It’s April Fools Day. It’s always amazed me how otherwise smart people are completely taken in by April Fools jokes. (This post is not a joke, by the way.) April Fools jokes of this category are usually the most effective–because they are effective tall tales–all fictional, but just believable enough to get smart people to suspend belief.
The European Commission has spent the better part of four years–four years–attempting to call Google to task for a host of business practices that favor Google’s products while at the same time trying to claim Google is transparent. The Commission prepared a lawsuit against Google (called a “Statement of Objections”) and that suit is presumably ready to file today. But lacking an understanding of Google hubris, the Commission engaged in settlement negotiations instead of filing their case and settling that. In other words, they thought it was a good idea to send a signal to Google that the Commission did not have confidence in their case (although the Commission appears to be the only one who does).
European national consumer rights groups believe Google’s practices were anti-consumer before the EC investigation and now that Google is imposing its settlement on the EC, continue to believe the practices are also unlawful. According to the businesses and consumers who the settlement is supposed to benefit, the settlement is an epic fail. To the degree that the settlement is not a settlement at all, it’s actually kind of a joke. An April Fools’ joke.
The European Commission is falling for just such an April Fools joke in their dealings with Google in Europe, but it’s not going to be very funny in the long run. The implications of falling for the joke are going to be long lasting and painful for all concerned. But at the end of the day, those who will endure the most pain may well be the competition regulators at the European Commission who are currently, and improvidently, choosing to negotiate a settlement with Google rather than just bring their case. And that’s no joke.
The European Commission has been investigating Google’s violation of competition law (what we Yanks would call antitrust) for four years that we know of. (Remember, in Europe, Google’s search monopoly is almost exhaustive. They’re over 90% of search.)
Here’s where the Commission could take a tip from those of us in the music and movie businesses who have had this experience with these people at Google. The Commission needs to understand something–the only thing that Google respects is force. If you blink–and the Commission has blinked–they will take you to the cleaners. They will want to talk and talk and talk. Very expensive dinners, lots of sucking up, and all the time they are delaying, continuing to profit from their illegal business models, making lots of money and changing absolutely nothing.
For example, Google continues to serve advertising to pirate sites and promote those sites in search results–yet the music and movie business allow Google to have the fig leaf of the legitimate business in licenses to Google Play. Why? I have no idea. But Google talks and charms people on the licensing side while absolutely ripping us off at the very same time. Think it can’t happen to you? Think again. We like to call Google Play the Genco Pura Olive Oil Company 2.0 (for you Godfather fans). It is the commercial cutout that allows Google to operate its racketeering business.
Consider when a senior Google executive–Marissa Meyer–said during a speech that Google favored their own products in search because it’s only fair, they paid to develop the products. She said the words. Eric Schmidt then told the U.S. Senate under oath that she may have said that but she didn’t really mean it, she meant something else altogether. Obfuscation, delay, and probably outright lies.
In the same hearing, Schmidt told Senator John Cornyn that he could not comment on Google’s $500,000,000 fine for violating drug laws–yes, folks, that’s half a billion dollars–because it was subject to a confidential settlement. It was not, of course. It was subject to a public nonprosecution agreement that anyone could read on the website of the U.S. Department of Justice. What was true was that Schmidt did not want to talk about it at a televised hearing. Senator Cornyn pointed this out, and after consulting with his lawyers, Schmidt said he would not answer questions on the advice of counsel.
We call this “taking the 5th” in the United States. Although Schmidt did not expressly invoke the 5th Amendment protection against self-incrimination, he refused to answer the question on his lawyer’s advice. In subsequent written testimony to Senator Cornyn, he said:
I was very measured in my remarks at the hearing, but as you state and as I understand better now, I can restate the facts stipulated in the NPA [public nonprosecution agreement] and could have restated those facts with you at the hearing. I apologize for my confusion.
Do you believe that Mr. Schmidt was “confused”? About the contents of a 19 page document under which he was authorizing the payment of $500,000,000 of the stockholders money to keep Google executives from being indicted? After consulting with counsel in real time?
Every day that passes it becomes increasingly apparent that whatever deal you think you made with Google, consumers and entrepreneurs are just not buying it. Today, for example, we read that the Bureau Européen des Unions de Consommateurs, one of the largest consumer rights groups in Europe says that Google’s settlement terms would allow Google to stack the deck to favor Google products in search results. (The BEUC is the umbrella organization for all the national consumer rights groups in Europe and has its own detailed proposal on a potential settlement.) This powerful consumer group now wants to join the antitrust action against Google in order to oppose the settlement.
And the issue is kind of where we came in, isn’t it? So after four years of negotiation, what has changed exactly?
This should come as no surprise because the settlement has been criticized far and wide, including by other commissioners at the EC:
Viviane Reding, the EU’s justice commissioner, and Michel Barnier, who leads financial-services policy, told Almunia at a regular meeting they were unhappy with his handling of last week’s settlement, said the people who declined to be named because the talks were private.
Let me sum it up in words of one syllable: Your deal sucks and you got hosed.
It should not be lost on anyone that the competition commissioner’s term is coming to and end in a few months–and all Google needs to do is continue to run out the clock. In fact, Google will probably welcome the BEUC complaint because it will allow Google to continue to obfuscate and delay.
Let’s be clear: Google LOVES litigation–particularly over something that let’s them make money during the course of that litigation. Google has managed to drag this antitrust investigation out for four years and if they get their way, it will crash and burn requiring them to start all over again with a new commissioner, who will need at least a few months to get up to speed. So we are talking mid 2015 at the earliest. Yada, yada, yada. Is it any wonder that Google has no respect for the nation state?
In case you are wondering, here’s what happened. What Google does is create an alternate reality around an overburdened public official and launch both a charm offensive and a delaying action. Their challenge is to get a smart person who knows better to believe in what is a form of practical joke and do it in public in plain view. Preferably after buying as much political clout as is available (because they can afford to buy it all.)
Getting smart people to suspend belief requires quite a story. It is a challenge worthy of a great novelist.
John Irving was once asked how he came up with his novels. He said that after he finished one book, he would keep a journal. It would be very detailed and document every single thing that he observed or happened to him every day. And that would go on for a while.
Then one day he would be writing his journal–and he would lie.
And he would lie a little more and lie a little more. And the lies would get bigger and bigger and more complex.
And then one day he was writing his next book.
An alternate reality that is believable enough to fool smart people into suspending belief. Because after all, a novel is a kind of practical joke.
April Fools, Mr. Almunia. You thought you were polishing up your legacy–and you are. When you figure out the joke, you’ll realize that it just won’t be the kind of legacy you had in mind. And your successor will either be a prime example of agency capture or will have to start all over again.
If you want to get an idea about how this will go, you should listen to the “Life With Father” comedy sketch by the brilliant American comedian Harry Shearer that imagines dinner at the White House with Eric Schmidt and the Obama family (from Le Show).
So if you need any help with the EU people on the antitrust stuff, obviously I have no pull with the guys over at the Justice Department.
But I will sit here and wish very hard on your behalf.
THE PRESIDENT’S DAUGHTER
But you told us you never take money from a corporation for your balls!
I beg your pardon?
She means inaugural balls.
That’s a relief!