Global companies have their perks. You can make a lot of money overseas. The biggest US tech companies are realizing that there is also a downside. Every country in which you make money could attempt to regulate you.
It is difficult to keep up with all the antitrust actions in tech around the globe. This is partly because it doesn't seem worth paying attention. Google was fined $2.7 billion in 2017 in Europe alone, and $5 billion in 2018 and $1.7 billion in 2019. Europe has been known for being home to some of the most aggressive regulators in the world. Although these sums are devastating for most companies they are just rounding errors for a company that generated $61.9 billion last quarter.
However, it seems that foreign countries are moving beyond simple fines. They are forcing tech companies to change their business models. In February, Australia passed a law giving news publishers the right to negotiate payments from dominant internet platformseffectively, Facebook and Google. South Korea was the first country to adopt a law requiring Apple and Google to allow alternative payment methods in their mobile app stores. This would threaten their 30 percent developer commission. In a case that could have huge implications, Google will soon have the task of responding to the Turkish competition authorities' demand that it stop favoring its properties in local search results.
These cases can have a ripple effect beyond the borders of the country that imposed the new rule. This creates natural experiments that regulators from other countries could emulate. For example, the fact that Google and Facebook have agreed to Australia's media bargaining codes might encourage similar efforts in other countries such as Taiwan, Canada, or even the US. Luther Lowe, Yelp's senior vice president for public policy, has spent over a decade lobbying against Google. He calls this "remedy creep".
Other companies might choose to shift their business model internationally if they are forced to. Apple implemented the solution after settling an investigation from Japan's Fair Trade Commission. Audio, video and reading apps can link to their websites to accept global payment.
Sometimes it's the market that drives it. Companies decide it is too expensive to implement different compliance strategies in different markets. Anu Bradford, Columbia University professor of international and antitrust laws, stated. Sometimes it's in anticipation of copycat regulations: They know there is copycat regulation and are not going to wait for the Russians, Turkish, or Turkish to take their case.
Although it hasn't received the same media attention as South Korea and Australia, Turkey's case could be the most important. It is because it reveals the core of Google's power as the gatekeeper of most internet traffic.
It concerns what is known as local search. For example, when you search for hardware stores or restaurants near you, this is almost half of all Google search results. Google's competitors and critics have complained for years that Google unfairly steers local search results to its offerings. Even though that may not be the most useful result, it is still a powerful tool. Google will likely feature the OneBox widget at the top of search results pages if you type in Chinese restaurant. It will contain a section of Google Maps as well as a few Google reviews about Chinese restaurants close to you. Scroll down to see the top organic results. They may be from Yelp and TripAdvisor.
For years, Google critics and their competitors have been frustrated by this dynamic. Yelp, one of the aggrieved rivals, filed a complaint to Turkey's competition authority. Google claims that local search results are intended to be as helpful to users as possible, and not to increase its profits. The Turkish regulators disagreed and concluded that Google had violated Article 6 Turkish Competition Law. They found that Google used its dominant position in the general market for search services to promote local search and price comparison services to exclude competitors. They imposed a $36 million fine in April. This is less than Google earns every two hours on average in 2020. The fine was minor, but the rest of this decision was significant. Google was ordered by the authority to find a way to display local search results that does not favor it over its competitors.
The case remains inlimbo for now. The competition authority must still issue a reasoned opinions stating its findings in detail. Google will then have the opportunity to submit its proposal to comply with the ruling. The competition authority will decide if the proposal is acceptable.
This is not the first Google rodeo in Ankara. The 2018 ruling by the competition authority regarding Google Shopping was similar. It found that Google had a preference over comparison-shopping websites. This decision was made in response to a similar European Union case. However, there was a significant difference. In that case the EU accepted Google's solution even though it was rejected by its competitors. The Turkish authorities refused. Google was faced with two options: either come up with a solution that the Turkish authorities would accept or pull the plug in Turkey on Google Shopping. Google chose to shut down its comparison shopping program in Turkey and opted for the latter.
Google could also do the same in this case. However, the stakes are much higher. The share of local search in the overall search market is much larger, and Turkey with its 85 million inhabitants is a large country. Local search is a widely used feature in large markets. Giving up on it would mean losing it. This gives the company a stronger incentive to propose a solution that will not be rejected by the competition authority. However, this also presents a risk: Any solution that is adopted in Turkey could be used elsewhere.
Yelps Luther Lowe said that if you are one of these global dominant companies, the downside to this is that a jurisdiction becomes a living example of an antitrust remedy in the wild, there's a high risk of a domino-effect effect. Amy Klobuchar suddenly can reach for her smartphone and shout, "Mr. Pichai. I have my Turkish VPN enabled right now. It appears that Turkish consumers are receiving a better deal then Minnesotans.
What would that look like? Google has not yet published any suggested remedies. Emily Clarke, a spokesperson for Google, stated that the company will wait to see the full opinion before it can determine its legal obligations. Yelp believes that the winner of organic search results should be eligible to have its API power OneBox results. This is because Googles algorithm already considers them the most relevant. If a search leads to a Google Maps results in the OneBox but the first link is from Yelp then Yelp should be able to populate that box instead. This would mean you'd see Yelp reviews and not Google reviews when looking for a restaurant to go to.
If this change is widely adopted, it could drastically alter the flow of large amounts of internet traffic. Rand Fishkin, an analyst, noted that more than 50% of Google search results end without users clicking on another site. This is partly due to the fact that Google's properties and direct answers account for more than half the pages a user sees when they search on mobile.
Lowe stated that if the jurisdiction requires them to behave in an open and nondiscriminatory manner, it basically reverses the original mechanism of Google. This is a torrent of traffic that goes to third-party services.
Yelp is keen to have top billing. It's not hard to see why. It is unclear if Turkey's regulators will make Google give it to them. If so, will Google follow suit or return Turkish users to the original 10 blue links? The consequences of this decision will not be limited to Turkey's borders. The world was conquered by US tech companies. The world now wants to conquer the other side.
This story first appeared on wired.com