinkedIn profile.

The move was spotted earlier by the FT, which reports that Facebook also posted a job listing on LinkedIn for a “lead counsel” in Washington to handle competition issues two weeks ago — suggesting a broader effort to bulk up its in-house expertise.

Patchen brings to her new employer a wealth of experience on the antitrust topic, having spent 16 years at the DoJ, where she began as a trial attorney before becoming an assistant chief in the antitrust division in 2014. Two years later she was made chief.

We reached out to Facebook about the hire and it acknowledged our email but did not immediately provide comment on its decision to recruit a specialist in antitrust enforcement.

The social media giant certainly has plenty playing on its mind on this front.

In 2016 it landed firmly on lawmakers’ radar and in hot political waters when the extent of Kremlin-funded election interference activity on the platform first emerged. Since then a string of security and data misuse scandals have only dialed up the political pressure on Facebook.

Domestic lawmakers are now most actively discussing how to regulate social media. Although competition scrutiny is increasing on big tech in general, with calls from some quarters to break up platform giants as a fix for a range of damaging impacts.

The FT notes, for example, that democratic lawmakers recently introduced legislation to address “the threat of economic concentration.” And the sight of Democrats pushing for tougher competition enforcement suggests the party’s love affair with Silicon Valley tech giants is well and truly over.

In Europe, competition regulators have already moved against big tech, issuing two very large fines in recent years against Google products, with more investigations ongoing.

Amazon is also now on the Commission’s radar. At a national level, EU competition regulators have been paying increasing attention to how the adtech industry is dominated by the duopoly of Google and Facebook.

Patchen, meanwhile, joins Facebook at the same time as some long-serving veterans are headed out the door — including public policy chief Elliot Schrage.

Schrage’s departure has been in train for some months, but a leaked internal memo we obtained this week suggests he’s being packaged up as a convenient fall guy for a freshly cracked public relations scandal.

Last month Facebook announced it was hiring more new blood: Former deputy prime minister of the U.K., Nick Clegg, to be its new head of global policy and comms — with Schrage slated then to be staying on in an advisory capacity.

In other recent senior leadership moves, Facebook CSO Alex Stamos also left the company this summer, while chief legal officer Colin Stretch announced he would leave at the end of the year.

But according to a Recode report this month, Stretch has now put his exit on hold — until at least next summer — apparently deciding to stay to help out with ongoing legal and political crises.

Google tweaks Android licensing terms in Europe to allow Google app unbundling — for a fee

Google has announced changes to the licensing model for its Android mobile operating system in Europe,  including introducing a fee for licensing some of its own brand apps, saying it’s doing so to comply with a major European antitrust ruling this summer. In July the region’s antitrust regulators hit Google with a recordbreaking $5BN fine for […]

Google has announced changes to the licensing model for its Android mobile operating system in Europe,  including introducing a fee for licensing some of its own brand apps, saying it’s doing so to comply with a major European antitrust ruling this summer.

In July the region’s antitrust regulators hit Google with a recordbreaking $5BN fine for violations pertaining to Android, finding the company had abused the dominance of the platform by requiring manufacturers pre-install other Google apps in order to license its popular Play app store. 

Regulators also found Google had made payments to manufacturers and mobile network operators in exchange for exclusively pre-installing Google Search on their devices, and used Play store licensing to prevent manufacturers from selling devices based on Android forks.

Google disputes the Commission’s findings, and last week filed its appeal — a legal process that could take years. But in the meanwhile it’s making changes to how it licenses Android in Europe to avoid the risk of additional penalties heaped on top of the antitrust fine.

Hiroshi Lockheimer, Google’s senior vice president of platforms & ecosystems, revealed the new licensing options in a blog post published today.

Under updated “compatibility agreements”, he writes that mobile device makers will be able to build and sell Android devices intended for the European Economic Area (EEA) both with and without Google mobile apps preloaded — something Google’s same ‘compatibility’ contracts restricted them from doing before, when it was strictly either/or (either you made Android forks, or you made Android devices with Google apps — not both).

