The unbearable bigness of gentle giant Google

If you use the internet, you cannot do so without using Google. It is the oxygen of the internet. It is the name of a company, but it has become a verb in the English language. And in many other languages. It has at least one billion users for each of its internet products, like search, email, video repository, storage, operating systems for mobile phones, maps and navigation and more recently, payments. And all these are totally free. Only on increased storage space, you have to pay a nominal amount. This is a company which arose out of the research of two graduate students at Stanford University. It is basically a search and indexing service, which is extremely efficient. Google has an index to more than 50 billion pages on the internet and is still growing exponentially. In many countries of the world, more than 90 or even 95 percent of all searches use Google. More than 2.5 million searches happen every minute across the world. And the results of those searches, which are instantaneous, are all free. People trust the searches and make their decisions based on those searches.

In many countries of the world, more than 90 or even 95 percent of all searches use Google

One of the tenets of Google, indeed its motto, mentioned in the prospectus of its first stock offering (IPO) is “Don’t Be Evil”. By that the company meant, that it would never betray the trust of its users.  It would only show relevant search results, would never annoy users with pop-up ads and it would never sell search results. It would never monetise that trust which people who used Google place implicitly on the company.

 This is a company which is worth 1.5 trillion dollars today, among the top five in the world. And to think it was born on the stock market just eighteen years ago.  If the users are not paying for the service they get, how does the company earn nearly 185 billion dollars of revenue every year? By selling ads. It is by far the world’s leading online ad selling company, generating 150 billion dollars in ad sales. It sells the “eyeballs” of its users to the advertisers and their intermediaries. The users don’t mind since they are using Google purely out of free choice, with the confidence that their information will not be sold to advertisers, only their eyeballs.

If the users are not paying for the service they get, how does the company earn nearly 185 billion dollars of revenue every year? By selling ads. It is by far the world’s leading online ad selling company, generating 150 billion dollars in ad sales

This then is the gentle giant, mostly loved by users, and has more goodwill than other tech giants like Amazon and Facebook. But its bigness and ubiquity are becoming bothersome. Since it pervades almost everything we do on the internet, it is in the eye of regulators. Even UPSC exam aspirants cannot do without Google. Or writers, authors, creative artists, even bureaucrats. Should Google now be regulated like a utility, just like regulating water and electricity supply? Since access to the internet has been raised to a citizens’ right, just like other utilities, in many countries, Google search also needs to be regulated the same way as access to drinking water. It affects public welfare. It should remain non-discriminatory, and nobody should be excluded. Apart from the utility aspect, the other thing that bothers policy makers is the sheer bigness, the size of the company. It can lead to abuse of dominance, and a conduct which can thwart if not strangle competition. Even if the motto of the company is “Don’t be Evil”. Is the company pursuing monopolistic practices, arm twisting vendors, or gagging would-be competitors? Complaints have been bubbling.

Should Google now be regulated like a utility, just like regulating water and electricity supply?

Many of these come from the “abuse of dominance” or what are called anti-trust violations in U.S. law. In 2018 the European Union’s competition regulator found Google guilty of using its large market share of the android operating system, by forcing phone makers to use Chrome as the default browser, and quashing competition from other browsers. It also forces phone makers to bundle other Google apps, to the detriment of competitors. This was found in violation of the EU’s competition law and the fine was 4.34 billion euros, the highest ever imposed on Google, until then. (Technically it was on a company called Alphabet, the parent of Google, which was formed after a restructuring in 2015). 

Is the company pursuing monopolistic practices, arm twisting vendors, or gagging would-be competitors? Complaints have been bubbling

The company appealed against the 2018 ruling, and after four years has lost the appeal in the general court. The company can now appeal to the apex court in the EU, but chances look slim, since the appellate court has upheld the fine.  Google on its part says that android is free, and users have the choice of phone makers as well as service providers and can also uninstall apps if they don’t want them. Android is also open source, unlike Apple’s iOS operating system. But the court was unconvinced by Google’s defense. The court said that Apple’s business model was different since it was only selling high-end mobile devices, whereas Google by giving a free operating system, was in the business of widening its user base, and using that base to sell advertising.

As if to follow up, Google has been hauled up by India’s competition watchdog, the Competition Commission of India, and a hefty fine of 2265 crore has been imposed. The charges are almost the same that the EU has slung on Google. This is that Google has been abusing its dominant position, and large market share (nearly 90%) of the Android operating system. It was preventing mobile handset manufacturers from installing other browsers and apps, thereby curbing competition. Interestingly CCI’s ruling was not the result of or in response to any complaint by a user, vendor, advertiser or customer. It came out of a summer project done by three student interns, who studied the EU case and its applicability to Indian conditions.

The court said that Apple’s business model was different since it was only selling high-end mobile devices, whereas Google by giving a free operating system, was in the business of widening its user base, and using that base to sell advertising

The other charge against Google in India is that it forces users to use only Google Pay in the Play Store, rather than any other payment option.  The investigation by CCI is quite in depth, and this column cannot fully summarise all the technical details. Google plans to appeal since it feels the CCI fine and charges are unfair. In the meantime, far from these rather abstruse and technical battles, the exam aspirants, the online shoppers, the late-night video viewers are all happily using Google indifferent to the confrontation between regulators and tech giants. It is time that Google updated its motto, “Don’t Be Evil”, to something additional like “Do the Right Thing”.

(Dr. Ajit Ranade is a noted economist)

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