Europe versus Google

Europe’s latest move against Google — a record $2.7 billion (2.4 billion euro) fine for anti-competitive behaviour — is understandable but ill-advised. For the sake of a questionable theory, it risks causing an escalating quarrel.
The European Commission accused Google of putting sites that compare prices for goods and services at an unfair disadvantage on its search pages. Years of wrangling preceded the finding, and they aren’t over: The company is likely to appeal, and this is only one in a series of pending
disputes between Google and the EU.
On the face of it, there’s something strange about the EU’s charge that Google is “anti-competitive.” Its search technology has empowered consumers, raising competition among suppliers of goods and services to new levels of efficiency. As a marketplace in its own right, the firm has plenty of rivals and is a small player next to Amazon. One might ask, what’s the problem?
It’s this: Google’s success in search has plainly given it forms of monopoly power. The same goes for other mega-companies in the new digital economy. Driving competitors out of business doesn’t necessarily hurt consumers; in the first instance, it may do the opposite. But later, once a monopolist is secure, efforts to gouge consumers can follow.
US regulators commonly want proof that consumers will be hurt by actions that lessen competition, and they’re more confident that the power of innovation will keep monopolists in check. (The Federal Trade Commission dropped its own investigation into Google in 2013.) EU regulators are more concerned about anti-competitive practices in their own
right. The U.S., you could say, takes a more optimistic view of creative
destruction.
With the digital economy still in its infancy, there’s room to question which approach — U.S. permissiveness or European caution — is right. It’s worth noting that some big U.S. firms have written in support of the EU’s actions. Even so, the idea that Google’s market power is or soon will be unassailable is hard to accept. The digital economy welcomes newcomers, whether incumbents like it or not. Google can be displaced in future just as its predecessor (Yahoo!) was. If it starts failing to give users what they want, it had better watch out.
If kept within bounds, divergent styles of competition policy needn’t be a bad thing: Europe is entitled to set its own rules, and time will tell whether U.S. or European consumers gain more from the digital revolution. In the meantime, though, it’s vital to stop disagreements in this area infecting other aspects of U.S.-EU trade policy.
That’s a risk, especially if the EU arouses suspicion that its regulators are acting in bad faith. Old-fashioned protectionism, after all, is another kind of anti-competitive strategy. As these cases go forward, Europe’s regulators should strive to prove their even-handedness. If they can negotiate reasonable remedies based on conduct, rather than grab headlines with enormous fines, that would help, too.

—Bloomberg