The US is taking on Google in a huge antitrust case. It could change the face of online search


Katharine Kemp, UNSW

The US Department of Justice (DoJ) has filed an antitrust lawsuit against Google for unlawful monopolisation. The department says Google’s conduct harms competition and consumers, and reduces the ability of new innovative companies to develop and compete.

It’s the most important monopolisation case in the US since 1998, when the DoJ brought proceedings against Microsoft.

It’s possible the current proceedings, given their timing, are politically motivated. US President Donald Trump and other Republicans have repeatedly voiced the view that Google is prejudiced against conservative beliefs.

But even if Democratic candidate Joe Biden is elected president, this action against Google is unlikely to go away.

The ramifications for Google, if the court rules against it, could ultimately be dramatic. The DoJ’s associate deputy attorney general, Ryan Shores, has refused to rule out seeking orders to break up the tech giant, saying “nothing is off the table”.

Google’s monopoly power

Google’s economic power is no secret. Regulators around the world, including in the European Union, are investigating the company’s conduct and bringing actions under competition, consumer and privacy laws.

US Attorney General William Barr said the new DoJ action:

[…] strikes at the heart of Google’s grip over the internet for millions of American consumers, advertisers, small businesses and entrepreneurs beholden to an unlawful monopolist.

Specifically, the DoJ claims Google is illegally monopolising the markets for online search and search advertising (the advertising that appears alongside search results).

According to the DoJ, Google’s US market share is roughly:

  • 88% in the market for general search services

  • 70% in the search advertising market.

However, holding a dominant position isn’t against the law. A company is allowed to enjoy a dominant position or even a complete monopoly, as long as it doesn’t do so by unlawful means.




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So what has Google allegedly done wrong?

The DoJ’s main complaint is Google has entered into several “exclusionary agreements” that preserve its monopoly power by hindering competition from rivals (and potential rivals). Exclusionary agreements are deals that restrict the ability of at least one party to deal with other players.

The DoJ says Google spends billions of dollars each year on:

  • long-term agreements with Apple that require Google to be the default search engine on Apple’s Safari browser

  • exclusivity agreements that forbid pre-installation of competing search services by certain mobile device manufacturers and distributors

  • arrangements that force certain mobile device manufacturers and distributors to pre-install Google search applications in prime locations on mobile devices and make them undeletable, regardless of consumer preference

  • using monopoly profits to buy preferential treatment for its search engine on devices, web browsers and other search access points.

The DoJ claims these agreements have created a “continuous and self-reinforcing cycle of monopolisation” in the market for online search and search advertising (which relies on Google’s dominance in online search).

Google has responded by describing the court action as “deeply flawed”. In a blog post it said:

[…] people don’t use Google because they have to, they use it because they choose to.

It also said users are free to switch to other search engines.

But even if that’s technically true, Google’s agreements for pre-installation, default settings and preferential treatment give it a substantial advantage over its rivals.

Does any of this matter when Google is ‘free’?

Google provides services that are hugely valued the world over — and with no direct financial cost to the user. That said, “free” services can still cause harm.

According to the DoJ, by restricting competition Google has harmed search users, in part “by reducing the quality of search (including on dimensions such as privacy, data protection, and use of consumer data)”. This is an important recognition that price is not all that matters.

The logic behind this claim is that other search engines with better track records on privacy, such as DuckDuckGo, might otherwise be more successful than they are.

Or, to frame that another way, Google might actually have to compete vigorously on privacy, instead of allegedly imposing privacy-degrading terms on its users.

DuckDuckGo logo
DuckDuckGo says it ‘does not collect or share personal information’ from users.
Shutterstock

What might happen if the action succeeds?

If Google is found to have contravened the prohibition against monopolisation under the US Sherman Act, it could face substantial fines and damages claims.

But perhaps more concerning for Google would be the prospect of the DoJ seeking to break up Google’s various businesses.

Google owns a range of highly successful services, including Google search, Google Chrome, the Android operating system, and numerous ad tech (“advertising technology”) services. Google’s position and access to data in one business arguably give it advantages in its other businesses.

Eleven Republican attorneys general from various US states have joined the proceedings and could individually seek remedies.

The action won’t be having a major impact any time soon, though. Google’s lawyers estimate the case would only come before the US District Court for the District of Columbia in a year.

Could our competition watchdog be taking notes?

Google could contravene Australia’s misuse of market power law under the Competition and Consumer Act 2010, if it has engaged in conduct of the kind alleged by the DoJ that has an effect on Australian markets.

As part of its 2019 Digital Platforms Inquiry, the Australian Competition and Consumer Commission (ACCC) said Google has substantial market power in the general search and search advertising markets in Australia. It has a market share of about 95% in both cases.

If this is true, it would be unlawful for Google to engage in any conduct that substantially lessens competition in a market (or has the purpose or likely effect of doing so). This could include entering exclusionary agreements that affect Australian markets.