“Going forward, Android partners wishing to distribute Google apps may also build non-compatible, or forked, smartphones and tablets for the European Economic Area (EEA),” confirms Lockheimer.

However the company is also changing how it licenses the full Android bundle — which previously required OEMs to load devices with the Google mobile application suite, Google Search and the Chrome browser in order to be able to offer the popular Play Store — by introducing fees for OEMs wanting to pre-load a subset of those same apps under “a new paid licensing agreement for smartphones and tablets shipped into the EEA”.

Though Google stresses there will be no charge for using the Android platform itself. (So a pure fork without any Google services preloaded still wouldn’t require a fee.)

Google also appears to be splitting out Google Search and Chrome from the rest of the Google apps in its mobile suite (which traditionally means stuff like YouTube, the Play Store, Gmail, Google Maps, although Lockheimer’s blog post does not make it clear which exact apps he’s talking about) — letting OEMs selectively unbundle some Google apps, albeit potentially for a fee, depending on the apps in question.

“[D]evice manufacturers will be able to license the Google mobile application suite separately from the Google Search App or the Chrome browser,” is what Lockheimer unilluminatingly writes.

Perhaps Google wants future unbundled Android forks to still be able to have Google Search or Chrome, even if they don’t have the Play store, but it’s really not at all clear which configurations of Google apps will be permitted under the new licensing terms, and which won’t.

“Since the pre-installation of Google Search and Chrome together with our other apps helped us fund the development and free distribution of Android, we will introduce a new paid licensing agreement for smartphones and tablets shipped into the EEA. Android will remain free and open source,” Lockheimer adds, without specifying what the fees will be either. 

“We’ll also offer new commercial agreements to partners for the non-exclusive pre-installation and placement of Google Search and Chrome. As before, competing apps may be pre-installed alongside ours,” he continues to complete his trio of poorly explained licensing changes.

We’ve asked Google to clarify the various permitted and not permitted app configurations, as well as which apps will require a fee (and which won’t), and how much the fees will be, and will update this post with any response.

The devil in all those details should become clear soon though, as Google says the new licensing options will come into effect on October 29 for all new (Android based) smartphones and tablets launched in the EEA.

Google files appeal against Europe’s $5BN antitrust fine for Android

Google has lodged its legal appeal against the European Commission’s €4.34 billion (~$5BN) antitrust ruling against its Android mobile OS, according to Reuters — the first step in a process that could keep its lawyers busy for years to come. “We have now filed our appeal of the EC’s Android decision at the General Court of the […]

Google has lodged its legal appeal against the European Commission’s €4.34 billion (~$5BN) antitrust ruling against its Android mobile OS, according to Reuters — the first step in a process that could keep its lawyers busy for years to come.

“We have now filed our appeal of the EC’s Android decision at the General Court of the EU,” it told the news agency, via email.

We’ve reached out to Google for comment on the appeals process.

Rulings made by the EU’s General Court in Luxembourg can be appealed to the top court, the Court of Justice of the European Union, but only on points of law.

Europe’s competition commissioner, Margrethe Vestager, announced the record-breaking antitrust penalty for Android in July, following more than two years of investigation of the company’s practices around its smartphone operating system.

Vestager said Google had abused the regional dominance of its smartphone platform by requiring that manufacturers pre-install other Google apps as a condition for being able to license the Play Store.

She also found the company had made payments to some manufacturers and mobile network operators in exchange for them exclusively pre-installing Google Search on their devices, and used Google Play licensing to prevent manufacturers from selling devices based on Android forks — which would not have to include Google services and, in Vestager’s view, “could have provided a platform for rival search engines as well as other app developers to thrive”.

Google rejected the Commission’s findings and said it would appeal.

In a blog post at the time, Google CEO Sundar Pichai argued the contrary — claiming the Android ecosystem has “created more choice, not less” for consumers, and saying the Commission ruling “ignores the new breadth of choice and clear evidence about how people use their phones today”.

According to Reuters the company reiterated its earlier arguments in reference to the appeal.

A spokesperson for the EC told us simply: “The Commission will defend its decision in Court.”

