It’s not clear what should be done to tame Big Tech, but one thing is sure: Fines aren’t enough.
Since Europe started scrutinizing tech giants on competitive grounds with investigations of Microsoft in the 2000s, the European Commission has fined major tech companies a total of €12.1 billion ($13.3 billion) for competition reasons, according to a Quartz review of Commission announcements. The EU has the power to seek civil fines against companies for anticompetitive conduct, whereas in the US federal antitrust laws don’t currently provide for civil penalties.
The bulk of the EU fines have come in the past two years, under competition chief Margrethe Vestager, now in her second term at the Commission. Since 2017, the Commission has fined Facebook, Google, and Qualcomm a collective €9.6 billion for anticompetitive behavior. The single biggest fine was a €4.3 billion penalty issued to Google in July 2018 for “illegal restrictions” imposed on Android device manufacturers (Android being Google’s mobile operating system).
These are vast sums of money in most respects, but not in relation to companies of Google’s scale. The same year the Commission fined Google €4.3 billion, Google parent Alphabet reported $137 billion in annual revenue. That meant the record-setting fine amounted to about 3.7% of Google’s annual revenue that year, so the company effectively earned it back in two weeks. In its 2018 annual report, Alphabet listed the fine as a line item under “costs and expenses,” an accounting category that also includes items like “research and development” and “sales and marketing.” The fine, in other words, was just another cost of doing business.
“I don’t think any of this is easy,” says Randy Picker, a professor at the University of Chicago Law School who teaches classes in antitrust. “If we think the European Commission has been the front edge of this, they’ve been chasing Google for more than a decade, and while they’ve gotten them to write some very large checks, I don’t know if they’ve changed competition in any meaningful way.”
Below is an account of every major fine issued by the European Commission to a big technology company in an antitrust matter since the turn of the century, and what the relative cost was to the firm.
The EU has fined Google three times, for a total of €8.3 billion. The first of those fines, €2.4 billion in June 2017, was issued for Google using its dominance in search to boost its comparison shopping service. The EU found Google had dominated the search market in every European Economic Area country since 2008, with the exception of the Czech Republic, where it become dominant in 2011. In most of those countries, Google’s search market share exceeded 90%. The problem wasn’t the market dominance alone, but that Google abused its position by systematically advantaging its Google Shopping service and demoting similar services from competitors. The €2.4 billion fine represented 2.5% of Alphabet’s €98 billion in annual revenue that year.
The next fine was even bigger: €4.3 billion in July 2018 for conditions Google imposed on Android device makers, like requiring manufacturers to pre-install the Google Search app and Chrome browser as a condition of licensing the Google Play app store. At the time, 80% of “smart mobile devices” in Europe ran on Android, and the Play Store accounted for more than 90% of apps downloaded on Android devices. Licensing the Play Store wasn’t really a choice for Android device makers. The European Commission deemed the Play Store illegally tied to Google’s search and browser apps.
The latest Google fine, €1.5 billion in March 2019, was for abusive practices in online advertising. Based on the company’s expected revenue this year, that fine would represent a mere 1% of sales.
Qualcomm
The EU fined Qualcomm twice in the past two years. In January 2018, it fined the chipmaker €997 million for shutting rivals out of the market for LTE baseband chipsets, which allow smartphones and tablets to connect to cellular networks. Then, this past July, it fined Qualcomm €242 million for selling 3G baseband chipsets below cost, or predatory pricing. The 2018 fine was just 5.2% of Qualcomm’s annual revenue. This year’s penalty is on track to be 1.2% of 2019 sales.
The Commission dinged Facebook €110 million in May 2017 for providing incorrect or misleading information over its $19 billion purchase of messaging service WhatsApp in 2014. Critics, including Democratic senator and presidential candidate Elizabeth Warren, have called for unwinding Facebook’s merger with WhatsApp. That would pose a far greater threat to Facebook than the EU fine, which amounted to barely 0.3% of its 2017 annual revenue.
Intel
Intel was fined €1.1 billion in May 2009, or 4.2% of annual revenue, for excluding competitors from the market for computer chips.
Microsoft
Europe’s investigations into Microsoft followed a series of similar probes in the US, which we examine closely in this field guide’s State of Play. The first fine, €497 million in March 2004, penalized Microsoft for tying its Windows Media Player to the Windows operating system. In addition to the fine, the European Commission ordered Microsoft to offer a version of Windows OS without Windows Media Player to PC makers within 90 days, and to enable rival vendors of digital office services to develop products that worked on Windows PCs. In February 2008, the EU fined Microsoft another €899 million for not complying with its 2004 decision.
Now what?
If fines aren’t meaningful for today’s tech giants, what else can be done? The “fix” to an antitrust problem is known in legal circles as a “remedy.” There are two main types of remedies: conduct and structural. Conduct remedies require the defendant to make certain changes to its behavior, like restrictions on pricing or unbundling certain products or services. Ned Cavanagh, a visiting professor at Cornell Law School, likens conduct relief to drug therapy: it’s non-invasive, like taking a prescription to eliminate an infection.
Structural relief, on the other hand, is like doing surgery when it’s become clear that drugs won’t cure the condition, Cavanagh says. It tends to involve restructuring the monopolist’s business, usually by breaking it up. The problem is that there’s no guarantee of structural relief achieving the intended results. “Structural relief may well shake up the marketplace, but there is no guarantee that aggressive competition would result,” Cavanagh told Quartz by email. “Worst case (as argued by the critics of the break-up proposed in Microsoft) is that instead of competition, we would just get two monopolists.”