So far, the ACCC has twice brought proceedings against Google, alleging it misled users about how it collects and uses their data. It is also investigating the conduct of Google and Facebook, in particular, in digital advertising markets as part of its ad tech inquiry.

While Australia’s consumer watchdog might wait and see how proceedings against Google fare in the US and the EU, the recent DoJ action could encourage the ACCC in any action it might be contemplating under Australian law on misuse of market power.




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The Conversation


Katharine Kemp, Senior Lecturer, Faculty of Law, UNSW, and Academic Lead, UNSW Grand Challenge on Trust, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Trump took a sledgehammer to US-China relations. This won’t be an easy fix, even if Biden wins



ROMAN PILIPEY/EPA

Hui Feng, Griffith University

Few would have thought a US-China relationship marked by relative stability for half a century would be upended in just four years.

But US President Donald Trump’s privileged tour of the Forbidden City in November 2017 by Chinese President Xi Jinping now looks like it happened in a bygone era, given the turbulence in the bilateral relationship since then.

The shift in the US’s China policy is no doubt one of the major legacies of the Trump administration’s foreign policy, alongside a renewed peace process in the Middle East.

When Trump’s daughter Ivanka said at the Republican National Convention that “Washington has not changed Donald Trump, Donald Trump has changed Washington”. This would certainly include its handling of China.

Trump was the first US president to be given a state dinner in the Forbidden City.
Andrew Harnik/AP

From strategic partner to competitor

Although China’s rise had been a concern of the previous Bush and Obama administrations, it was the Trump administration that transformed the entire narrative on China from strategic partner to “strategic competitor”, starting with its National Defence Strategy report released just one month after Trump’s 2017 China visit.

This read, in part,

China and Russia want to shape a world antithetical to US values and interests. China seeks to displace the United States in the Indo-Pacific region, expand the reaches of its state-driven economic model and reorder the region in its favour.

This new way of thinking deemed the US’s decades-long engagement strategy, deployed since President Richard Nixon in the early 1970s, a failure.

US President Richard Nixon and Chinese Premier Zhou Enlai toast in 1972.
Wikimedia Commons

Prior to Trump, the US had sought to encourage China to grow into a responsible stakeholder of a rules-based international order.

But the Trump administration believes such “goodwill” engagement has been exploited by China’s “all-of-nation long-term strategy” of asserting its power in the Indo-Pacific region.

According to the Trump administration, this is centred on “predatory economics” in trade and technology, political coercion of less-powerful democracies and Chinese military advancement in the region.




Read more:
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Trump takes a unilateral, transactional approach

Trump’s sledgehammer approach to the US-China relationship has been problematic at best.

For one, Trump viewed the relationship transactionally, hardly scratching the surface of the deeper structural issues — such as state subsidies and labour standards — that exist between the countries.

He believed he could reduce the massive US trade deficits with China through a “big, beautiful monster” of a trade deal and this would be a silver bullet for both the economy and his re-election prospects.

This explains all the flip-flops during the drawn-out trade negotiations, during which Beijing largely managed to use the deal as bait to keep larger strategic issues off the table.

China and the US signed a trade deal in January, but relations have only soured further since then.
ERIK S. LESSER/EPA

Moreover, Trump’s policies toward China, at least on the trade front, were unilateral. Instead of finding common ground with allies, Washington angered and deserted its allies by invoking punitive tariffs (Canada), renegotiating trade agreements to the US advantage (Japan and South Korea) and reducing its security commitments under NATO.

At the same time, the Trump administration relinquished US leadership in global institutions dealing with trade, climate change and human rights. As a result, the US lost its allies when it needed them most and gave China a new platform on the international stage.




Read more:
The China-US rivalry is not a new Cold War. It is way more complex and could last much longer


China hawks get the upper hand

Trump’s China policy has been further mired by competing interests in his cabinet.

According to former National Security Adviser John Bolton, Trump’s team was “badly fractured” in its handling of the trade war against China and its wider China policy.

The spectrum of voices in the cabinet ranged from China moderates such as Treasurer Steven Mnuchin and senior advisor Jared Kushner to sceptics such as US Trade Representative Robert Lighthizer to more radical China bashers such as Bolton, Vice President Mike Pence and Secretary of State Mike Pompeo.

China hawks like Mike Pompeo have become increasingly vocal in their anti-China rhetoric in the past year.
Andrew Harnik/AP

As Trump became increasingly frustrated with a recalcitrant Xi reneging on “the deal” in mid-2019, followed by the outbreak of the COVID-19 pandemic, the China hawks in the administration gained the upper hand.

Although this led to a more coherent approach to addressing the strategic challenges posed by China, the result was more direct confrontations with Beijing and heightened tensions.

The past year has marked a low point in relations with tit-for-tat actions on a number of fronts, including

The China hawks in the Trump administration now advocate empowering the Chinese people to change the Communist Party’s behaviour — just shy of calling for a regime change in China.

