EU May Try to Break Up Google

EU May Try to Break Up Google

Ghost of Microsoft past

Legislators in the European Parliament on Friday are drafting a resolution calling on Google to be split into two companies so that the Internet giant can no longer unfairly leverage its search dominance to artificially prop up its other, money-losing, businesses and illegally harm its competitors. The parliament does not have the authority to break up Google, nor does it have a formal say in EU antitrust laws or agencies. But this resolution should at least trigger harsher antitrust oversight and penalties against the firm in a variety of cases that are currently underway.

"Search engines like Google should not be allowed to use their market power to push forward other commercial activities of the same company," a co-sponsor of the proposed resolution noted in a statement. "In case the current anti-competitive behavior continues to exist, a regulation of the dominant online web search should be envisaged."

The EU parliament can't introduce bills or laws, but it does ratify bills introduced by the European Commission into laws. The EC, of course, is the EU agency that is currently undergoing several antitrust-related inquiries into Google, and it is trying to reach a settlement in a year-old case against the company regarding abuse of its search dominance.

And it is doing so under new leadership. New EU Competition Commissioner Margrethe Vestager replaced Joaquin Almunia this month and has already said that she will not be steamrolled by Google as was her overly-compliant predecessor.

The parliamentary resolution—described as "very likely" by key members—would call on Vestager's EC to do more to curb Google's illegal behavior in the EU and stop it from "suppressing competition to the detriment of European consumers and businesses." And it specifically calls for the "unbundling [of] search engines from other [Google] commercial services."

It's impossible to discuss even the possibility of breaking up Google without referencing the decade-old call, in the United States, for Microsoft's breakup. That action was sought by an overly-aggressive Judge Thomas Penfield Jackson who quickly grew tired of Microsoft's lies and legal antics. But it was tossed aside by an appellate court which accused Judge Jackson of bias even as it upheld most of the findings against the software giant.

Reeling from this experience, Microsoft went on to have its most ineffectual decade ever, releasing product bombs like Windows Vista and Zune, and allowing Google—and Apple—to race forward without fear of real competitive reprisals. So in some ways, the issue we're seeing today in the EU and elsewhere is an indirect result of Microsoft's antitrust ills. And it should be viewed in this context.

Researching Judge Jackson I came across a particularly relevant passage from his summary of findings against Microsoft. If one were to reword these findings and replace the word "Microsoft" with "Google," you would find that it is just as apt today:

"Through its conduct toward [competitors], Google has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Google's core products. Google's past success in hurting such companies and stifling innovation deters investment in technologies and businesses that exhibit the potential to threaten Google. The ultimate result is that some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Google's self-interest."

I don't foresee a future in which the EU formally requires Google to split into at least two companies in order to continue doing business in its member states. But the days of simply trusting Google to do the right thing are clearly over. Today, the EU is belatedly acknowledging that a company with Google's market power needs to be closely monitored to ensure that it's not stifling innovation or illegally harming other businesses. And it can't happen quickly enough.

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