EU antitrust regulator eyeing Amazon’s use of merchant data

The European Union’s competition commission is looking into how Amazon uses data from retailers selling via its ecommerce marketplace, Reuters reports. Competition commissioner Margrethe Vestager revealed the action today during a press conference. “We are gathering information on the issue and we have sent quite a number of questionnaires to market participants in order to […]

The European Union’s competition commission is looking into how Amazon uses data from retailers selling via its ecommerce marketplace, Reuters reports.

Competition commissioner Margrethe Vestager revealed the action today during a press conference. “We are gathering information on the issue and we have sent quite a number of questionnaires to market participants in order to understand this issue in full,” she said.

It’s not a formal antitrust probe at this stage, with Vestager also telling reporters: “These are very early days and we haven’t formally opened a case. We are trying to make sure that we get the full picture.”

The Commission appears to be trying to determine whether or not third-party merchants selling on Amazon’s platform are being placed at a disadvantage vs the products Amazon also sells, thereby competing directly with some of its marketplace participants.

Companies found to be in breach of EU antitrust rules can be fined up to 10 per cent of their global annual turnover.

We’ve reached out to Amazon for comment.

In recent years the ecommerce giant has greatly expanded the own-brand products it sells via its marketplace, such as via its Amazon Elements line, which includes vitamin supplements and baby wipes, and AmazonBasics — which covers a wide array of ‘everyday’ items including batteries and even towels.

The company does not always brand its own-brand products with the Amazon label, also operating a raft of additional own brands — including for kids clothes, women’s fashion, sportswear, home furnishings and most recently diapers, to name a few. So it is not always immediately transparent to shoppers on its marketplace when they are buying something produced by Amazon itself.

Meanwhile, tech giants’ grip on big data has been flagged as a potential antitrust concern by Vestager for several years now.

In a speech at the DLD conference back in 2016 she said: “If a company’s use of data is so bad for competition that it outweighs the benefits, we may have to step in to restore a level playing field,” adding then that she was continuing to “look carefully at this issue”.

It’s not clear how the Amazon probe will pan out but it signifies a stepping up of the Commission’s action in this area.

The EU also issued Google with a recordbreaking $5BN fine this summer, for abusing the dominance of its Android mobile operating system.

That fine followed another recordbreaking penalty in 2017, when Google was slapped with an $2.7BN antitrust fine related to its search comparison service, Google Shopping.

Google is appealing against both rulings.

Hate speech, collusion, and the constitution

Half an hour into their two-hour testimony on Wednesday before the Senate Intelligence Committee, Facebook COO Sheryl Sandberg and Twitter CEO Jack Dorsey were asked about collaboration between social media companies. “Our collaboration has greatly increased,” Sandberg stated before turning to Dorsey and adding that Facebook has “always shared information with other companies.” Dorsey nodded […]

Half an hour into their two-hour testimony on Wednesday before the Senate Intelligence Committee, Facebook COO Sheryl Sandberg and Twitter CEO Jack Dorsey were asked about collaboration between social media companies. “Our collaboration has greatly increased,” Sandberg stated before turning to Dorsey and adding that Facebook has “always shared information with other companies.” Dorsey nodded in response, and noted for his part that he’s very open to establishing “a regular cadence with our industry peers.”

Social media companies have established extensive policies on what constitutes “hate speech” on their platforms. But discrepancies between these policies open the possibility for propagators of hate to game the platforms and still get their vitriol out to a large audience. Collaboration of the kind Sandberg and Dorsey discussed can lead to a more consistent approach to hate speech that will prevent the gaming of platforms’ policies.

But collaboration between competitors as dominant as Facebook and Twitter are in social media poses an important question: would antitrust or other laws make their coordination illegal?

The short answer is no. Facebook and Twitter are private companies that get to decide what user content stays and what gets deleted off of their platforms. When users sign up for these free services, they agree to abide by their terms. Neither company is under a First Amendment obligation to keep speech up. Nor can it be said that collaboration on platform safety policies amounts to collusion.

This could change based on an investigation into speech policing on social media platforms being considered by the Justice Department. But it’s extremely unlikely that Congress would end up regulating what platforms delete or keep online – not least because it may violate the First Amendment rights of the platforms themselves.

