Competition regulation

Google faces potential breakup as DOJ targets search monopoly

The US Department of Justice has proposed remedies to dismantle Google‘s dominance in the search market, which analysts warn could undermine the company’s primary profit source and hinder its advancements in AI. The DOJ may seek to compel Google to divest parts of its business, including the Chrome browser and Android operating system, while also considering measures such as barring the collection of sensitive user data, requiring transparency in search results, and allowing websites to opt out of their content being used for AI training.

The proposed changes have already affected Alphabet’s stock, which fell by 1.5% after the announcement. Analysts indicate that if these remedies are put into action, they could diminish Google’s revenue while providing more opportunities for competitors like DuckDuckGo and Microsoft Bing, as well as AI companies such as Meta and Amazon. With Google’s share of the US search ad market expected to fall below 50% for the first time in over a decade by 2025, these remedies are viewed as essential for creating a more competitive landscape.

Despite the ambitious nature of the DOJ’s proposals, some experts are sceptical about their feasibility. Adam Kovacevich from the Chamber of Progress argues that these remedies could encounter legal challenges and may not withstand the appeals process. While investors appear doubtful that a forced breakup of Google will take place, the situation highlights the increasing scrutiny and pressure on the tech giant within a rapidly changing competitive landscape.

X exempt from gatekeeper obligations in EU’s Digital Markets Act

Elon Musk’s platform, X (formerly known as Twitter), will not be classified as a ‘gatekeeper’ under the EU’s Digital Markets Act (DMA), a landmark set of tech regulations that impose strict obligations on major digital players. According to sources familiar with the situation, the European Commission, which has been investigating X since May, is expected to confirm this decision in the coming week.

The DMA prevents dominant tech companies from abusing their market power, particularly in messaging apps and pre-installed software. Platforms designated as gatekeepers must comply with rules to promote competition, such as ensuring their messaging systems are interoperable with rival apps and allowing users to choose which apps to install by default on their devices.

Despite meeting the user-base threshold for a gatekeeper, X argued that it does not meet the additional criteria of being a key intermediary between businesses and consumers. This claim led the Commission to launch its investigation to clarify whether the platform should face the extra obligations imposed by the DMA.

While several major companies, including Alphabet, Amazon, Apple, Meta, Microsoft, TikTok’s parent company ByteDance, and Booking.com, have already been named as gatekeepers under the act, X has successfully avoided this designation, at least for now. If violations are found, this decision could spare X from stringent requirements and potential penalties, amounting to up to 10% of a company’s global revenue.

As the Commission’s ruling draws near, it highlights the ongoing scrutiny faced by tech giants under EU regulations to curb their influence over the digital economy. For Musk’s X, this is a significant reprieve amid growing regulatory pressure on Big Tech worldwide.

E-commerce in Europe sees rebound amid strong competition from Temu

Online shopping in Europe is making a comeback this year, with ecommerce turnover expected to reach €958 billion, up 8% from 2023, according to a report by Ecommerce Europe. While inflation has strained consumer spending power, recovering confidence is pushing more shoppers back online. However, the competitive market has intensified, particularly due to low-cost platforms like Temu, which is owned by PDD Holdings. These marketplaces, known for offering cheap products, are challenging local players across Europe.

In countries like Germany and Denmark, industry leaders have voiced concerns over the growing presence of Chinese platforms like Temu, which offer significantly lower-priced goods. These platforms are seen as creating an uneven playing field, as they are not always subject to the same regulations as European retailers. Despite these challenges, e-commerce in Europe is seeing its first real growth in years after adjusting for inflation, signaling a shift toward a “new normal” in consumer behavior.

US DoJ aims to break Google’s search engine monopoly

The US government is considering drastic measures to break up Google’s dominance in the online search industry, which could lead to the company divesting critical parts of its business, such as its Chrome browser and Android operating system. The potential legal move follows a judge’s August ruling that declared Google had illegally established a monopoly in online search. With the tech giant controlling about 90% of internet searches in the US, the Justice Department is pushing for remedies that could transform how Americans access information and shrink Google’s revenue while creating more opportunities for competitors.

