Google & Facebook face anti-trust heat across globe

Time to check BigTech’s market dominance in India, too

Politics

December 17, 2020

/ By / New Delhi

Google & Facebook face anti-trust heat across globe

Facebook has been accused by US newspaper Wall Street Journal of breaking its own rules to allow a hate-campaign mounted by the ruling BJP members to run on its network

Google faces acid test in the United States as nearly a dozen states joining antitrust case against the firm, while it has been condemned to over EUR 8 billion fines by the European Union, which finalised new rules, earlier this week, to regulate BigTech and social media firms. In India, however, Google and Facebook continue to rule the roost.

Few had imagined the scenario even five years ago, but the seemingly invincible Big Tech firms Google, Amazon, Facebook and Apple are all facing the heat of competition authorities across the globe as government regulators finally wake up to the threats to a fair and free market that the behemoths pose, by their sheer size and market domination.

On Wednesday, Texas became the latest state to join a nationwide suit against big tech giants Google and Facebook, accusing them of colluding to fix the market of online advertising, aimed at keeping the prices artificially high and keeping competition out of the market.

In a separate development, the United States federal government and governments of 48 US states and territories have put under the scanner the acquisition by Facebook of Instagram and WhatsApp – and therefore, the present structure of the giant social media company.

The lawsuit against Google says that it reached an illegal deal with Facebook to maintain a chokehold over the lucrative digital advertising market. The complaint, filed in U.S. District Court in Texas, alleges that Facebook emerged in 2017 as a powerful new rival to Google, challenging its established dominance in online advertising. Google responded by initiating an agreement in which Facebook would curtail its competitive moves, in return for guaranteed special treatment in Google-run ad auctions, the lawsuit claims. “Google is a trillion-dollar monopoly brazenly abusing its monopolistic power, going so far as to induce senior Facebook executives to agree to a contractual scheme that undermines the heart of the competitive process,” Texas Attorney General Ken Paxton, who led the suit, said in a statement.

The accusations opened up a fresh front of criticism for both tech giants, each of which face federal antitrust lawsuits filed in recent weeks. In the lawsuit against Facebook, the US Federal Trade Commission and state attorneys general led by New York allege that Mark Zuckerberg’s firm stifled competition in order to protect its monopoly in social media. The lawsuits seek court orders unwinding Facebook’s acquisition of Instagram and WhatsApp.

“Personal social networking is central to the lives of millions of Americans,” Ian Conner, the director of the FTC’s Bureau of Competition, said in a statement. “Facebook’s actions to entrench and maintain its monopoly deny consumers the benefits of competition. Our aim is to roll back Facebook’s anticompetitive conduct and restore competition so that innovation and free competition can thrive,” the statement said.

The almost coordinated attacks against Google and Facebook make them the biggest regulatory response to antitrust activities since the Justice Department sued Microsoft in 1998. Unlike the Google case, the Facebook complaints seek a court order breaking up the company.

Europe turns up the heat

The two firms face unprecedented pressure not just in the United States, but also across the Atlantic in Europe, which unveiled its own plans to regulate technology firms earlier this week. Under the draft rules, social media and other tech platforms could face fines as high as 6 pc of global revenue if they don’t comply with orders to remove terror propaganda or other illegal posts. The measures are an attempt to force tech companies to take responsibility for illegal content posted or products sold on their sites. Tech platforms will also have to provide regulators with information about how they tackle other harmful content, according to the draft.

European officials expect the regulatory revamp will curtail the proliferation of harmful posts, including those that incite violence, a concern that has only deepened in the wake of recent terror attacks in France and Austria.

Another regulation that the EU is finalising deals with the proposed “gatekeeper” regulation, under which large platforms could face fines or break-ups in Europe if they misuse competitor data or engage in other anti-competitive behaviour. The EU will establish a new board in charge of supporting national authorities to monitor tech companies’ compliance with the rules, according to the draft.

