Google faces yet another antitrust probe, this time in the US

US Senator Orrin Hatch has written to the FTC requesting the body investigate whether it is using it dominant position in search and digital advertising to stifle the market place.

The Republican Senator, quite a frequent critic of the technology industry, is asking whether practises such as restricting competing advertising services to collecting data from users’ Gmail inbox are having a notable impact on the industry. The issue raised doesn’t seem to be about a single instance, but the collective impact of several smaller practices. A more wholistic investigation into Google’s business might well uncover some uncomfortable truths.

“Needless to say, I found these reports quite disturbing,” the Senator stated in the letter. “Although these reports concern different aspects of Google’s business, many relate to the company’s dominant position in search and accumulating vast amounts of personal data. That is why I also write to the Federal Trade Commission (FTC) to reconsider the competitive effect of Google’s conduct in search and digital advertising.”

Google is of course becoming quite used to dealing with antitrust complaints and investigations, though it will still remain an irritation. The restriction of publishers search advertisements from competitors is currently the subject of on-going monitoring from the European Commission, though more prying eyes and prodding fingers from cumbersome regulators is hardly going to enthuse the Google management team.

This is not the first time the FTC would be taking an interest in Google, though since the last investigation in 2013, Senator Hatch has pointed to several developments in the market. Google is currently under a consent order from the agency to hold it more accountable to privacy and data protection rules, though critics have suggested it violated this order with its most recent intrusion into users lives.

Recently Google was exposed for collecting location data on users who had ticked the opt-out button on some popular apps. Google subsequently changed the wording in some T&Cs, stating apps might continue to collect data irrelevant of the opt-out, with the process of actually getting off the Google grid being an incredibly cumbersome and difficult one. The issue here is more about how important Google products are to the lives of consumers, some people simply can’t avoid the products, but this should not be a reason for the internet giant to abuse this position.

President Trump has set his sights on Google, and it seems he has the support of his party, as the Google legal team warms up for another bout with the FTC.

Qualcomm finally gets a legal win in Taiwan

The Qualcomm lawyers are building a reputation as the hardest working in the industry, though at least they no-longer have to battle the Taiwanese Fair Trade Commission.

The resolution of the dispute will come as a welcome relief, allowing the team to focus on other fronts against Apple, the European Commission and various, and the legal team have even saved Qualcomm quite a bit of cash. The deal reverses most of the $773 million fine, though it has agreed to up research commitments in the country.

“We are pleased to have reached a mutually beneficial resolution with the TFTC that puts the litigation behind us,” said Alex Rogers, President of Qualcomm Technology Licensing. “This settlement directly addresses concerns raised by the TFTC, regardless of disputed positions, and builds on our foundation of collaborative, long-term business relationships in Taiwan.

“We are happy to reaffirm our commitment to licensing our valuable intellectual property under principles of fairness and good faith. With the uncertainty removed, we can now focus on expanding our relationships that support the Taiwanese wireless industry and rapid adoption of 5G technology.”

As part of the agreement, Qualcomm will increase its research footprint in the country and has committed to spending $700 million over the next five years. In exchange, Qualcomm will stop getting fined and can continue to charge manufacturers royalties on its technology. The FTC will keep the $89 million Qualcomm has already paid, but will forget about the rest.

It will cost the chip giant cash in the long-term, but this is a minor price to pay in securing a future for its threatened licensing business. This was the major worry for investors, as it is a cash-cow, generating the majority of profits which few would want to see run dry. With Apple recruiting governments around the world in its battle against the licensing business model, this is a certainly a win for Qualcomm.

Qualcomm still faces various antitrust investigations around the world, building an expensive legal bill, but with Taiwan concluding the activities are not monopolistic or abusing market position, it is precedent which Qualcomm can point to.

DoJ appeals AT&T/Time Warner deal on grounds of ignorance

The Department of Justice has attacked a trial judges approach and methods when reviewing AT&T’s much debated acquisition of Time Warner, in it’s against the greenlight for the deal.

AT&T closed it’s $108 billion acquisition of Time Warner two days after District Court for the District of Columbia Judge Richard Leon gave his seal of approval, though the Department of Justice is not done yet. An appeal has been launchedx      , arguing competition would be distorted in the pay TV market as a result as AT&T would have a bargaining advantage over rivals, with the main focus of the appeal seemingly being directed at the Judge Leon.

