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How E.U.’s Google Fine Explains High Cellphone Costs in the U.S.

“The knee-jerk reaction to the European Union’s decision to fine Google $5.1 billion is to blame the Europeans. How can it be possible that in Europe the antitrust authorities determined that Google abused its dominance in the smartphone market when in America it did not?

It’s not the first time. Just last year the European Commission (the administrative arm of the European Union) fined Google $2.8 billion for unfairly favoring its comparison-shopping service in the search engine market, a charge that the American Federal Trade Commission had dropped a few years earlier.

July 24, 2018  |  by Luigi Zingales
Read on NY Times

“The knee-jerk reaction to the European Union’s decision to fine Google $5.1 billion is to blame the Europeans. How can it be possible that in Europe the antitrust authorities determined that Google abused its dominance in the smartphone market when in America it did not?

It’s not the first time. Just last year the European Commission (the administrative arm of the European Union) fined Google $2.8 billion for unfairly favoring its comparison-shopping service in the search engine market, a charge that the American Federal Trade Commission had dropped a few years earlier. Is this the first salvo in an incoming trade war or a form of tax-thy-neighbor policy?

It would be both wrong and dangerous to just blame the Europeans. Wrong, because there is reliable evidence that the European Commission does not target American companies: It is just as tough with all firms, including domestic ones.

Dangerous, because it will deflect from asking the real important question: Is there something wrong with American antitrust? Perhaps there is a reason Americans are paying so much more for smartphones in the United States than Europeans are.

Antitrust legislation may differ on the two sides of the Atlantic, but the differences cannot explain the treatment of Google. The latest fine was imposed for tying the Google search engine and Chrome browser to the Android operating system. This is almost identical to aMicrosoft case, completed in 2001,in which the technology giant was charged for tying its browser to the Windows operating system. In that case, authorities in both Europe and the United States ruled against Microsoft.

So if the law is similar, it must be the enforcement that differs. The United States invented antitrust and for decades has been the pioneer in its enforcement. Not anymore. A recent paper shows that in the last two decades, enforcement in the United States has been much less strict than in Europe.

Why the difference? One possible reason is the different amount of lobbying. According to official reporting, Google spent $18 million last year in lobbying in America and only about $6 million in Brussels. But this theory is implausible. Who thinks that Google would not have spent an extra $12 million to save $5.1 billion?

A more plausible difference, however, lies in the power held by the antitrust authorities in Europe versus the United States: The European Commission can issue fines, which can later be appealed in court. By contrast, the Federal Trade Commission can only propose fines, which need to be ruled by a judge.

This difference is amplified by the different types of appointees chosen. In the United States the head of the antitrust is generally a lawyer, leery of upsetting his future employment opportunities with too-aggressive enforcement. In Europe it is generally a career politician, eager to gain some popular consensus…”

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