Google’s Internal Response to Imminent E.U. Charges
recode.net
recode.net
The agreements they force phone vendors to sign up to if they want to ship Google Play services with Android phones also stink to high heaven & are an anti-trust suit waiting to explode in Google’s face - that self-imposed banana skin appears to be next on the EU commission’s agenda.
Google can afford to pay any fine the EU is likely to impose of course. The greater cost may be in exec time & loss of face, plus the generalised malaise that seems to go along with losing an anti-trust suit.
Indeed, early on in Android's life, Google was much more hands-off with the OEMs, letting a thousand flowers bloom... we got fragmentation and subpar devices, developers and consumers complained, and Google set forth on tightening the reins and exerting more control such that when people buy an "Android" phone, it means a particular experience. (And of course there's nothing stopping OEMs from shipping AOSP-based devices and just not calling them Android - as in fact a number have done).
The issue I have is that if you're a non-techy user and you get accustomed the "The Samsung Way", then try to switch to a different brand device, it can be very disorienting. They practically feel like different OSes in some cases.
In addition, the current Nexus devices (5/6) are pieces of crap compared to the halo phones from the big OEMs.
But I do agree, that OEM skins do improve some lacking features of the stock Android, they also bring in tons of dark patterns and just terrible UX design with them - TouchWiz (Lollipop) for example removes all timed audio profile functionality, brings confusing duplicated apps for pretty much all standard applications (Play Store, Google Fit, Calendar, Mail, Keep, etc.) with their own separate accounts, hides camera functionality in public API and several other problems. Not to mention a completely different design of the OS from the whole Material ecosystem.
And thats a tip of the iceberg considering the times of Android 2.3/4.0 when Google CTS tests weren't so strict and developing anything worthwhile was practically impossible since OEMs kept overwriting even default integrated themes - stuff like setting black text to be white, removing fonts and other fun stuff we had to deal with.
Samsung phones have been degrading in quality as well - screens have become more fragile, Samsung has focused on copying Apple in many ways, and probably most damning, the market has responded negatively to these more recent changes.
Give me a more spartan device like the Nexus 5 over that crap any day. Google had it right, but unfortunately has been blocked from bringing that experience over wholesale.
But without Motorola in the picture, it's an easy argument to make that if the EU wants to encourage a competitive handset market (Android) over a monolithic one (Apple), the core product feature set has to be centrally controlled. Too much fragmentation of the platform would lead to the emergence of a dominant vendor (likely Samsung) and actually decrease competition as their competitors will no longer be at sufficient scale to support a differentiated product in both hardware AND software.
The thing is, the Google Play Store is more than just an app store, it's an entire ecosystem of apps and libraries that are guaranteed to be there and synchronized across the device. If you make Google services optional, then developers can't rely on their presence and would have to develop against multiple APIs. You'd get into a situation where an app would work on one manufacturer's device and not on another, and the platform would likely crumble over time as the user experience would pale in comparison to the tightly integrated iPhone.
Developers having to do real work is irrelevant, because developers are not the goal of antitrust law. Antitrust law is about protecting consumers, and if developers have to do more work because of it, so be it. If the EU's new limits on Google after this case causes their infrastructure to collapse or become unfeasible, that's Google's problem to solve. These are technical issues, not legal ones, and have no place in this discussion.
Developers having to do work is absolutely a competitive issue: it's erecting a barrier to entry through regulation because it drives up the cost of developing an Android app. For many developers, it would likely drive the cost beyond the point of feasibility.
And the market is likely at the point where even if the restrictions were relaxed, companies wouldn't take advantage of them because the market has already settled on Google and Apple. But if they were relaxed, it would likely be the end of Google's support of AOSP, which would further hamper the ability of OEMs to develop their own platforms / ecosystems.
Most other OEMs would take longer to set up their own apps, but they'd all follow suit.
And they absolutely compete against each other. They just don't do it in public because there are more effective ways of competing.
If they did have a dominant market position, there is all sorts of tying going on between OSX and iOS lately.
What the graphs show is that there are a number of strong competitors in the shopping space, which may create a strong public interest in ensuring Google is not being allowed to use it's perceived search monopoly position to muscle into the space and limit competition by giving itself better positions in results.
If the EU Commission finds that Google has a sufficient near monopoly on search and that their practices with respect to expanding their reach in shopping is anti-competitive, then Google's current weak position in shopping is entirely irrelevant unless they're hoping to show that being given such a prominent position in their search results does not give a business any advantages (their ad sales people ought to start hyperventilating if Google makes that argument).