“The district court held otherwise, but only by erroneously ignoring fundamental principles of economics and common sense,” the appeal document states. “These errors distorted its view of the evidence and rendered its factual findings clearly erroneous, and they are the subject of this appeal.

As you can see from the statement above, the Department of Justice seems to be claiming Judge Leon was not able to consider the long-term economic impact of the acquisition of competition, but also has found issue with the court made the ‘vast majority’ of its evidentiary rulings during sealed bench conferences and declined to release the transcripts of these conferences to anyone during the trial.

“The district court substantially constrained the government’s presentation of evidence showing that the merged entity would have greater bargaining leverage,” the appeal reads.

Part of these discussions included evidence which the government would have wanted access to, AT&T’s own analysis of the potential competitive impact of the acquisition for example, but also that Judge Leon dismissed public FCC filings made by AT&T and DirecTV explaining the potential competitive harm from vertical integration, refusing to treat the documents as relevant submissions. The Department of Justice also argues it was not given enough air-time to question economic experts or evidence presented by AT&T.

The implication seems to lean on the idea of bias. Although it has not been directly said, the Department of Justice seems to be hinting Judge Leon favoured AT&T and was not able to offer an independent evaluation of the saga.

While this is a massive acquisition, vertical deals are not unusual in the technology industry, in fact, some might suggest it is the norm for growth. With big ticket acquisitions becoming more common in the industry, some might suggest the Department of Justice’s opposition to the deal might be more political than economical. President Trump’s distain for Time Warner owned brands are no secret, a public hatred which might be fuelling the theories.

AT&T, Verizon and GSMA face collusion investigation

AT&T, Verizon and the GSMA are the subjects of a reported probe from the US Department of Justice as to whether the trio have been blocking or hindering the adoption of eSIMs.

According to the New York Times, the Department of Justice has opened an antitrust investigation to understand whether the three have been in cahoots to make life difficult for users wanting to switch services to competitors through the eSIM technology, designed to make life fairer for the consumer. Should there be any truth to suspicions of a co-ordinated attack on consumers, there could be some pretty serious consequences.

The DoJ takes these sorts of issues pretty seriously, stating the following on its website: “Consumers have the right to expect the benefits of free and open competition — the best goods and services at the lowest prices. Public and private organizations often rely on a competitive bidding process to achieve that end. The competitive process only works, however, when competitors set prices honestly and independently.”

There have been various examples of the DoJ tackling market collusion in recent years, including an investigation as to whether the four major airline carriers were keeping ticket prices artificially high, with the most stringent of punishments being $100 million. In some circumstances, the fine can be increased to twice the gain or loss involved with the nefarious activity. Although the DoJ will take any collusion accusations seriously, industries where there are a smaller number of providers raise red flags. The telco space is technically a perfect scenario for collusion.

While there has not been a comment from the DoJ, Verizon and AT&T have both downplayed the investigation, brushing off any concerns, while the GSMA has released the following statement.

“This standard contains a wide range of features, including the option for the eSIM to be locked. In the United States, consumers would have this option; however, they would need to explicitly consent to this under specific commercial agreements with their mobile operator, for example when purchasing a subsidised device. The development of the latest version of the specification is on hold pending the completion of an investigation by the United States Department of Justice. The GSMA is cooperating fully with the Department of Justice in this matter.”

Sources close to the matter have said the investigation was launched after one device manufacturer, said to be Apple, and a competitor of Verizon/AT&T filed complaints the development or actioning of the eSIM technology was being hindered by the trio. The complaint states AT&T, Verizon and the GSMA were pushing the development of the standard down a direction which would not be beneficial to the consumer. One of these developments would be to lock devices into a single provider.

eSIM technology would allow consumers to switch providers without having to physically change the SIM in the handset. It is one way in which the industry is trying to remove the unfair and unjust strangle hold telcos have on their customers. Switching providers is a tiresome and unnecessarily prolonged exercise for users as it stands, as providers make it as difficult as possible; some just give up through frustration which is not the sign of a healthy relationship.

