Android case

Europe’s Android case sharpens divide with US

Brussels move raises political heat on Washington regulators to adopt tougher, EU-like approach toward tech giants.

By  Nicholas Hirst , Nancy Scola  and Tony Romm

The divergence between Europe and America over how to regulate the digital economy is growing starker with each headline grabbing move by Brussels.

The antitrust charges leveled against Google over its dominant Android operating system follow the European Commission’s recent prominent cases against American tech industry titans Amazon and Qualcomm and almost 12 months to the day after the EU’s first big assault on Google’s search engine. By contrast, the U.S. hasn’t waged a high-profile antitrust tech battle since accusing Apple and large publishers of fixing the price of e-books in 2012.

Brussels’ aggressiveness is emboldening critics of America’s restrained regulatory approach and opponents of Google and other tech giants to push Washington to copy the interventionist EU playbook. In the words of someone from a company that’s challenging Google on the antitrust front, America has been “outsourcing its antitrust enforcement to Europe.”

But there are powerful voices, including in the Obama administration and Congress, who say the EU’s enforcers are out of sync with the fast-changing nature of the digital economy, and hostile to America to boot. “I made it very clear that I thought they ought to be very careful because it looks like they’re abusing U.S. companies,” said Senate Finance Committee Chairman Orrin Hatch, following a meeting earlier this month with Margrethe Vestager, the EU’s antitrust chief who’s led the charge against Google.

The upshot: Expect more transatlantic turbulence ahead as the world’s two most important legal jurisdictions take diametrically opposed political and philosophical approaches to regulation.

This split first emerged in 2001, when GE was ready to close its acquisition of Honeywell. Washington said yes. Brussels said no. GE walked away with its tail between its legs and without Honeywell.

The disagreements have magnified in the digital age.

While the Obama administration has vigorously opposed several mega-mergers in recent years — including the sale of GE’s appliance business to Electrolux and the merger between Office Depot and Staples — the days are long gone when the U.S. busted up phone or oil monopolies.

“I routinely tell people if you want to raise a grievance about anti-competitive behavior let’s go to Europe not Washington,” said Gary Reback, an antitrust lawyer who brought past complaints against Microsoft in the EU and U.S. and has filed an EU complaint against Android on behalf of Disconnect, a U.S. app maker.

Some blame the transatlantic rift on U.S. campaign finance laws, which allow companies to curry favor by pumping money into candidates’ coffers. Some say it’s the court system, which makes it easier and sometimes faster for firms to fight it out before a U.S. judge than wait for regulators to step in. There is fertile entrepreneurial breeding ground from Silicon Valley to New York for startups that challenge aging companies and business models in the U.S. in a way that doesn’t exist in Europe. Others simply say America is more open to business than Europe.

While EU regulators operate under a generally permissive court regime that has enabled them to build successful cases against tech powerhouses in the past, U.S. antitrust officials are weighed down more by the courts and the priorities of the government of the day. Laws against abuse of dominant position are “much harsher” in Europe, said Nicolas Petit, law professor at the University of Liège in Belgium, adding that the EU does not share the “genuine belief in the U.S. that markets are self-correcting.”

Local politics matters too. The charge against Google was initially led by European newspaper publishers, including Axel Springer (which is co-owner of POLITICO’s European edition). There are “political influences within the Commission that don’t bode well for Google or for other tech companies,” said Frederik Erixon, director of the European Centre for International Political Economy. The Commission has “greater flexibility to stretch the limits of competition regulation” than in the U.S., he added.

“We have no grudge against any company,” Vestager said on Wednesday. “For us it is obviously a duty to be able to … find the facts. [The facts] may look different in the eyes of other authorities. I think that is something we have to accept.”

Data collected by Open Secrets show Google and its affiliates spent more than $10 million in campaign donations and more than $75 million on lobbying in Washington in just over a decade up to 2014. Google employees visited with members of the Obama administration once a week, on average, according to a Wall Street Journal report last year, and Google parent company Alphabet’s Executive Chairman Eric Schmidt has sat on various advisory panels for the president.

“We are out of the Google enforcement business, at least until there is a new administration or potentially ever. Big corporations are learning that it is better to hire lobbyists than lawyers,” said Reback, the lawyer for Google-complainant Disconnect.

In its complaint, the European Commission alleges that Google is abusing the No. 1 position of its Android operating system, denying consumers a wider choice — to the detriment of its competitors — by reserving prime spots on mobile devices for its own apps like Chrome Internet browser and its lucrative search business. Vestager charged Google last year with abusing its dominant position in web searches by favoring its own products in search results over those offered by its rivals.

“We take these concerns seriously, but we also believe that our business model keeps manufacturers’ costs low and their flexibility high, while giving consumers unprecedented control of their mobile devices,” Kent Walker, the general counsel of Google parent company Alphabet, wrote in a blog post Wednesday.

Google declined to comment on its lobbying activities.

Proponents of reining in Google in the U.S. are using this week’s case to raise the political heat in Washington. “The Android action is a reminder that U.S. regulators have fallen behind,” said Luther Lowe, vice president of public policy at Yelp, a listings and search service which has filed a complaint against Google in Brussels. “The disparity of enforcement puts pressure on the U.S. because European consumers are now poised to enjoy better protections than consumers in the United States.”

Google’s critics say the European Commission’s Android investigation closely parallels the landmark U.S. Justice Department case against Microsoft in the late 1990s and early 2000s, which ended with Microsoft making its Windows operating system work with competitors’ software.

The anti-Google brigades can point to some progress. Richard Blumenthal, the Democratic senator from Connecticut, earlier this month suggested the U.S. Federal Trade Commission open a new investigation, even though it closed a probe of Google’s search and advertising businesses in 2013. In an interview with POLITICO Wednesday, Blumenthal said, “The European action should certainly revive and re-energize scrutiny, as I urged the FTC chairman to do, because they’re very significant issues that should be explored…. We have different laws, but the goal and spirit of the law is very similar.”

The attorneys general for Utah and the District of Columbia wrote the FTC earlier this year expressing competition concerns about Google. A report by the White House’s Council of Economic Advisors this month argued for more vigorous enforcement of antitrust rules.

“Do we hope the [European] Commission’s proceedings in this case might have some ripple effect? Yes. Do we expect it necessarily? No. But we do have a sense of hope of essentially embarrassing U.S. authorities into acting,” said Thomas Vinje, the legal counsel for FairSearch.org, a group of Google opponents that includes Expedia, TripAdvisor, Nokia and, until this year, Microsoft. “These are very grave issues affecting consumers, and the U.S. authorities should pursue them as well.”

The FTC settled a probe into Google’s search and advertising businesses in 2013 after the California company committed to relax its terms and conditions for advertisers and competitors. That was enough to placate Canadian regulators, who closed a three-year investigation into Google this week, saying the FTC’s settlement was enough for them too.

At the time of Google’s 2013 settlement with the FTC, critics called it a slap on the wrist. It later emerged that some FTC staff had in 2012 recommended suing Google for giving greater preference in search results to its own offerings — a revelation that fueled criticism that U.S. regulators tend to go easy on the company.

Last fall, the FTC was reported to be looking at complaints that Google requires some Android phone makers to give Google apps preference — the same issue on which the Vestager has now taken action. The FTC did not confirm the Android inquiry at the time, and an agency spokesman this week declined to comment on the matter.