Being a global company has its perks. There is a lot of money to be made abroad. But the largest US tech companies are discovering that there is also a downside: any country where you make money is a country that could try to regulate you.
Keeping track of all technology-related antitrust actions around the world is difficult, in part because it doesn’t always seem worth paying close attention to. In Europe, which has long been home to the world’s most aggressive regulators, only Google was fined $2.7 billion in 2017, a $5 billion fine in 2018 and a $1.7 billion fine in 2018. 2019. These figures would be devastating to most companies, but they are nothing more than rounding errors for a company that reported $61.9 billion in revenue last quarter.
However, abroad is increasingly going beyond fines on the wrist. Instead, they are forcing technology companies to change the way they do business. In February, Australia passed a law giving news publishers the right to negotiate payments from dominant internet platforms, essentially Facebook and Google. In August, South Korea became the first country to pass a law forcing Apple and Google to open their mobile app stores to alternative payment systems, threatening their hold on the 30 percent commission they charge developers. And in a case with potentially huge ramifications, Google will soon have to respond to the Turkish competition authority’s demand to stop favoring its own properties in local search results.
The fallout from such cases could ripple well beyond the borders of the country enforcing the new rule, sparking natural experiments that regulators in other countries could emulate. For example, the fact that Google and Facebook have agreed to the Australian media negotiation code could accelerate similar efforts in other countries, including Taiwan, Canada and even the US. Luther Lowe, who as Yelp’s senior vice president of public policy has lobbied for antitrust actions against Google for more than a decade, approvingly calls the phenomenon “cure creep.”
In other cases, the companies forced to change their business model abroad may decide to adopt the shift globally before being forced to do so. After completing an investigation by Japan’s Fair Trade Commission, Apple decided to roll out the solution — which would allow audio, video and reading apps to link to their own websites to accept payments — globally.
“Sometimes it’s the market that drives it: The companies decide it’s too expensive to create different compliance strategies in different markets,” said Anu Bradford, a professor of international and antitrust law at Columbia University. “Or, sometimes, it’s pending copycat regulation: they know it’s there, and they’re not going to wait for the Russians or Turks to do their own thing.”
While it hasn’t received the same level of media coverage as Australia and South Korea, the case in Turkey could well become the biggest deal. That’s because it gets to the heart of how Google uses its power as a gatekeeper for most internet traffic.
The case is about what is called local searching, such as when you search for “restaurants near me” or “hardware store.” This is a huge category of search traffic – nearly half of all Google searches, according to some analysts. Google’s critics and competitors have long complained that Google is unfairly using its dominance to drive local search results into its own offerings, even if that may not be the most helpful result. Think about how, if you search for “Chinese restaurant” on Google, the top of the results page will likely have a widget that Google calls the OneBox. It includes a section of Google Maps and a few Google reviews of Chinese restaurants near you. You have to scroll down to find the best organic results, which could be from Yelp or TripAdvisor.
This dynamic has been irritating Google critics and competitors for years. One of those aggrieved competitors, Yelp, started the case in Turkey by filing a complaint with the country’s competition authority. Google states that the local search results are designed to help users as much as possible, not to cover their own profits. But Turkish regulators disagreed, concluding that Google “violated Article 6 of the Turkish Competition Act by abusing its dominant position in the general search services market to promote its local search and accommodation price comparison services in a way to exclude its competitors.” (I am quoting a translation from a Turkish lawyer.) In April, they fined about $36 million. That’s less than Google earned every two hours on average in 2020. But while the fine was trivial, the rest of the decision wasn’t. The authority issued a preliminary ruling ordering Google to devise a way to display local search results that does not favor itself over competitors.
For now, the matter is in limbo. The competition authority has yet to issue a “reasoned opinion” detailing its conclusions. Google will then have the opportunity to submit its proposal to comply with the ruling. It is up to the competition authority to decide whether that proposal is good enough or not.
This is not Google’s first rodeo in Ankara. In 2018, the competition authority made a similar ruling on Google Shopping, finding that Google favored itself over other comparison sites. This came on the heels of an analogous case of the European Union, but with an important difference: in that case, the EU accepted Google’s solution, even though its competitors argued it was not sufficient. The Turkish authorities did not. That gave Google the choice: come back with a solution that the regulators would accept, or pull the plug on Google Shopping in Turkey. The company opted for the latter option and simply closed the country store comparison module.
Google could do the same in the current case. But the stakes would be much higher. Local search is a much larger part of the total search pie, and Turkey, with a population of 85 million people, is a large place. Giving up local search would take away a commonly used feature in a large market. That means the company has a greater incentive to propose a solution that is not rejected by the competition authority. But that, in turn, carries an additional risk: any solution adopted in Turkey could be demanded elsewhere.
“If you’re one of these globally dominant companies, the downside is that if one of those jurisdictions becomes a living example of an antitrust remedy, there’s a huge knock-on effect risk,” said Yelp’s Luther Lowe. “Because Amy Klobuchar can suddenly hold up her smartphone during a Senate hearing where Sundar Pichai testifies and says, ‘Mr. Pichai, I have now activated my Turkish VPN and it seems that Turkish consumers are getting a better deal than Minnesota consumers .’”
What could that look like? Google has not published any suggested remedies; Emily Clarke, a spokesperson, said the company is waiting for the full advice to be released before it can figure out what its legal obligations are. Yelp argues that whoever wins the organic search results should also be given the right to use the OneBox results through its API, based on the theory that Google’s own algorithm has already considered them the most relevant result. In other words, if a search currently leads to a Google Maps result in the OneBox, but the first link below is from Yelp, then Yelp should populate the OneBox instead, meaning you’ll see Yelp reviews first. see, not Google reviews, when trying to figure out where to dine.
Such a change, if widespread, could dramatically alter the flow of much of the Internet’s traffic. As analyst Rand Fishkin noted in 2019, more than 50 percent of Google searches end without the user clicking to another site. That’s partly because, as the Markup documented last year, Google’s own properties or “direct answers” make up more than half of the first page a user sees when searching on mobile.
“If this jurisdiction forces them to behave in an interoperable and non-discriminatory way, that’s basically reverting Google’s original mechanism as a kind of turnstile,” Lowe said. “You’re just getting a huge flow of traffic to third-party services.”
It’s easy to see why a company like Yelp wants a crack at the top billing. The question is whether Turkish regulators will force Google to give it to them – and if so, whether Google will go along or send Turkish users back to the original 10 blue links. Either way, the consequences are unlikely to be limited to Turkey’s borders. American technology companies took the world by storm. Now the world wants to conquer it again.
This story originally appeared on wired.com.