AT&T and Verizon are the dominant players in the US mobile space, controlling around 70% of the market share, though the ability to more seamlessly switch providers might erode this position. The last few years have seen T-Mobile US make very positive steps to challenge the status quo, therefore it might make sense Verizon and AT&T would look to influence standards to protect themselves. The big question is whether this alleged influence would directly hurt competition and consumers. Consumers are often an afterthought for telcos, especially those who are at the top of market share rankings, though protecting the consumer would be top of the priority list for the Department of Justice.

Makan Delrahim, who leads the antitrust division at the DoJ, has previously spoken about the “cartel-like behaviour” of the telcos, while the department is also scrutinising the AT&T/Time Warner deal on the grounds of competition. We get the impression the DoJ is searching for evidence of wrong-doing as opposed to performing an independent investigation. It is a slight nuance, but could swing 50/50 calls.

Google fined for search engine bias in India, but probably doesn’t care

Google has been fined roughly $21 million by the Competition Commission of India (CCI) for search engine bias; on most recent financial results, it would take Google around 90 minutes to work off the fine.

The investigation into Google initially began in 2012, following a complaint from dating website  Matrimony.com and social justice group Consumer Unity & Trust Society. The investigation ruled that Google abused its dominant market position around the design of Search Engine Result Page, with the team favouring commercial relationships.

“The CCI in its order noted that the allegations against Google in respect of search results essentially centred around design of Search Engine Result Page (SERP),” the CCI said in a statement.

“Exhibiting a self-imposed regulatory forbearance from scrutinizing product designs in ascertaining anti-trust violations, CCI noted in its order that product design is an important and integral dimension of competition, undue intervention in designs of SERP can affect legitimate product improvements.

“CCI further observed in its order that Google, being the gateway to the internet for a vast majority of internet users due to its dominance in the online web search market, is under an obligation to discharge its special responsibility.”

This is of course not the first time Google has found itself on the wrong side of right when it comes to antitrust watchdogs. Back in June it was fined €2.42 billion by the European Commission for bias on its comparison shopping service, Android got put in the naughty corner by authorities in Turkey in March, while it has also been under investigation in South Korea. These are only a couple of examples; Google is no stranger to the courtroom.

While action from the regulatory authorities is a positive sign, the time it took to make this decision and the amount which Google is being fined are the issue.

Firstly, five years to come to a decision is way too long. During this time Google would most likely have carried on with (now found) dodgy activities, profiting considerably off them. Google is an incredibly profitable machine and would have made hundreds of millions, if not billions, across this period. If a business practise is wrong it needs to be identified and stopped quickly. Five years is abysmal.

Secondly, the fine; it is nowhere near high enough. As mentioned before, using a crude calculation based on the total revenues brought in over the last quarter ($32.323 billion) it would take Google approximately 90 minutes to pay off the fine. If authorities want to be taken seriously they need to impose fines which are taken seriously by the guilty. $21 million is nothing to Google and is hardly going to be considered a deterrent. Right now, the CCI is looking like a very toothless watchdog.

France accuses Amazon of abusing dominant market position

The French are going to war with Amazon over how much influence the eCommerce giant has over market conditions.

The balance between consumer protection and capitalist freedoms Western economies are built on is a difficult one to find. The quest to remain competitive, offering prices which are attractive to the consumer, can sometimes see giants of industry abuse the small fish, which is want the DGCCRF France’s consumer fraud watchdog, is claiming.

The Directorate General of Competition, Consumer Affairs and Fraud Control (DGCCRF) has been conducting a two-year investigation into the activities of the internet giant which has led to the lawsuit. Believing Amazon is largely abusing its dominant position, the Commercial Court of Paris is seeking a €10 million fine to keep the giant in check.

“The platform imposes unbalanced relations to its vendors,” DGCCRF official Loic Tanguy is quoted as telling Le Parisien.

While details are relatively thin on the ground for the moment, it would appear the DGCCRF believes Amazon is using its dominant position in the eCommerce space, to unfairly negotiate (or dictate) terms in its supply chain. For the most part, most people would lean towards lighter touch regulation, encouraging commercial innovation and competition, but a wary eye needs to be kept on whether organizations are getting too powerful.

