The Giant and His Tricks

The search engine company has to pay a €2.42 billion fine: It may no longer act as market organizer and trader at the same time.

Those who want to grasp the dimensions of what is currently going on here probably have to visualize just one number: At the beginning of this week, Google’s parent company Alphabet had a market value of more than $2 trillion — that’s 14 times the value of Volkswagen, the world’s biggest car manufacturer, and 200 times the value of Lufthansa. The Himalayas versus the German Fichtel Mountains, one might say.

Of course, market value alone is not an indicator whether a corporation is abusing its size in order to hobble smaller competitors. The temptation is great, though — as was demonstrated by the investigations against the giants Google, Amazon, Facebook, and Apple in recent years. The European General Court, a constituent court of the Court of Justice of the European Union, has now essentially confirmed this. Pursuant to the verdict, Google has to pay the €2.4 billion fine ($2.7 billion) that Brussels imposed on the company in 2017. The accusation: It utilized its dominant search engine to systematically redirect price-seeking consumers to its company-owned comparison service.

With that, the judges hit one of Google’s (but also Amazon’s) sore spots: Both companies run online marketplaces on which they both also act as sellers. This must naturally lead to a conflict of interest, as, of course, the companies want to present their own goods and offers to be as noticeable as possible. It could be compared to the operator of a weekly market who opens a large stand right by the only entrance to the market, where he offers all the customers’ favorite products at the lowest price and on his own account. What reason would shoppers then have to visit the smaller vendors at their more distant stands?

An Idea that Sounds Like Socialism but Isn’t

In order to solve this issue, the international community should force the giants to outsource the market operations and sales to independent subsidiary companies. Corporations that don’t consequently follow this would literally have to be split up. That sounds like socialism, but it isn’t; similar decisions have been made in the past, for instance, in the energy, telecommunication and train sector. And a second idea currently being discussed in the U.S. Congress deserves attention — representatives want to force the giant companies to offer customers a version of their search or social media platforms that operates without personalized algorithms. Users would then receive less perfectly fitted ads, but also less false information.

However, antitrust legislation and regulations alone are not sufficient. Instead of just breaking up successful companies, it would be better for the European Union and the United States to radically rework their industrial political concepts and strategically support young and up-and-coming businesses via subsidies, but also through simplifying the laws pertaining to permits and taxation. Bureaucracy and high costs are often hindrances for competitors, sometimes just as significant as Google and the like.

This is all the more true since the top dog issue sometimes resolves itself. The bigger companies get, the more clumsy they tend to behave and more blatant managements errors occur. In case there are follow-up questions, please refer to former celebrities like IBM. Or Hertie,* Nokia and General Electric.

*Translator’s Note: Hertie was a renowned German department store chain that filed for bankruptcy in 2008.