But unlike the United States, the EU had already been taking actions against Google and other BigTech firms for several years, at times even drawing rebuke from the Trump administration about how it was doing so to hurt US interests. Nonetheless, over the past three years, the EU has already imposed fines of over EUR 8 billion on Google for various counts of illegal practices to attain or protect its market domination and squash competition. The European Commission said Google’s practices amounted to an “abuse of Google’s dominant position in general internet search by stifling competition in comparison shopping markets. Google’s generic search algorithms demoted rival comparison shopping services in its search results,” the regulator found, while systematically giving its own products prominent placement.

Google is currently fighting three penalties imposed by the EC in European courts. It also includes a EUR 4.5 billion fine for licensing practices of its Android operating system. Google was also penalised EUR 1.5 billion by the European antitrust body on charges that it stifled competition by contractually restricting publishers using its AdSense service from hosting its competitors’ ads.

Sitting cosy with government in India

Though they may be facing immense pressures at home and in the key European market over their illegal practices, both Facebook and Google sit pretty in India, potentially their biggest market in the future. Mark Zuckerberg and Google’s Sundar Pichai are seen paying obeisance regularly in the court of Prime Minister Narendra Modi.

Both have partnered with the Indian government to launch ‘public welfare’ activities such as free internet connections at railway stations or investing in select businesses, close to the government. Earlier this year, Facebook announced USD 5.7 billion investment in Mukesh Ambani’s Jio Platforms to acquire a 9.9 pc stake in a company that controls several key businesses of the Reliance Group, including its telecom, e-commerce and retail ventures.

Curiously, just a few weeks later, arch-rival Google, too, bet big on Jio Platforms and put in USD 4.5 billion. This was part of the USD 10 billion that Pichai had announced as Google’s planned investments in India over the next five years.

Facebook’s connections with the ruling party go beyond investing in ‘government-friendly’ businesses. Facebook has been accused by US newspaper Wall Street Journal of breaking its own rules to allow a hate-campaign mounted by the ruling BJP members to run on its network, despite being flagged as being against the company’s policies. Facebook’s public policy head in India Ankhi Das stepped down in August after WSJ revealed that she had openly violated Facebook’s electoral neutrality rules and promoted BJP’s propaganda and also made several internal postings about her staunchly pro-Modi position. Facebook also broke its rule on election funding transparency as another investigation revealed that three of the top 10 political advertisers on Facebook were BJP’s proxies, who could not even be traced and yet spent USD 800,000 in 18 months leading up to Parliamentary elections in 2019.

With both firms so tight with the government and the ruling elite, it is hard to see Indian competition authorities waking up to rein in the big tech firms and discipline them. It was the same body that also allowed unprecedented leeway to Mukesh Ambani’s Jio telecom when it had launched services about five years ago. Starting from zero subscribers, Jio lured customers with freebies and various other anti-market practices and today it leads the Indian market with over 404 million subscribers. Along the route, it broke every antitrust rule and despite several pleas from the incumbent telecom players, notably Airtel and Vodafone, the competition commission of India continued to look the other way.

The only place where the Indian antitrust body has been active is in digital payments business where unfortunately for them, both Google and Facebook, are up against incumbents like Paytm that are close to Modi.

In November, CCI opened investigation into allegations like Google was abusing its market position to promote its payments app as well as forcing app developers to use its in-app payment system. Later that month, the National Payments Corporation of India which regulates digital payments in India said that third-party payments apps, from January 1, 2021, will not be allowed to process more than 30 pc of the total volume of transactions on state-backed United Payments Interface (UPI) framework, which facilitates seamless peer-to-peer money transfers.

The move will likely stymie the growth of payments services offered by Facebook, Google and Walmart, while boosting the likes of Reliance’s Jio Payments Bank and SoftBank-backed Paytm, which are armed with bank permits. More than 2.07 billion UPI transactions were processed in October, according to NPCI, with Walmart’s PhonePe accounting for just over 40 pc of those transactions. Google Pay was a close second, with rivals like Paytm and dozens of others splitting the remaining 20 pc share.

In the entire episode of the BigTech and other big businesses in India, the Indian consumer remains out of the picture for all. Be it in the business, the market regulators or the government. For now, the best an Indian consumer can hope for is that the antitrust regulators in the US and the EU would ensure that the BigTech firms follow good practices not just in markets under their jurisdiction, but indeed around the world.

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