Amazon could be considered one of the founders of the digital economy, boasting the world’s most popular eCommerce platform, as well as the most successful IaaS business, but you have to wonder when the rules need to change. When a company gets to a certain size, there could be cause to create a new rule book, as there is opportunity to distort market conditions. Some might argue Amazon is powerful enough for this to happen.

According to Le Parisien, Amazon is able to dictate terms to more than 10,000 French businesses which use the platform, which ‘push them to bankruptcy’. There are various different examples, from Amazon imposing shorter delivery times overnight, delays in verifications, poor customer service to requiring sellers to have more frequent check-ups.

The DGCCRF also believes Amazon can rollout contract amendments whenever it chooses, while there is a constant threat of suspending contracts, keeping the sellers under permanent pressure. Amazon has also completely removed itself from any liability, which is common practise on eCommerce platforms, though the dictation of its own brand promises on the sellers gives Amazon considerable control. It can demand the highest standards of suppliers, without feeling any repercussions should these standards not be met.

It is worth noting Amazon has not commented to date, and such claims might well be exaggerated by frustrated sellers, but it would not be the first time a giant is making profits from squeezing the supply chain. Retailers and supermarkets have been doing it for years, though the difference is the scale of regulation; rules in physical retail spaces have been around for decades, whereas the internet is still largely the wild west.

This is a case which needs to be handled very carefully though. The internet giants are facing a huge amount of scrutiny from competition watchdogs around the world, but any decisions need to be made with the future in mind. Precedents will be set and the economic freedoms of the internet need to be preserved. The heavy hand of the government needs to ensure it does create a mess of red-tape and bureaucracy, which would potential damage the fortunes of small businesses more than the intended targets.

Do not expect this case to be resolved in the near future, as Amazon will likely fight this one to the bitter death. €10 million is not a huge amount of money to the internet Goliath, but should a precedent be set in France, the ripples could quickly gather momentum. If other governments start to head down the same route, those €10 million fines will start to add up and it will prove to be a very awkward situation.

Taiwan fines Qualcomm $773 million for antitrust violations

US mobile chip giant Qualcomm has been the recipient of yet another fine for claimed anticompetitive business practices.

This time it’s Taiwan, where its Fair Trade Commission has concluded that Qualcomm abused its dominant position in the mobile chip market for at least seven years by refusing to provide products to companies that didn’t agree with its conditions. The ruling itself is currently only published in Taiwanese, so the specifics are sketchy, but it looks like Qualcomm’s dominance is being used against it.

This is part of a growing number of legal actions against Qualcomm for similar reasons. At the end of last year Korea fined Qualcomm $850 million for very similar reasons. Europe is still in the process of investigating the company, the implications of which could be far greater, and Apple is putting its considerable resources into attacking the entire premise behind Qualcomm’s licensing business model.

As with many tech-related antitrust actions, it’s clear that once a company achieves a certain level of market dominance a different set of rules apply to its behaviour. Terms and conditions that would be considered acceptable in a more competitive environment are considered illegal when used by a company that is considered to be dictating the market.

Qualcomm hadn’t returned a request for comment at time of writing but it’s reasonable to assume it will appeal. The even bigger issue at stake for Qualcomm is not just the growing cost of these fines but its very way of doing business. The licensing model means that Qualcomm doesn’t just get revenue from selling its chips (mainly modems), but also a fee for every product sold that contains them. There is a growing movement opposing that model which must have Qualcomm very concerned.

Boresome bureaucrats make power play over frightening foreigners

We all knew Canadians were afraid of the dark and that Scots are not always fond of vegetables, but who knew the European Commissioners were wary of foreigners?

In her latest speech, the European Commission’s chief Gaggler for competition Margrethe Vestager, has seemingly set the tone; foreign money isn’t as good as the Euro. The latest move is a bit of a power play, with the Commission (hereafter known as the Gaggle of Red-tapers) seeking more influence over M&A activity.

“Because we know that fair competition is the way for Europe to succeed. But it needs to be based on a real level playing field,” said Vestager.

“In the last few months, we’ve heard concerns about foreign – often state-owned – investors taking over European companies that control key technologies. This issue isn’t simple. It needs careful consideration, before we decide how to act. We’re working on this issue now, and we plan to put forward concrete proposals in the autumn.”

