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A Teachable Moment: Google’s Insulting Reply to News Corp Tells the New Regime in Brussels What It Needs to Know

September 19, 2014

As MTP readers will recall, Google is locked in the proverbial death struggle with the European Commission over antitrust complaints of Google’s anticompetitive behavior.  Those complaints resulted in an antitrust investigation going back several years.  For Google, winning that investigation would look like palming off as real change some ice in winter changes to their business practices as part of a bureaucratic charm offensive.  That charm offensive resulted in the embarrassing image of Eric “Uncle Sugar” Schmidt cozying up to his new BFF the Competition Commissioner of the European Commission, Joaquín Almunia.

Commissioner Almunia gave Google not one, not two, but an unprecedented three opportunities to negotiate a settlement on Google’s own terms–and Google is desperately trying for a fourth before Mr. Almunia’s term expires in October, and yes I do expect an October surprise from Mr. Almunia.  Every time Google got a chance to renegotiate rather than getting fined or sued by the European Commission, two things happened:  The deal looked shadier and shadier to a wider and wider group of consumers, small business and competitors, and the clock was ticking on Commissioner Almunia’s term in office–a term that ends in October with a new commissioner replacing him in November.

Not only is it ever more apparent, and embarrassingly so, that Mr. Almunia ain’t exactly a steely eyed missile man, he’s been put in the very awkward position of looking like he’s been conned just as the clock runs out.  That almost surely means that Google will not only have to start over again with Almunia’s successor, but will also put the successor on guard for the buddy act from Uncle Sugar and Google’s other smarmy lobbyists–who are legion.  Not only does Google risk a $5 billion fine, the US multinational behemoth is looking at lots of other regulatory oversight.

And the contours of that oversight have yet to be determined because Mr. Almunia was so distracted by Schmidt.  What’s happened during Mr. Almunia’s investigation may yet inform the next competition commissioner’s investigation and rulings.

The Piracy Platform

As Complete Music Update observes:

Google is increasingly seen as a big enabler of piracy by the copyright industries, for failing to de-list blatantly copyright infringing websites from its search results, even when courts have ordered said websites be blocked on infringement grounds. And on launching her organisation’s ‘Measuring Music’ report yesterday, UK Music boss Jo Dipple noted that a top priority for the industry’s lobbyists is getting “help to ensure the many legal music services we licence are given priority in online search results”.

By using its dominant search engine to drive traffic to pirate sites (many of which publish advertising served by Google’s advertising shops Adsense and DoubleClick), Google is arguably able to drive down pricing for its legitimate music services because the alternative is zero.  Ask yourself how many times you’ve heard someone say that YouTube’s abysmal royalty is “better than nothing”, meaning better than being ripped off.

News Corp’s CEO Robert Thompson wrote a complaint to Mr. Almunia regarding Google’s position in the piracy food chain among other things.  This letter is particularly compelling because of a few factors.  Just as Mr. Almunia’s investigation into Google was really falling apart a few months ago, YouTube launched its attack against indie labels resulting in IMPALA filing a complaint against YouTube with the EU–that is, Mr. Almunia–regarding YouTube’s cartoon-like treatment of indie labels.  While the timing of the IMPALA complaint was outside of Mr. Almunia’s investigation of Google, it merits an investigation of its own.  This is why YouTube was being particularly idiotic, even for them.  It is hard to explain why YouTube’s senior executive team thought that this was a good plan except for the usual reason.  Blood lust for beating up the weaker kid blinded them from seeing that the weaker kid was about to land a haymaker.

But that’s almost too easy an explanation, however accurate.  There must have been something else, we’re just all failing to see what it was.  Just not smart enough, you know how it is.

Mr. Thompson made a couple key points about Google from the point of view of News Corp as a content creator.  What’s interesting about that is how it connects the current investigation to Google’s profit from piracy and use of piracy as a competitive advantage that allows it to dominate online music search, including video search with YouTube.  Even Fred “Shred ‘Em if You Got “Em” Von Lohman will have a hard time spinning this one.

Mr. Thompson said:

“A company that boasts about its ability to track traffic chooses to ignore the unlawful and unsavoury content that surfaces after the simplest of searches. Google has been remarkably successful in its ability to monetize users, but has not shown the willingness, even though it clearly has the ability, to respect fundamental property rights.”

“The internet should be a canvas for freedom of expression and for high-quality content of enduring value. Undermining the basic business model of professional content creators will lead to a less informed, more vexatious level of dialogue in our society. Your decision to reconsider Google’s settlement offer comes at a crucial moment in the history of the free flow of information and of a healthy media in Europe and beyond”.

We’ve had Google’s sunshine blown up our skirts for over a decade and as Mr. Thomson suggests it just doesn’t explain this:

Goog Transparency

And it also doesn’t explain why Google doesn’t comply with the many promises it has broken to creators, producing results like this:

myfreemp3

As Complete Music Update said:

Thomson’s letter confirms that Murdoch’s newspaper and book empire is an ally of those in the music business who reckon that Google – while on one level a partner and revenue generator – is also an enemy of the content industries. And while Thomson’s specific focus is the allegedly anti-competitive business practices rather than the intellectual property issues usually raised by the labels, firstly it’s anti-competitive behaviour being alleged by the indie label community against Google in the ongoing YouTube dispute, and secondly Thomson makes sure Almunia is also aware of the copyright concerns in his letter too.

The Teachable Moment

The unlikely allies of IMPALA and News Corp can help the new competition commissioner understand that they have identified the real hook for the next investigation of the competition commission–not only does Google profit from piracy and lie about it, Google uses piracy to give their own products a competitive advantage.  There are an increasing number of studies showing a link between search and piracy–the most recent from Professors Sivan, Smith and Telang, Do Search Engines Influence Media Piracy?  (extending the work of Professors Danaher, Smith, Telang and Chen.) There’s very little difference between the anticompetitive practices for which Google was investigated by the EU over the last several years and those that they employ daily to drive traffic to pirate sites.  Traffic that profits Google’s advertising sales while driving royalty prices lower because of both their market dominance (such as with YouTube) and the “it’s better than nothing” hopelessness Google engenders with its defective search policies that it could change overnight, but won’t.

Google’s Nondenial Denial

How does Google respond to News Corp?  The Guardian reports:

Google chose to use language the Sun would understand in response toNews Corp’s complaint to the European Commission that it was a “platform for piracy”. In one of the less likely corporate responses of recent years, Google issued the following statement: “Phew what a scorcher! Murdoch accuses Google of eating his hamster.” And that was that, Google deciding an homage to the paper’s famous Freddie Starr front page was more effective than a point-by-point rebuttal of News Corp chief executive’s Robert Thomson’s complaint. Google fans (and otherwise) keen to explore the issues further were pointed to a recent blogpost by its executive chairman Eric Schmidt. No word yet on whether News Corp will respond in kind. “Up yours, Google” maybe? Or “Will the last person not to use Google as a search engine please turn off their computer?”

This is what is called a nondenial denial that could have been written by one of the sophomoric Google fanboys.  (In fact, it would not surprise me if that were literally true.)

It’s still a nondenial denial, but it tells you that Google doesn’t give a rats patootie about the consequences of its role in promoting piracy to its own advantage, doesn’t respect the EU investigation and really does not care about creators.

It also doesn’t really care much about governments, either.  And when it comes to individual creators struggling against a gigantic American multinational media empire–like Google–we all need the government to do its part to protect creators and consumers from these rogue companies profiting from outright theft in the biggest income transfer of all time.

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