And in fact the existence of a healthy, competitive eco-system in shopping would make any anti-competitive behaviour by a powerful monopolist far more damaging and important to curtail in the eyes of the EU Commission. It should not be something you'd want to draw attention to.
A much better argument would be to highlight far more the breadth of niche search engines, and how e.g. searches on Amazon and Ebay and others should also be included in any assessment of search market share, and that this would show that Google's market power is not as great as it would seem if you only look at "general purpose" search engines.
There are two points:
1. "Recode obtained an internal memo". If I were Google, I'd leak that on purpose. A polished internal memo that is leaked is more powerful than explicit PR, because of its supposed "internal" nature. "They didn't write it thinking others may read it, so it's probably honest and pure."
2. As I read, I thought exactly the same thing as your first paragraph: Search, making themselves look weak. I also remembered something Peter Thiel said in a PandoMonthly.. That non monopolistic companies try to look big and monopolistic, and that truly huge monopolistic companies downplay it to the point you worry about their survival.
He gave the example of Google, of course, and did the exact same thing as in the internal memo (talked about the other markets and how competition is so fierce, nothing is granted).
That was one of the best interviews I've seen, by the way..
The (current) EU charges only target Google Shopping and the placement of Googles own products in relation to competitors.
The point is that the issue that is relevant to whether or not their behaviour falls afoul of EU anti-trust rules is whether or not they have a monopoly position for search, and whether or not they are using such a monopoly position to expand their reach in the shopping space, not whether or not Google Shopping faces competition or currently does well.
If anything, the fact that Google Shopping faces stiff competition makes their alleged attempt to leverage their search position to expand its reach more serious, as there is an existing market they may hurt through anti-competitive practices.
So, how is this not malicious altering of normal search results, so you can push out competition?
How about insurance? How about travel? How about google+ imposed on youtube? How about changing ToS of android for OEMs?
It is not the consumers this anti-trust action is intended to protect, but those competitors of Google Shopping. The presumption of a lot of anti-trust law is that protecting competition is in the long term public interest that outweigh short term impact on consumers. Some anti-trust actions are motivated by direct consumer interest, but most is motivated by preventing anti-competitive practices by a monopolist from harming competitors.
If competitors of Google Shopping are treated fairly in terms of search results, and can buy the same kind of position that Google Shopping can (I don't think they can), then there would be no issue.
My point in terms of Amazon is not that Amazon search isn't different to Google - clearly they are, though they too have paid third party results on their pages.
My point is that to Google it's their search dominance they need to downplay, not the relatively market position of Google Shopping. Giving their own business preferential treatment is perfectly legal if they're not in a monopoly position. The moment they're found to have a monopoly position, a lot of forms of preferential treatment becomes illegal anti-competitive practices.
They can beat this in two ways: By convincing the EU or EU courts that they do not have a search monopoly, or convincing the EU that they are not giving Google Shopping preferential treatment. The latter I think would be extremely hard given how Google Shopping results are positioned.
The way they can not beat this is by talking about how there's a lot of competition in comparison shopping. If anything, that gives the EU Commission a stronger reason to act on allegations of anti-competitive behaviour, as it means there are Google competitors that may be harmed by any anti-competitive behaviour that might be occurring.
Thanks, this is an interesting point. Search users fit into different profiles based on context. Marketers have known this for a while, as different keywords target users in research mode, ready-to-purchase mode, review mode, etc. Buyers searching for "best blue widgets" have different intent than "cheap blue widgets" or "buy Acme blue widgets".
Specific engines like Yelp, ebay, Amazon target users in specific contexts, but google targets general contexts. Why should Google avoid improving searches for specific queries if it has the technical ability to do so?
I suppose the question is, did Google overstep boundaries in the way it improved search results for specific contexts? Did Google violate antitrust laws by scraping content from these context-specific engines, then effectively saying "if you don't like it, we'll stop, but you can't use our search engine" (Yelp). [0]
[0] http://bit.ly/1ILbpMb (non-paywalled WSJ article via Google search, ironically enough)
When your search query has commercial intent, Google shows their own shopping-powered results at the top and if you click on one of those products, it goes DIRECTLY to the advertiser. Unless someone clicks on "shop for x product on Google" then it doesn't count in their traffic graph.
The "internal" nature of the memo makes this even more perplexing as the argument seems almost tailored to convince an external audience who may not understand search as well as people within Google do.
I think vidarh makes a great point about Google losing share to apps and vertical specific search engines and many people now go directly to Amazon when they start shopping or directly to Yelp when they want restaurant reviews or Tripadvisor for hotel reviews. Mobile is also changing user behavior (at least on iOS) where I rely a lot more on task-specific apps that I know and trust vs. searching for the details on Google.