In short, the Gagglers are hoping to emulate those crafty Germans. In the land of beer and sausages, the Government now has the power to veto certain acquisitions, should said acquisition impact national security or involve cutting-edge technology. There are several versions of these rules throughout the European Union; deals can be blocked if it can be proved to impact something of national importance, such as defence, energy, financial stability or security.

The rules were drawn up after the lederhosen enthusiasts objected to a bid for robot maker Kuka from Chinese organization Midea Group. The acquisition ultimately went through without intervention, but it seems the grumpy Germans seemingly wanted to make sure it doesn’t happen again.

It’s a nice, broad brief (which will put a smile on the faces of the lethargic legislators, who seem to work most efficiently [if efficient is even possible when talking about the Gaggle of Red-tapers] in the grey areas), which will extend the influence of the weary watchdog.

Currently, the Gaggle can only intervene in deals on the grounds of competition, but this new approach will make sure Commissioner Vestager will be able to make sure European companies are for European people, like any worthwhile Xenophobe.

And for those who have already felt the sharp edge of the Gagglers tedious (albeit slow very slow moving) stick, such rules would allow the cumbersome bureaucrat to weigh in pretty much where ever it want. Almost everything in the telco or technology space could be considered cutting-edge; nothing will be safe from the army of meandering coffee-breakers.

If you were under the impression regulators were able to slow down technological developments to date, wait until these rules get passed. You appreciation for how little can get done by over-paid and over-indulged public servants will be taken to a new level.

Google gives in to Gaggle over shopping shenanigans

Google has put forward details on how it will submit to the will of the European Commission (hereafter known as the Gaggle of Red-tapers) after it was hit with a €2.4 billion fine relating to Google Shopping search results.

Details are a bit thin on the ground at the moment, though Google told Telecoms.com it has informed the Gagglers how it plans to comply with the decision. It just hasn’t told anyone else yet.

For some it might come as a bit of a surprise. Those of a combative mind set might have assumed Google might have flexed its legal muscles and snarled over the Atlantic, but it would appear even the ‘do no evil’ giant is just as human as the rest of us; it can also succumb to the weight of red tape, just as the rest of us have at some point given up and accepted a penalty due to the cumbersome, illogical and inefficient public sector processes.

Back in June, the Gagglers hit the Googlers with a fine of €2.42 billion, a record amount would you know, for favouring its own shopping comparison service in some search results. As you might expect with anything associated with the European Commission, this was a saga which had been dragging on for some time, though the scale of the fine wowed a few people.

This would be the reason some would have expected a fight from Google. Rumours circulated in the weeks prior to the announcement of a €1 billion fine, but the actual amount was certainly a bit higher.

“What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate,” said Chief Gaggler Margrethe Vestager, at the time. “And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.”

As well as ordering Google come up with a solution which evened the playing field, the lethargic legislator ordered the company to sort it all out by September 28. Failure to do so would have resulted in additional daily fines of 5% of revenues. Going on 2016 revenues, that would have been roughly $12 million a day. There certainly was some incentive there.

Perhaps this is the reason Google chose to comply with the ruling as opposed to fight it. Most people would presume the legal might of Google is considerable, but in this case there was a lot to lose should the boresome bureaucrat work wonders with the red tape and coffee breaks.

“It is Google’s sole responsibility to ensure compliance with the Commission antitrust decision,” the European Commission has said in a statement.

“The Commission’s role is to monitor Google’s compliance. In this context the Commission can confirm that, as required by the Commission decision, it has received information from Google on how the company intends to ensure compliance with the Commission decision by the set deadline. Furthermore, Google will continue to be under an obligation to keep the Commission informed of its actions by submitting periodic reports.

“The Commission decision requires Google to stop its illegal conduct within 90 days of the decision and refrain from any measure that has the same or an equivalent object or effect. In particular, the Commission decision sets out the principle that Google has to give equal treatment to rival comparison shopping services and its own service.”

While the boresome bureaucrats might be slapping their backs in Brussels in between mouthfuls of waffles and exceptionally strong beer, there is another battle on the horizon. This might be a landmark win for the Gaggle, but when taking on Google in antitrust case concerning Android, the Silicon Valley techies might not be as compliant. Google has a lot more to lose when it comes to the operating system, so this might be where we see the true legal might of the search engine giant.