Europe’s Attacks on Google Are Backfiring
(The Bloomberg View) -- You have to hand it to Europe’s regulators. They rarely miss a chance to antagonize an American tech company, no matter what the cost to their own people.
In a blog post on Tuesday, Alphabet Inc.’s Google announced that it will start charging phone-makers that want to pre-install some of its apps and services for devices sold in Europe. This was the entirely predictable result of an antitrust ruling by the European Commission in July, in which it imposed a record $5 billion fine on Google and demanded that it shape up without specifying exactly how.
What the commission objected to was an arrangement Google had with smartphone makers. It offered them its Android operating system free of charge and granted them access to its Play app store so long as they pre-installed certain Google apps on their phones. Although consumers could access plenty of non-Google alternatives with a click or two, the commission felt this added exertion amounted to an improper barrier to competition.
In fact, the bargain had worked perfectly well for the company and consumers alike. It helped Google’s products spread around the world, boosted its user base, and kept the resulting data flowing into its servers. That data, in turn, helped make its products — Google Search, Google Maps, Gmail, YouTube — better and better. Consumers reaped the benefits at both ends: cheaper smartphones and free products that kept improving, as if by magic.
Yet it wasn’t magic. Making those products required a load of investment, forethought and inventiveness. Google didn’t vanquish its competitors through malfeasance; it did so by offering products its users liked. Along the way, it showed them lots of ads (some $28 billion worth last quarter alone). By one relevant measure, consumers were just fine with this trade-off: Android now powers nearly 90 percent of new smartphones.
Businesses, too, benefited. With access to a secure and open-source operating system, they built thousands of useful applications for Android phones. Because Google imposed order on the larger ecosystem — for instance, by discouraging manufacturers from offering inconsistent versions of Android — these app makers could be confident that their products would work seamlessly for a global audience, to everyone’s benefit.
But never mind all that. In July, the European Commission insisted (vaguely) that Google bring this arrangement to an end. So now the company will start charging a licensing fee to manufacturers that want to offer Gmail, Google Maps, the Google Play store and YouTube in Europe, thereby making phones more expensive and life more difficult for businesses. It will also let phone-makers sell devices that use “forked” versions of Android in Europe, thereby degrading security and worsening inconsistencies across the ecosystem.
It’s not the end of the world. But Europe’s alleged remedy is all the more galling for being uncomprehending: Now that consumers have become so reliant on Google’s products, they’re not going to want phones that come without them. Had the commission acted a decade ago, it could at least have made a plausible if misguided argument that it was encouraging competition. Now it’s simply making things worse.
Europe’s regulators seem unable to believe that a company might benefit the world while also making lots of money. What they fail to understand is that the biggest losers in this unending charade are the citizens they supposedly represent.
Editorials are written by the Bloomberg View editorial board.
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