One of the government’s proposals involves halting Google’s massive payments to ensure its search engine remains the default on new devices. In 2021 alone, Google paid $26.3 billion to companies like Apple to keep its search engine pre-installed on smartphones and browsers. The Justice Department argues that ending these agreements is necessary to prevent Google from maintaining its dominant position in search distribution today and in the future, particularly as the market expands into AI.

Prosecutors are also eyeing Google’s role in the growing AI sector. They propose opening up Google’s vast indexes, data, and models to its rivals to prevent the company from monopolising AI-driven search technologies. Additional suggestions include limiting Google’s ability to make deals, restricting competitors’ access to web content and allowing websites to opt out of having their data used for AI training. Google, however, has pushed back, arguing that such interventions could distort the rapidly developing AI industry and stifle innovation at a crucial moment.

The stakes are high for Google, which plans to appeal the proposed remedies, calling them ‘radical’ and far beyond the scope of the legal case. Google maintains that its search engine’s popularity is due to its superior quality and points to competition from companies like Amazon as proof of a competitive market. Meanwhile, the company faces mounting legal battles, including a separate ruling forcing it to open its Play app store to greater competition.

The Justice Department is expected to submit more detailed proposals by 20 November, with Google having until 20 December to respond with its suggestions.

Why does it matter?

The antitrust case is seen as a significant victory for regulators seeking to rein in the power of Big Tech, with similar lawsuits already filed against Meta, Amazon, and Apple. Smaller competitors, like Yelp and DuckDuckGo, have voiced support for breaking up Google’s assets, advocating for changes that could level the playing field in both search and AI.

Judge allows FTC antitrust case against Amazon to proceed

A US District judge has allowed the Federal Trade Commission’s antitrust case against Amazon to proceed, although some claims made by state attorneys general from New Jersey, Pennsylvania, Maryland, and Oklahoma were dismissed. The FTC accuses Amazon of using anti-competitive tactics to dominate the online retail market, including an algorithm that allegedly inflated prices for US households by over $1 billion before it was discontinued in 2019.

Amazon had sought to dismiss the case, arguing that the FTC had not proven harm to consumers. However, the judge ruled that it’s too early to consider Amazon’s defense that its practices benefited competition. The case will continue, keeping the spotlight on Amazon’s business practices.

Court ruling forces Google to allow rival app stores

A US judge has ruled that Google must make significant changes to its Play Store, allowing Android users to access third-party app stores and payment methods for three years. The ruling comes after a jury sided with ‘Fortnite’ creator Epic Games, which accused Google of monopolising app access and in-app payments on Android devices.

The order, issued by Judge James Donato, prevents Google from blocking alternative payment options or pre-installing its app store through deals with device makers. The decision is set to take effect on 1 November 2024, giving Google time to comply. However, Google plans to appeal the ruling, arguing that it could harm consumers, developers, and device makers.

Epic Games CEO Tim Sweeney called the decision “big news” and said it could lead to a more competitive Android ecosystem by 2025. Meanwhile, Google is also facing antitrust cases over its dominance in web search and ad technology.

Rivals urge EU to rein in Microsoft’s Edge advantage

Several rival web browsers, including Vivaldi, Waterfox, and Wavebox, along with a web development advocacy group, have called on the European Commission to impose stricter antitrust regulations on Microsoft’s Edge browser. In a letter dated 17 September, the group argued that Edge, pre-installed on all Windows devices, is given an unfair distribution advantage, limiting competition. This follows a recent lawsuit by Opera, a Norwegian browser company, which challenged the Commission’s decision to exempt Edge from the Digital Markets Act (DMA).

