Being a global company has its perks. There’s a lot of money to be made overseas. But the biggest US tech companies are finding out that there’s also a downside: Every country where you make money is a country that could try to regulate you.
It’s hard to keep track of all the tech-related antitrust action happening around the world, in part because it doesn’t always seem to be worth paying close attention to. In Europe, which has long been home to the world’s most aggressive regulators, Google alone was hit with 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 corporation that reported $61.9 billion in revenue last quarter.
Increasingly, however, foreign countries are going beyond slap-on-the-wrist fines. Instead, they’re forcing tech companies to change how they do business. In February, Australia passed a law giving news publishers the right to negotiate payments from dominant internet platforms—effectively, Facebook and Google. In August, South Korea became the first country to pass a law forcing Apple and Google to open their mobile app stores to alternate payment systems, threatening their grip on the 30 percent commission they charge developers. And in a case with potentially huge ramifications, Google will soon have to respond to the Turkish competition authority’s demand to stop favoring its own properties in local search results.
The consequences of cases like these can ripple far beyond the borders of the country imposing the new rule, creating natural experiments that regulators in other countries might emulate. The fact that Google and Facebook have acquiesced to Australia’s media bargaining code, for example, might accelerate similar efforts in other countries, including Taiwan, Canada, and even the US. Luther Lowe, who as Yelp’s senior vice president of public policy has spent more than a decade lobbying for antitrust action against Google, refers to this phenomenon, approvingly, as “remedy creep.”
In other cases, the companies being forced to change their business model abroad might decide to adopt the shift globally before they’re forced to. After settling an investigation by Japan’s Fair Trade Commission, Apple decided to implement the solution—allowing audio, video, and reading apps to link to their own websites to accept payment—globally.
“Sometimes it’s the market driving it: The companies decide it’s too costly to make different compliance strategies in different markets,” said Anu Bradford, a professor of international and antitrust law at Columbia University. “Or, sometimes, it’s in anticipation of copycat regulation: They know it’s out there, and they’re not going wait for the Russians or Turkish to do their own case.”
While it hasn’t gotten quite the same level of media attention as Australia and South Korea, the case in Turkey could end up being the biggest deal. That’s because it cuts to the heart of how Google uses its power as the gatekeeper for most internet traffic.
The case is about what’s called local search, like when you look for “restaurants near me” or “hardware store.” This is a huge category of search traffic—nearly half of all Google searches, according to some analysts. Google’s critics and competitors have long complained that Google unfairly uses its dominance to steer local search results to its own offerings, even when that might not be the most helpful result. Think about how, if you search on Google for “Chinese restaurant,” the top of the results page will probably feature a widget that Google calls the OneBox. It will include section of Google Maps and a few Google reviews of Chinese restaurants near you. You’ll have to scroll down to find the top organic results, which may be from Yelp or TripAdvisor.
This dynamic has exasperated Google critics and competitors for years. One of those aggrieved competitors, Yelp, initiated the case in Turkey by lodging a complaint with the country’s competition authority. Google argues that its local search results are designed to be maximally helpful for users, not to pad its own bottom line. But the Turkish regulators disagreed, concluding that Google “has violated Article 6 of the Turkish Competition Law by abusing its dominant position in the general search services market to promote its local search and accommodation price comparison services in a way to exclude its competitors.” (I’m quoting a translation provided by a Turkish lawyer.) In April they imposed a fine of about $36 million. That’s less than 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 come up with a way of displaying local search results that doesn’t favor itself over competitors.
For now, the case is in limbo. The competition authority still has to issue a “reasoned opinion” laying out its conclusions in detail. Then, Google will get the chance to submit its proposal for complying with the ruling. It will be up to the competition authority to decide whether that proposal is good enough or not.
This isn’t Google’s first rodeo in Ankara. In 2018 the competition authority made a similar ruling about Google Shopping, finding that Google privileged itself over other comparison-shopping sites. This came on the heels of an analogous European Union case, but with an important difference: In that case, the EU accepted Google’s solution, even though its competitors argued it was inadequate. The Turkish authorities did not. That gave Google a choice: come back with a solution the regulators would accept, or pull the plug on Google Shopping in Turkey. The company chose the latter option, simply shutting down its comparison shopping module in the country.
Google could do the same thing in the current case. But the stakes would be far higher. Local search is a much bigger share of the overall search pie, and Turkey, with a population of 85 million people, is a big place. Giving up on local search would be taking away a commonly used feature in a large market. That means the company has a greater incentive to propose a fix that won’t get rejected by the competition authority. But that in turn raises a complimentary risk: Any solution adopted in Turkey could be demanded elsewhere.
“If you’re one of these globally dominant companies, the downside is, if one of those jurisdictions becomes a live example in the wild of an antitrust remedy, there’s a huge domino-effect risk,” said Yelp’s Luther Lowe. “Because suddenly, Amy Klobuchar can hold up her smartphone in a Senate hearing where Sundar Pichai is testifying and say, ‘Mr. Pichai, I have my Turkish VPN activated right now, and it appears that Turkish consumers are getting a better deal than Minnesota consumers.’”
What might that look like? Google hasn’t publicized any proposed remedies; Emily Clarke, a spokesperson, said the company is waiting for the full opinion to be released before it can figure out what its legal obligations are. Yelp argues that whoever wins the organic search results should also win the right to have its API power the 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 in the OneBox, but the first link below that is from Yelp, then Yelp should get to populate the OneBox instead—meaning you would see Yelp reviews first, not Google reviews, when trying to figure out where to get dinner.
Such a change, if adopted widely, could dramatically reshape the flow of a great deal of internet traffic. As the analyst Rand Fishkin noted in 2019, more than 50 percent of Google searches end without the user clicking to another site. That’s partly because, as the Markup documented last year, Google’s own properties or “direct answers” make up well more than half of the first page a user sees when searching on mobile.
“If this jurisdiction compels them to behave in an interoperable and non-discriminatory way, that basically reverts the original mechanism of Google as kind of a turnstile,” said Lowe. “You get just a huge torrent of traffic to third party services.”
It’s easy to see why a company like Yelp wants a crack at top billing. The question is whether Turkey’s regulators will force Google to give it to them—and, if so, whether Google will go along or send Turkish users back to the original 10 blue links. Either way, the consequences will probably not stay confined to Turkey’s borders. US tech companies conquered the world. Now the world wants to conquer back.
This story originally appeared on wired.com.
https://arstechnica.com/?p=1796339