What is hate speech anyway?

Trying to find a universal definition for hate speech would be a fool’s errand, but in the context of private companies hosting user generated content, hate speech for social platforms is what they say is hate speech.

Facebook’s 26-page Community Standards include a whole section on how Facebook defines hate speech. For Facebook, hate speech is “anything that directly attacks people based on . . . their ‘protected characteristics’ — race, ethnicity, national origin, religious affiliation, sexual orientation, sex, gender, gender identity, or serious disability or disease.” While that might be vague, Facebook then goes on to give specific examples of what would and wouldn’t amount to hate speech, all while making clear that there are cases – depending on the context – where speech will still be tolerated if, for example, it’s intended to raise awareness.

Twitter uses a “hateful conduct” prohibition which they define as promoting “violence against or directly attacking or threatening other people on the basis of race, ethnicity, national origin, sexual orientation, gender, gender identity, religious affiliation, age, disability, or serious disease.” They also prohibit hateful imagery and display names, meaning it’s not just what you tweet but what you also display on your profile page that can count against you.

Both companies constantly reiterate and supplement their definitions, as new test cases arise and as words take on new meaning. For example, the two common slang words to describe Ukrainians by Russians and Russians by Ukrainians was determined to be hate speech after war erupted in Eastern Ukraine in 2014. An internal review by Facebook found that what used to be common slang had turned into derogatory, hateful language.

Would collaboration on hate speech amount to anticompetitive collusion?

Under U.S. antitrust laws, companies cannot collude to make anticompetitive agreements or try to monopolize a market. A company which becomes a monopoly by having a superior product in the marketplace doesn’t violate antitrust laws. What does violate the law is dominant companies making an agreement – usually in secret – to deceive or mislead competitors or consumers. Examples include price fixing, restricting new market entrants, or misrepresenting the independence of the relationship between competitors.

A Pew survey found that 68% of Americans use Facebook. According to Facebook’s own records, the platform had a whopping 1.47 billion daily active users on average for the month of June and 2.23 billion monthly active users as of the end of June – with over 200 million in the US alone. While Twitter doesn’t disclose its number of daily users, it does publish the number of monthly active users which stood at 330 million at last count, 69 million of which are in the U.S.

There can be no question that Facebook and Twitter are overwhelmingly dominant in the social media market. That kind of dominance has led to calls for breaking up these giants under antitrust laws.

Would those calls hold more credence if the two social giants began coordinating their policies on hate speech?

The answer is probably not, but it does depend on exactly how they coordinated. Social media companies like Facebook, Twitter, and Snapchat have grown large internal product policy teams that decide the rules for using their platforms, including on hate speech. If these teams were to get together behind closed doors and coordinate policies and enforcement in a way that would preclude smaller competitors from being able to enter the market, then antitrust regulators may get involved.

Antitrust would also come into play if, for example, Facebook and Twitter got together and decided to charge twice as much for advertising that includes hate speech (an obviously absurd scenario) – in other words, using their market power to affect pricing of certain types of speech that advertisers use.

In fact, coordination around hate speech may reduce anti-competitive concerns. Given the high user engagement around hate speech, banning it could lead to reduced profits for the two companies and provide an opening to upstart competitors.

Sandberg and Dorsey’s testimony Wednesday didn’t point to executives hell-bent on keeping competition out through collaboration. Rather, their potential collaboration is probably better seen as an industry deciding on “best practices,” a common occurrence in other industries including those with dominant market players.

What about the First Amendment?

Private companies are not subject to the First Amendment. The Constitution applies to the government, not to corporations. A private company, no matter its size, can ignore your right to free speech.

That’s why Facebook and Twitter already can and do delete posts that contravene their policies. Calling for the extermination of all immigrants, referring to Africans as coming from shithole countries, and even anti-gay protests at military funerals may be protected in public spaces, but social media companies get to decide whether they’ll allow any of that on their platforms. As Harvard Law School’s Noah Feldman has stated, “There’s no right to free speech on Twitter. The only rule is that Twitter Inc. gets to decide who speaks and listens–which is its right under the First Amendment.”

