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Being a global company has its advantages. You can earn a lot of money abroad. But America’s biggest tech companies are finding there’s a downside, too: Every country where you make money is a country that might try to regulate it.
It’s hard to keep track of all of the tech-related antitrust action happening around the world, in part because it doesn’t always seem worth paying close attention to. In Europe, which has long been home to the world’s most aggressive regulators, Google alone received a $ 2.7 billion fine in 2017, a $ 5 billion fine in 2018, and a $ 1.7 billion fine in 2019. These sums would be devastating for most companies, but they are little more than rounding errors for a company that reported $ 61.9 billion in revenue last quarter.
However, increasingly, foreign countries are going beyond fines. Instead, they are forcing tech companies to change the way they do business. In February, Australia passed a law giving news publishers the right to negotiate payments from the dominant internet platforms, effectively Facebook and Google. In August, South Korea became the first country to pass a law that forces Apple and Google to open their mobile app stores to alternative payment systems, threatening their control over the 30 percent commission they charge developers. And in a case with potentially huge ramifications, Google will soon have to answer to the Turkish competition authority. demand stop favoring your own properties in local search results.
The consequences of cases like these can extend far beyond the borders of the country imposing the new rule, creating natural experiments that regulators in other countries could emulate. The fact that Google and Facebook acquired Australia’s media trading code, for example, could accelerate similar efforts in other countries, including Taiwan, Canada, and even the United States. Luther Lowe, who as Yelp’s senior vice president of public policy has spent more than a decade pushing for antitrust action against Google, approvingly refers to this phenomenon as a “slow fix.”
In other cases, companies that are forced to change their business model abroad may decide to embrace the change globally before they are forced to do so. After resolving an investigation by the Japan Fair Trade Commission, Apple decided implement the solution—Allow audio, video, and reading applications to link to their own websites to accept payments around the world.
“Sometimes it’s the market that drives it – companies decide it’s too costly to carry out different compliance strategies in different markets,” said Anu Bradford, professor of international law and antitrust at Columbia University. “Or sometimes it’s in anticipation of copycat regulation – they know it’s out there and they’re not going to wait for the Russians or the Turks to make their own case.”
While it has not received the same level of media attention as Australia and South Korea, the case of Turkey could end up being the biggest problem. That’s because it goes to the heart of how Google uses its power as the gatekeeper for most of the internet traffic.
The case is about what’s called a local search, like when you search for “restaurants near me” or “hardware store.” This is a huge category of search traffic:close to half of all Google searches, according to some analysts. Critics and competitors of Google have long complained that Google is unfairly using their domain to direct local search results to their own offers, even when that might not be the most useful result. Think about how, if you Google “Chinese restaurant,” the top of the results page will likely include a widget that Google calls OneBox. It will include a Google Maps section and some Google reviews of Chinese restaurants near you. You’ll have to scroll down to find the best organic results, which can be from Yelp or TripAdvisor.
This dynamic has infuriated Google’s critics and competitors for years. One of those aggrieved competitors, Yelp, started the case in Turkey by filing a complaint with the country’s competition authority. Google argues that its local search results are designed to be of maximum use to users, not to augment its own results. But Turkish regulators disagreed, concluding that Google “has violated Article 6 of Turkey’s Competition Law by abusing its dominant position in the general search services market to promote its local search and price comparison services. hosting so as to exclude your competitors. ” (I quote a translation provided by a Turkish lawyer). In April imposed a fine of about 36 million dollars. That’s less than what Google earned every two hours, on average, in 2020. But while the fine was trivial, the rest of the decision was not. The authority issued a preliminary ruling ordering Google to propose a way to display local search results that does not favor its competitors.
For now, the case is in limbo. The competition authority has yet to issue a “reasoned opinion” setting out its findings in detail. Then, Google will have the opportunity to present its proposal to comply with the sentence. It will be up to the competition authority to decide whether that proposal is good enough or not.
This is not Google’s first rodeo in Ankara. In 2018, the competition authority issued a similar ruling on Google Shopping and found that Google privileged itself over other price comparison sites. This came on the heels of a similar case in the European Union, but with one important difference: in that case, the EU accepted Google’s solution, even though its competitors argued that it was inappropriate. The Turkish authorities did not. That gave Google a choice: come back with a solution that regulators would accept or shut down Google Shopping in Turkey. The company chose the last option, simply closing its comparison module for purchases in the country.
Google could do the same in the current case. But the stakes would be much higher. Local search is a much bigger part of the overall search pie, and Turkey, with a population of 85 million people, is a significant place. Giving up local search would be to eliminate a commonly used feature in a large marketplace. This means that the company has a greater incentive to propose a solution that will not be rejected by the competition authority. But that, in turn, poses a complementary risk: Any solution adopted in Turkey could be required elsewhere.
“If you are one of these dominant global companies, the downside is that if one of those jurisdictions becomes a living example in the nature of an antitrust remedy, there is a huge risk of a domino effect,” said Luther Lowe of Yelp. “Because suddenly Amy Klobuchar can hold up her smartphone at a Senate hearing where Sundar Pichai is testifying and say, ‘Mr. Pichai, I have my Turkish VPN turned on at the moment and it looks like Turkish consumers are getting a better deal than Minnesota consumers. ‘”
What could it look like? Google has not published any proposed solutions; Emily Clarke, a spokeswoman, said the company is waiting for the full opinion to be released before it can find out what its legal obligations are. Yelp argues that whoever wins organic search results should also win the right to have their API power OneBox results, on the theory that Google’s own algorithm has already deemed them the most relevant result. In other words, if a search right now leads to a Google Maps result on OneBox, but the first link below is from Yelp, then Yelp should fill out the OneBox instead, which means you’ll see the Yelp reviews first. , not Google reviews. , when trying to figure out where to dine.
Such a change, if widely adopted, could dramatically reshape the flow of a large amount of Internet traffic. As analyst Rand Fishkin indicated In 2019, more than 50 percent of Google searches ended without the user clicking on another site. That’s partly because, as the markup documented Last year, Google properties or “direct responses” accounted for more than half of the first page a user sees when searching on a mobile device.
“If this jurisdiction forces them to behave in an interoperable and nondiscriminatory way, that basically reverses Google’s original mechanism as a kind of turnstile,” Lowe said. “You get a huge stream of traffic to third-party services.”
It’s easy to see why a company like Yelp wants a top billing crack. The question is whether Turkey’s regulators will force Google to give it to them, and if so, whether Google will accept or send Turkish users to the original 10 blue links. Either way, the consequences probably won’t be limited to Turkey’s borders. American tech companies conquered the world. Now the world wants to conquer again.
This story originally appeared in wired.com.