China becomes more assertive under Xi

Beijing was largely wrong-footed in dealing with a maverick US president so different from previous administrations it had handled with ease.

However, it would be wrong to assign blame for the deteriorating relationship on Washington alone. It takes two to tango.

As Xi has consolidated his power, China has

The list goes on. And these were not provoked by the US.

China has increased its military exercises near Taiwan in recent weeks, including a simulated invasion of the island.
Taiwan Ministry of National Defense/AP

A new president won’t fix the relationship

It is extraordinary that what started as Trump’s petty complaints on trade with China eventually escalated into what many call “a new Cold War”.

Trump may not have succeeded in completely changing Washington, but his administration has at least shifted the public narrative and strategic view of China among the US elites.

Getting tough on China has become a source of rare bipartisan consensus in a polarised political climate. In fact, even if Trump loses the election to Democratic challenger Joe Biden, a fundamental U-turn in US-China relations is still unlikely.

China could face more challenges with a Biden presidency than another four years of Trump.
Carolyn Kaster/AP

The Democratic Party platform contains similarly harsh criticisms of China. Biden has also written:

if China has its way, it will keep robbing the United States and American companies of their technology and intellectual property.

However, Biden does suggest he would ditch tariffs as means in securing a fairer trade deal with China. And he wants to build a

united front of US allies and partners to confront China’s abusive behaviours and human rights violations.

So, if Beijing was hoping the upcoming election would fix its Trump problem by bringing someone new into the White House, it shouldn’t hold its breath.

The US-China relationship has been drastically changed by Trump — and this won’t be undone easily.




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The Conversation


Hui Feng, ARC Future Fellow and Senior Research Fellow, Griffith University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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United States’ standing wanes on Lowy Asia power index



Lowy Institute

Michelle Grattan, University of Canberra

The United States has registered the largest fall in relative regional power of any country in the Indo-Pacific during the last year, according to the Lowy Institute’s Asia Power Index.

The index, started in 2018, ranks 26 countries and territories according to the power they wield in the region. It uses multiple indicators across military capability and defence networks, economic resources and relationships, diplomatic and cultural influence, and resilience and future resources.

While the US is still the most powerful country in the region, it has gone from a 10 point lead over China two years ago to five points in 2020, scoring a rating of 81.6.

“Despite its continuing pre-eminence, US standing has waned in all but one of the eight Index measures,” the report says.

It says the closing power disparity with China suggests America, “far from being the undisputed unipolar power, can more correctly be described as the first among equals in a bipolar Indo–Pacific”.

The US lost the most points in measures where China is ahead – economic relationships, economic capability, and diplomatic influence.

Despite the US’s significant advantages, “the current US administration’s unilateral inclinations mean the United States is an underachiever in its ability to wield broad-based power in Asia. In addition, the coronavirus has contributed to a loss of US prestige.

“America has suffered the largest reputational hit in the region for its domestic and international handling of the COVID-19 pandemic.”

The report says while China has been “diplomatically diminished” by COVID it is “holding ground in its overall power”.

“In conditions where most countries are less powerful than a year ago, China’s fast economic rebound from COVID-19 will widen the power differentials between itself and the rest of the region.”

China, which ranks second at 76.1 on the regional power index, has an unchanged score.

“China leads in four of the eight measures of power: economic capability, diplomatic influence, economic relationships and future resources. But the country delivers inconsistent results in the other measures, with stark strengths and weaknesses. By contrast, US performance in the Index still appears more rounded.”

Australia and two other middle powers – Vietnam and Taiwan – were the only countries to gain in comprehensive power in 2020.

“Their competent handling of the COVID-19 pandemic was a necessary, but not sole condition for improving their regional standing.”

Australia ranks number 6 on the index with an overall rating of 32.4. It was previously 7th and has overtaken South Korea. Its greatest improvement was in cultural influence.

“Australia’s comparative advantages as a middle power are most evident in its defence networks, where it ranks second behind the United States. Despite a far more modest military capability, Australia is ranked ahead of the United States for its defence diplomacy with non-allied partners.

“Canberra has led the way in forging variable geometry — bilateral, trilateral, quadrilateral and ‘quad plus’ — defence partnerships with a diverse range of countries, including India, Japan, Indonesia and Vietnam. Australia carries less ‘great power baggage’ and has demonstrated it can be far nimbler in Southeast Asia than its US ally.”

But the report warns of the effect of the contraction of migration to negative levels.

“Dropping out of the demographic ‘Goldilocks zone’ will have adverse implications for Australia’s fundamentals as a young and growing middle power. The failure to reverse this trend in the next few years would result in a smaller, poorer and ultimately less secure nation.”

The report also concludes that Japan will take much of the next decade to recover economically from COVID. It says that of all the countries, “India’s economy has lost the most growth potential through the damage inflicted by the pandemic”.

The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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