Instead, when it comes to social media and the First Amendment, courts have been more focused on not allowing the government to keep citizens off of social media. Just last year, the U.S. Supreme Court struck down a North Carolina law that made it a crime for a registered sex offender to access social media if children use that platform. During the hearing, judges asked the government probing questions about the rights of citizens to free speech on social media from Facebook, to Snapchat, to Twitter and even LinkedIn.

Justice Ruth Bader Ginsburg made clear during the hearing that restricting access to social media would mean “being cut off from a very large part of the marketplace of ideas [a]nd [that] the First Amendment includes not only the right to speak, but the right to receive information.”

The Court ended up deciding that the law violated the fundamental First Amendment principle that “all persons have access to places where they can speak and listen,” noting that social media has become one of the most important forums for expression of our day.

Lower courts have also ruled that public officials who block users off their profiles are violating the First Amendment rights of those users. Judge Naomi Reice Buchwald, of the Southern District of New York, decided in May that Trump’s Twitter feed is a public forum. As a result, she ruled that when Trump blocks citizens from viewing and replying to his posts, he violates their First Amendment rights.

The First Amendment doesn’t mean Facebook and Twitter are under any obligation to keep up whatever you post, but it does mean that the government can’t just ban you from accessing your Facebook or Twitter accounts – and probably can’t block you off of their own public accounts either.

Collaboration is Coming?

Sandberg made clear in her testimony on Wednesday that collaboration is already happening when it comes to keeping bad actors off of platforms. “We [already] get tips from each other. The faster we collaborate, the faster we share these tips with each other, the stronger our collective defenses will be.”

Dorsey for his part stressed that keeping bad actors off of social media “is not something we want to compete on.” Twitter is here “to contribute to a healthy public square, not compete to have the only one, we know that’s the only way our business thrives and helps us all defend against these new threats.”

He even went further. When it comes to the drafting of their policies, beyond collaborating with Facebook, he said he would be open to a public consultation. “We have real openness to this. . . . We have an opportunity to create more transparency with an eye to more accountability but also a more open way of working – a way of working for instance that allows for a review period by the public about how we think about our policies.”

I’ve already argued why tech firms should collaborate on hate speech policies, the question that remains is if that would be legal. The First Amendment does not apply to social media companies. Antitrust laws don’t seem to stand in their way either. And based on how Senator Burr, Chairman of the Senate Select Committee on Intelligence, chose to close the hearing, government seems supportive of social media companies collaborating. Addressing Sandberg and Dorsey, he said, “I would ask both of you. If there are any rules, such as any antitrust, FTC, regulations or guidelines that are obstacles to collaboration between you, I hope you’ll submit for the record where those obstacles are so we can look at the appropriate steps we can take as a committee to open those avenues up.”

Alphabet earnings and the jaws of antitrust

It pays to be a monopolist. Alphabet’s earnings were stellar, and that is truly saying something. Just a few weeks ago, the European Union placed a record €4.34 billion fine on the Mountain View-based company, a penalty for the company’s payments to OEMs to include Google Search as the default search option in order to […]

It pays to be a monopolist.

Alphabet’s earnings were stellar, and that is truly saying something. Just a few weeks ago, the European Union placed a record €4.34 billion fine on the Mountain View-based company, a penalty for the company’s payments to OEMs to include Google Search as the default search option in order to access Google Play, the company’s App Store.

The acrimonious feud with the EU has become such a constant financial concern for the company that it now includes a “European Commission fines” line item in its consolidated statements of income.

Yet, one can’t help but stand back in awe at a company whose results show the complete lack of teeth of existing antitrust law, whether here in America or anywhere else globally. Alphabet’s revenues grew by $6.6 billion, far more than the record fine the EU laid on the company. Net income for the quarter was $3.2 billion even after the fine was deducted as an expense. The Alphabet cash machine remains as strong as ever.

The EU fine was of course one component in the plan of the antitrust authorities. There are structural remedies, namely that Alphabet needs to cease and desist on leveraging Android to cement its market share in search. But at this point, what exactly are the alternatives for handset manufacturers? DuckDuckGo? Bing?

