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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 Comments off

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.

Celebrity Justice: Lindsay Lohan, Google, the FTC and the Ennui of Learned Helplessness

January 17, 2012 1 comment

[Editor Charles sez:  This post first ran on December 17 before the FTC let Google off the hook. and we though it was worth another read.]

When a chicken is placed on an electrical grid inside a cage and shocked repeatedly, it begins to get the idea that no matter where it stands, no matter how high it jumps, no matter where it lands it cannot escape the pain of the electrical shock.

And eventually it stops jumping and just takes the shock.

This is called learned helplessness in which resistance is futile.  It’s also the state of mind that a massive tech oligarch would like to produce in the minds of those who oppose them to the point that the average person would say something like, why do you complain about Google?   You really need to get over it, I’m writing as a friend.

I happened to notice that news of Lindsay Lohan’s most recent brush with the law came on the same day as news leaked that Google may have avoided yet another prosecution by the Federal Trade Commission and would get a wrist slap in America for what will likely be a vigorous prosecution in the European Union for largely the same bad behavior.  This would be the same Federal Trade Commission that saw nothing criminal in Google sending thousands of cars with Wi-Fi sniffers around America under the guise of taking pictures of the people’s houses and posting them on the Internet.  Which was worse, openly invading your privacy by posting pictures of your house online, or secretly capturing unprotected Wi-Fi data.  The fact that they got away with both contributes to the sense of powerlessness that Googlers so crave.

But let’s not jump to conclusions.  Google’s back room deal with FTC Chairman Jon Leibowitz is still just a rumor and may be overstated, so let’s not overreact.  We have to assume that given Google’s well-known political influence, the truth may end up being that FTC Chairman Jon Leibowitz merely offered to slap his own wrist.

This would be the logical next step in the government’s handling of Google—after all, according to Google’s lawyer Boris Feldman, the Justice Department apologized to Google for a perfectly normal “crime doesn’t pay” speech by the U.S. Attorney for Rhode Island.  This interview followed the announcement that Google avoided indictment by a Rhode Island grand jury and paid a $500,000,000 fine for violations of the controlled substances laws.  The U.S. Attorney’s statements were perfectly normal for a prosecutor concluding a years-long grand jury investigation of a major corporation in which over 4 million documents were produced that proved that the company was shot full of bad actors—and paid the highest corporate fine in US history.  If there was anything unusual about it, it was that the speech was not made by the Attorney General of the United States.

Google, it appears, enjoys a kind of sovereign immunity—it apparently must consent to be prosecuted before it can be indicted and then those charged with enforcing the law let them go on their way like a stoned once-beautiful actress charming a cop after committing mayhem on the highway.

The joke about Lindsay Lohan is whether she’ll get incarcerated for 5 or 10—minutes.  This example of celebrity justice is particularly timely given the high degree of government interest in protecting Google.  The FTC’s celebrity justice includes corporations and their executives.  If the FTC fails to prosecute Google, what Chairman Leibowitz is teaching us is straight out of Animal Farm–that some animals are truly more equal than others.    And those who are in the tech industry oligarchy that Eric Schmidt defined as the Gang of Four—you know, giving a cartel a name without regard to the consequences—are most equal of all.

I attended last year’s Senate Antitrust Subcommittee hearing on Google’s abuse of its dominant market power.  Senator John Cornyn questioned Mr. Schmidt about Google’s nonprosecution agreement with the Department of Justice—you know, the one that the DOJ apologized about.  Mr. Schmidt told what I believe Mr. Schmidt had to know was a well-rehearsed lie—that the terms of the nonprosecution agreement prevented him from discussing it publicly.  In other words that the nonprosecution agreement was a secret.

This is false.  It is not only false, it is unambiguously false.  Senator Cornyn evidently knew it to be false–as did most of the visitors in the committee room by the rustle of whispers–and questioned Schmidt more closely about it.  After consulting with his lawyers arrayed behind him at the witness table, Mr. Schmidt declined to answer on the advice of counsel.  He did not use the words “I take the 5th” but he came as close to it as I’ve ever seen.  This did not go over well with the committee.  (And was largely suppressed in the mainstream media.)

And yet, when Schmidt walked out of the committee room, what I could see that the Senators could not was the smirk on Schmidt’s face and his lawyers—because he had gotten away with it one more time.  Given the sharp letter that Senators Kohl and Lee subsequently wrote to the FTC, I don’t think he fooled anyone on the Subcommittee although he was smirking like he’d really put one over on the Senators.

But apparently, Google can still strut its stuff to get away with it and the FTC and the DOJ political appointees just fall right in line. And don’t think this criticism is partisan–it’s not.  However biased Google is toward the left, they are quickly catching up on the right by talking out of both sides of their mouth.

So like Lindsay Lohan, Google appears to have gotten away with it.  This time.  But here’s some free advice from someone who knows about what the famous can and cannot get away with.  It’s not that they can always get away with it, it’s just that they have to do something really bad before the system will prosecute them.  Or they have to have a run in with Judge Judy.

And given what we know about Google, I feel very confident that Google has already done this really bad thing.  It’s only a matter of time until they find their Judge Judy.  Or a prosecutor like Rudy Giuliani.  Remember–if you’d told a room full of MBAs in 1985 that in a few years time Drexel would be bankrupt and Milken would be in prison, you would have been laughed out of the room.  Just like you would be now if you told a room full of computer science students that in a few years time Google will be bankrupt and Eric Schmidt will be in prison.  And that RICO would get both of them.

So don’t allow them to let you drift into that ennui of learned helplessness.  Google are not immune and we still live in a country of laws.  Even if it doesn’t look that way all the time.  Even if Leibowitz is slapping his own wrist, the Senate Antitrust Subcommittee is not.

But for today, be concerned about Jon Leibowitz’s self-inflicted wrist bruising and remember that nothing says Internet Freedom like getting away with it.

If  you let it.

If you’d like to comment on the Google investigation, you can contact the FTC:

Questions or Comments about Antitrust Issues

Contact the FTC’s Bureau of Competition, and please include your day-time telephone number.

  • Email: antitrust@ftc.gov (Note: Email is not secure. Mark confidential information “Confidential” and send it via postal mail.)
  • Mail: Write to:
    Office of Policy and Coordination
    Room 7117
    Bureau of Competition
    Federal Trade Commission
    601 New Jersey Ave, NW
    Washington, D.C. 20580
  • Phone: (202) 326-3300
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