DMA aims to stop dominant online platforms from restricting consumer choices by setting guidelines for ‘gatekeeper’ services. Rival browsers argue that Microsoft’s practice of making Edge the default browser on Windows undermines the spirit of the law. They contend that Edge’s pre-installed presence gives it an unfair advantage, making it harder for independent browsers to compete, especially as many users rely on Edge to download alternatives.

Neither Microsoft nor the European Commission has commented on the issue, but critics have pointed out that Edge’s pop-up messages often misrepresent the features of rival browsers. Despite these allegations, Microsoft Edge holds only a small portion of the global browser market, with just over 5%, while Google Chrome dominates with 66%.

Amazon’s AI partnership with Anthropic cleared by UK regulator

The United Kingdom‘s Competition and Markets Authority (CMA) has confirmed that Amazon’s $4 billion partnership with AI startup Anthropic will not be subject to a more in-depth investigation. The regulator determined that the deal did not raise competition concerns under Britain’s merger regulations.

Amazon expressed support for the CMA’s decision, noting that it acknowledged the regulator’s lack of jurisdiction over the collaboration. The CMA also cleared a similar partnership between Microsoft and Inflection AI, while a deal between Alphabet and Anthropic remains under review.

Anthropic, which was co-founded by siblings Dario and Daniela Amodei, former OpenAI executives, reiterated that its partnerships with major tech firms do not compromise its independence or governance. The startup has received billions in investments from several large companies.

Amid growing antitrust scrutiny of deals between startups and big tech firms, regulators are closely monitoring collaborations like those involving Anthropic and its partners.

Appario sues to dismiss Indian antitrust investigation

Appario, a former top seller on Amazon India, has petitioned a court to dismiss an antitrust investigation that concluded Amazon and several sellers breached local competition laws. The Competition Commission of India (CCI) alleges that Amazon, Walmart’s Flipkart, and certain smartphone brands favoured select sellers and prioritised specific listings. These accusations were based on a 2021 Reuters investigation, which exposed Amazon’s internal practices. Despite the findings, Amazon continues to deny any misconduct.

Appario, which has ceased selling on Amazon, is contesting the CCI’s findings in the Karnataka High Court, asserting that the report implicating it should be “set aside.” This legal action marks the first challenge to the CCI’s ongoing investigation, initiated in 2020, and poses a significant obstacle for Amazon in India, one of its most important markets.

The CCI previously conducted raids on Appario and other sellers during its investigation. Court records indicate that Appario is also challenging a CCI order that requires it to submit financial statements following the investigation. Neither Amazon nor Appario has commented on the ongoing legal proceedings.

EU debates future of telecom regulations amidst competing visions

The European Commission’s Competition Directorate (DG COMP) and the Connectivity Directorate (DG CNECT) are at the centre of a critical debate over the future of the EU telecom regulations. That discussion highlights the struggle within the EU to balance regulatory harmonisation with market fragmentation.

DG CNECT advocates for increased consolidation in the telecom sector, arguing that the current fragmented landscape hampers competitiveness and investment compared to the more integrated markets of the US and China. In contrast, DG COMP warns that excessive national consolidation could lead to higher consumer prices and undermine the competition necessary for innovation.

As these discussions progress, DG COMP and DG CNECT are examining the implications of indirect deregulation in the telecom sector. Specifically, DG COMP has raised concerns that eliminating regulated sub-markets could increase the bureaucratic burden on national regulators, thereby reducing the effectiveness of oversight across the EU. That shift would transfer more responsibility to individual member states, potentially leading to inconsistencies hindering the EU’s telecom objectives. Meanwhile, while DG CNECT supports deregulation, it must consider the potential impacts on market dynamics and consumer protection.

DG COMP and DG CNECT are committed to fostering innovation within the telecommunications sector through strategic investments in future technologies. DG COMP emphasises the importance of competitive markets in driving advancements like edge computing and OpenRAN. At the same time, DG CNECT argues for regulatory frameworks and consolidation to facilitate these investments. Ultimately, their shared focus on innovation aims to enhance the EU’s telecommunications infrastructure and maintain its competitiveness in the global market.