My colleague Natasha Lomas, along with many other journalists, discussed the potential of the EU demanding that Alphabet being broken up. Yet, even such a meat cleaver of a structural remedy would seem to be useless at this juncture. Google Search essentially has no peer, and isn’t likely to have one in the near future. It has brand equity, data equity, extensive capital investments and trade secrets. No amount of structural remedies save the complete destruction of the company is going to reduce those burdens to competition.

These fines then are less about punishing behavior — after all, they aren’t deterring would-be monopolists from their activities. Instead, they essentially act as an excess profits tax, a way to uniquely target extraordinarily profitable tech companies without changing general business taxes.

Even when we expand the lens beyond just these anticompetitive enforcement actions to include data sovereignty issues like GDPR, Alphabet is once again positioned to be a winner. As I have written before, Alphabet and Amazon are likely the only companies with sufficient scale to even begin to handle the myriad laws and regulations emanating around the world on data sovereignty. Far from empowering consumers, these laws essentially ensure that there is now an added “regulatory network effects” barrier to competition in these markets.

The next billion internet users will ultimately determine the ceiling for Alphabet’s revenues

To me, there is only one force today that has any potential to threaten Alphabet’s complete and ongoing dominance, and that is China and its ambitious tech industry. Transsion’s subsidiaries dominate in the African smartphone market, and it along with other smartphone players like Xiaomi have targeted India and its quickly burgeoning middle class. If the next one to two billion internet users come to rely on Chinese internet services instead of Alphabet, that could prove a serious competitive headwind for the company.

One legacy of GDPR may simply be that it forced large tech companies to double down on the U.S. and Europe at a time when they should have been focused on global expansion. Alphabet broke the $5 billion revenue barrier for the Asia-Pacific region for the first time this quarter, but that amounts to only 15.6 percent of the company’s revenues. Meanwhile, Facebook, dealing with its Cambridge Analytica imbroglio, has started to curtail the expansion of its Free Basics internet access scheme.

Those distractions provide a rare opportunity for Chinese companies to focus exclusively on global expansion. Certainly Huawei and ZTE have taken that course. While broadly blocked from the U.S. market and with Australia preparing to ban 5G deployments, the two have had tremendous success in developing markets, with infrastructure and handset products that are often significantly cheaper than competitors.

All of that might mean little to the U.S. or European consumer, but it does potentially put a ceiling on the growth of Alphabet and other large tech companies. As TechCrunch pointed out yesterday, there has been a race to see who will break the trillion-dollar market cap barrier first among the major tech players. Alphabet is sitting at $865 billion and a trillion isn’t far away. But could it grow much beyond that? That to me depends on these new, developing markets, and there the race is much more competitive.

As these earnings show, the jaws of antitrust have no teeth, and competitive dynamics might constrain Alphabet to merely be a trillion-dollar company. It pays — over and over again — to be a monopolist.

EU fines Asus, Denon & Marantz, Philips and Pioneer $130M for online price fixing

The European Union’s antitrust authorities have issued a series of penalties, fining consumer electronics companies Asus, Denon & Marantz, Philips and Pioneer more than €110 million (~$130M) in four separate decisions for imposing fixed or minimum resale prices on their online retailers in breach of EU competition rules. It says the four companies engaged in so called […]

The European Union’s antitrust authorities have issued a series of penalties, fining consumer electronics companies Asus, Denon & Marantz, Philips and Pioneer more than €110 million (~$130M) in four separate decisions for imposing fixed or minimum resale prices on their online retailers in breach of EU competition rules.

It says the four companies engaged in so called “fixed or minimum resale price maintenance (RPM)” by restricting the ability of their online retailers to set their own retail prices for widely used consumer electronics products — such as kitchen appliances, notebooks and hi-fi products.

Asus has been hit with the largest fine (63.5M), followed by Philips (29.8M). The other two fines were 10.1M for Pioneer, and 7.7M for Denon & Marantz.