And this doesn't seem to worry anyone here. We continue to tack on more regulation, tax rules detrimental to small businesses in their complexity, and now surveillance that would make Obama blush[1]. Oh, but we will show these evil monopolists with this formal complaint.
It's quite a common schtick among big businesses (including the aforementioned monopolists) to blame the lack of small business competition on tax rules.
The tax rules they refer to actually do nothing to small businesses, but they are usually detrimental to their own bottom line.
This is how Google/Microsoft/Amazon ended up reaping such huge profits and paying such pathetically low taxes. It didn't happen by accident, and it also didn't help any small businesses along the way. Quite the opposite.
Everyone treats their Fords and Fiats well, but for smaller companies, it's all the red tape and small stuff that's most annoying, not even the overall tax level.
I like to pay a little more tax and actually have a decent healthcare system, social security net, and retirement.
One of the problems is that many of the large US corporations legally avoid tax via one of the tax havens (including my country of origin, The Netherlands). It creates an uneven playing field.
There is no reason why European companies couldn't compete. Taxes may be higher, but wages are lower, and costs may be significantly lower if you are in east Europe.
I also don't completely agree with the sentiment that started this thread, there are also plenty of European startups/ex-startups doing well: Booking.com, Spotify, Rovio, Mojang (Swedish) was just bought by Microsoft for 2.5 billion, Skype was also a European before it was purchased by Microsoft.
* There are taxes and taxes. Pay a % every month, simply and easily? That's not such a big deal - everyone has different tollerances and preferences, but it is what it is. Italy has lots of little, annoying taxes and gotchas, though, which take a lot of time and are irritating. For businesses, a lot of these need to be paid even if the business is not profitable (like startups!).
* Healthcare is actually more expensive in the US as a % of GDP. "Europe" wins there in my personal experience. For businesses it's easier too: no shopping around for health insurance.
* Social security changes a lot from country to country. Italy's system does not really seem to be working that well to me, though.
* Retirement. I don't trust either the Italian or US systems. I hope yours works better.
My point was mostly that it's all the small - and constant - annoyances that make life harder for a small business here in Italy.
http://www.economist.com/news/united-states/21606293-small-b... - this kind of backs up what I said - it's not the overall level of taxation so much as the 'hassle' factor.
I would suspect that things are better in the Nordic countries, and maybe the Netherlands too.
I would suspect that things are better in the Nordic countries, and maybe the Netherlands too.
Definitely. I have my gripes about social security in The Netherlands and I think basic income would be better, but social security is pretty good: 75% of the last income for the first two months, 70% for the remainder of the year. After that, a single gets Euro 960.83 per month, a married couple Euro 1,372.62 per month, plus an extra amount quarterly per child (which IIRC everyone, including working people, gets).
With regards to retirements, everyone gets so-called 'AOW' (850,97 per month or 2 * 586,56). Normally when you work, you also collect money in a private pension, which gets added to the AOW. AOW is directly paid by taxes, the private pension is a fund.
Normally, when you work all your life, AOW + pension + home ownership gives you a royal retirement.
Regulations also set the minimal viable size of a business. Small manufacturing businesses of all kinds are beset by the CE compliance requirements.
Part of that cake: Pretty much any non-downtown store in Europe.
I think a big problem has been the economics of scale you mention, because Europe has not really functioned as a common market. One part is language. This is changing a bit (at least here), and most Danish tech startups now make their products English-first, or even English-only, which greatly increases the odds of international adoption. Some is more cultural, though; we don't read French or Italian or German media, and nobody else reads Danish media, so things that get a "buzz" in one country travel fairly slowly cross-border, while American media spreads quickly. Probably a lot more factors of this sort.
One issue of incentives, though, is that it can still be in many cases an individually rational choice to target a more "provincial" market. If you're a Danish startup and identify a Danish-specific underserved market, you have less potential for growth, but may have higher probability of at least modest success, due to much less competition. So even if it's better for Europe as a whole for startups to target a broad, international market, it might be rational for individual startup founders to target smaller, country-specific markets. American startup founders to a large extent lack this choice, because there are not many tech market niches which are, say, Tennessee-specific.
The language barrier keeps economics of scale from coming into effect for founders. The abundance of investment capital is an important factor. If that factor increases you become less dependant from factors like "knowing the right people" and "got to having a superb idea".
Building upon your "provincial market" statement: Couldn't it be said, that those country-specific niches will lure the entrepreneurial folk into building dead-end, non-scalable products? :)
Would you mind elaborating on what makes the EU not as good as the US for startups? From spending some time in Berlin, it reminded me of a smaller, cheaper, and overall much nicer San Francisco.