The Commission found the manufacturers put pressure on ecommerce outlets who offered their products at low prices, writing: “If those retailers did not follow the prices requested by manufacturers, they faced threats or sanctions such as blocking of supplies. Many, including the biggest online retailers, use pricing algorithms which automatically adapt retail prices to those of competitors. In this way, the pricing restrictions imposed on low pricing online retailers typically had a broader impact on overall online prices for the respective consumer electronics products.”

It also notes that use of “sophisticated monitoring tools” by the manufacturers allowed them to “effectively track resale price setting in the distribution network and to intervene swiftly in case of price decreases”.

“The price interventions limited effective price competition between retailers and led to higher prices with an immediate effect on consumers,” it added.

In particular, Asus, was found to have monitored the resale price of retailers for certain computer hardware and electronics products such as notebooks and displays — and to have done so in two EU Member States (Germany and France), between 2011 and 2014.

While Denon & Marantz was found to have engaged in “resale price maintenance” with respect to audio and video consumer products such as headphones and speakers of the brands Denon, Marantz and Boston Acoustics in Germany and the Netherlands between 2011 and 2015.

Philips was found to have done the same in France between the end of 2011 and 2013 — but for a range of consumer electronics products, including kitchen appliances, coffee machines, vacuum cleaners, home cinema and home video systems, electric toothbrushes, hair driers and trimmers.

In Pioneer’s case, the resale price maintenance covered products including home theatre devices, iPod speakers, speaker sets and hi-fi products.

The Commission said the company also limited the ability of its retailers to sell-cross border to EU consumers in other Member States in order to sustain different resale prices in different Member States, for example by blocking orders of retailers who sold cross-border. Its conduct lasted from the beginning of 2011 to the end of 2013 and concerned 12 countries (Germany, France, Italy, the United Kingdom, Spain, Portugal, Sweden, Finland, Denmark, Belgium, the Netherlands and Norway).

In all four cases, the Commission said the level of fines were reduced — 50% in the case of Pioneer; and 40% for each of the others — due to the companies’ co-operation with its investigations, specifying that they had provided evidence with “significant added value” and had “expressly acknowledg[ed] the facts and the infringements of EU antitrust rules”.

Commenting in a statement, commissioner Margrethe Vestager, who heads up the bloc’s competition policy, said: The online commerce market is growing rapidly and is now worth over 500 billion euros in Europe every year. More than half of Europeans now shop online. As a result of the actions taken by these four companies, millions of European consumers faced higher prices for kitchen appliances, hair dryers, notebook computers, headphones and many other products. This is illegal under EU antitrust rules. Our decisions today show that EU competition rules serve to protect consumers where companies stand in the way of more price competition and better choice.”

We’ve reached out to all the companies for comment.

The fines follow the Commission’s ecommerce sector inquiry, which reported in May 2017, and showed that resale-price related restrictions are by far the most widespread restrictions of competition in ecommerce markets, making competition enforcement in this area a priority — as part of the EC’s wider Digital Single Market strategy.

The Commission further notes that the sector inquiry shed light on the increased use of automatic software applied by retailers for price monitoring and price setting.

Separate investigations were launched in February 2017 and June 2017 to assess if certain online sales practices are preventing, in breach of EU antitrust rules, consumers from enjoying cross-border choice and from being able to buy products and services online at competitive prices. The Commission adds that those investigations are ongoing.

Commenting on today’s EC decision, a spokesman for Philips told us: “Since the start of the EC investigation in late 2013, which Philips reported in its Annual Reports, the company has fully cooperated with the EC. Philips initiated an internal investigation and addressed the matter in 2014.”

“It is good that we can now leave this case behind us, and focus on the positive impact that our products and solutions can have on people,” he added. “Let me please stress that Philips attaches prime importance to full compliance with all applicable laws, rules and regulations. Being a responsible company, everyone in Philips is expected to always act with integrity. Philips rigorously enforces compliance of its General Business Principles throughout the company. Philips has a zero tolerance policy towards non-compliance in relation to breaches of its General Business Principles.”

Anticipating the decision of the EC, he said the company had already recognized a 30M provision in its Q2 2018.