Google: "But look, we still haven't destroyed all the competition. Why don't you please wait until we do?"
The relevant EU Commission is not a court, and this isn't an adversarial proceeding between Google and competitors, even for all that Google competitors lobbied the EU for action.
> If the competition can't yet show harm, there isn't a crime yet.
The issue here isn't crime, or something that competition has to show anything, and plenty of crimes do, in fact, exist when harm cannot be shown, anyway.
True, but the principle is a common one. And it is adversarial in that the Commission is prosecuting and Google is defending. This isn't a cooperative investigation.
To the extent that courts do not try hypothetical controversies, they also depend on actual proof and not unproven harm. How do you suppose a company would be found guilty of about-to-violate-antitrust-laws?
Its actually not as common as you might think; the principle in the US legal system that courts do not address hypothetical situations and issue advisory rulings distinguishes courts in the US system from courts in many non-US systems and many non-court adjudicative bodies (in the US and other systems.)
> And it is adversarial in that the Commission is prosecuting and Google is defending
Its more inquisitorial than adversarial, since there is not a separate prosecuting entity from the adjudicating entity, but the key point was that it wasn't between Google and its competitors, so its competition doesn't need to show anything, contrary to the suggestion made that the competition needs to show harm.
> To the extent that courts do not try hypothetical controversies, they also depend on actual proof and not unproven harm.
Only if the legal standard relevant to the controversy requires concrete harms. A prosecutor doesn't, for instance, have to show any harm when prosecuting attempted murder.
> How do you suppose a company would be found guilty of about-to-violate-antitrust-laws?
Antitrust laws very frequently prohibit conduct undertaken with the intent of monopolizing an industry, though the degree of actual harm is often relevant to the zeal with which antitrust authorities prosecute offenses, and the remedies imposed. Actual harm is often relevant in antitrust analysis, but may not be essential for a violation to occur -- just as the case for many other kinds of violations of law.
Any country or group of countries with a shared legislation can be seen as a platform. Yes, like the software platforms we are discussing here in HN. You must obey their rules. People who wants 100% market freedom forget that when companies like Google has an incredible market share THEY ARE THE MARKET, and they impose their own rules (imposing agreements, modifying and limiting APIs, etc) just like the EU is doing now.
There is only one thing that leaves a bitter taste in my mouth, nobody is innovating enough to really compete with Google in some important fronts such as search. This can't be solved with regulations.
The way safari runs on iOS compared to other browser is very similar to how Microsoft shipped explorer with windows. Except windows did not prevent other browser from using the full API and your app didn't have to go through a approval process.
There's nothing wrong with refusing to interoperate with competitors. The market often works to take care of that to some extent.
However, when you have one player which is manifestly more powerful than the competition, you don't have a fair market. The whole reason we have anti-trust legislation is the recognition that this isn't desirable, and that businesses with too much pressure can exert influence which is harmful to the market in the long term.
Yes, the effect of laws that are about constraining harmful uses of market power depend, among other things, on whether or not an actor has market power in the market at issue.
I'm not sure why this is surprising.
EDIT: If you read HN, you're probably not a real human. Let's not fool ourselves.
Wow...
That's the whole point of these rules, any company can do whatever they want on their own platform except when the become so dominant competition no longer happens.
Please stop comparing actions when it's context that matters here.
4.5 Non-Compete.
You may not use the Market to distribute or make available any
Product whose primary purpose is to facilitate the distribution
of software applications and games for use on Android devices
outside of the Market.
It's like saying "so many people are driving BMW, it's not fair for Audi, BMW should include an Audi advertisement now and then. If they don't, they will have to pay us a big fine!". Isn't Europe a free market?
How is that any different from people using websites directly? I don't see any change here, except that now 1 out of 8 minutes is apparently spent away from content?
>Apps that compete directly with Google such as [...] are easily available to Android users
They forgot to mention how you are not allowed to distribute alternative app stores over Google Play and can only be installed after changing the phone settings.
Today 7 out of every 8 minutes on mobile devices is spent within apps.
Microsoft's power was reduced more by market shifts, failure to adapt, and unanticipated new tech than it was by monopoly sanctions.
I do believe absolute free markets are not practical, as evidenced by the fact they mostly don't exist.
However, the minimum force principle applies. For every government constraint on tech I thing it's fair to ask, is there no way the market can fix itself in 5 years? How many disruptive shifts will happen during that time?
Maybe government could help more by starting first with stronger patent reform?