Google: News Corp joins push to take the tech giants down a peg

Concentrating power in too few hands, as has been allowed to happen with the tech giants, is never good for society.

Google headquarters in California.

News Corp has joined a growing chorus of voices calling for Google to be broken up, as Australia continues to lead the global conversation in what to do about the tech giants.

The once inconceivable idea of breaking up Google is now very much in play, and the technology giant’s 74-page rebuttal to the concerns outlined in the Australian Competition & Consumer Commission’s digital platforms inquiry preliminary report highlights its tone deafness to market power ­issues.

Google told the ACCC last week that it saw no reason for any extra regulatory intervention in the market and refuted claims it had too much market power in ­internet search, search advertising and news media referrals.

It’s a bold claim, especially when about 19 million Australians use Google’s website daily and 94 per cent of searches in the market occur over its search engine. And it’s one that’s only going to add more fuel to the fire when it comes to ACCC boss Rod Sims’s task of bringing it to heel.

Share of desktop search traffic

Acquiring power

Parent company Alphabet consists of not only Google but a range of businesses spanning autonomous driving, drones, home ­internet and artificial intelligence. Google has become so powerful that it’s a verb in the dictionary and is so ubiquitous that to some less experienced internet users, it is the internet.

News Corp, owner of The Australian, says in its submission to o the ACCC, published yesterday: “Google enjoys overwhelming market power in both online search and ad tech services, and … is abusing its dominant position to the detriment of consumers, ­advertisers and publishers.

“While News Corp Australia recognises that divestment is a very serious step … divestment is necessary in the case of Google, due to the unparalleled power that it currently exerts over news publishers and advertisers alike.”

Joining the fight

Spinning off Google’s search engine business is a position that’s more mainstream than you’d think, and extends across the ­political divide.

US presidential candidate Elizabeth Warren this week unveiled a plan to break up the US tech ­giants. She did so onstage at the South by Southwest tech festival in Austin, Texas, where the audience — which included members of those very tech companies — spontaneously broke out into chants of “Break Them Up”.

Warren compared the situation to baseball.

“You can be the umpire; that’s like the platform,” the Democrat said. “Or you can own the team; that’s one of the businesses. But you don’t get to be the umpire and own the team in the league.”

Republicans, too, are joining the fight. Prominent senator Orrin Hatch has called on the US Federal Trade Commission to­ look into anti-competitive effects from Google’s dominance in ­online ads and search.

Warren said at SXSW that the tech giants are competing ­unfairly, given they’re eating up smaller rival start-ups and are not ­allowing healthy competition. Google has acquired more than 200 start-ups since it was founded, including products used by millions of Australians every day, ­including YouTube and mobile operating system Android.

Warren said: “Look at it this way, someone like Amazon runs a platform — you know, the place where you buy your coffee maker and get it delivered in 48 hours, and that’s great.

“But in ­addition to that, they’re sucking up all that information about every purchase, every sale and every one of the other little businesses that are offering their products on Amazon.”

She said her position was not one of socialism but one that is compatible with capitalism. “I believe in markets — markets that work,” she said.

“Markets that have a cop on the beat and have real rules and everybody follows them. I believe in a level playing field.”

Elizabeth Warren: “You can be the umpire; that’s like the platform. Or you can own the team; that’s one of the businesses. But you don’t get to be the umpire and own the team in the league”

Dominant player

News Corp agrees, saying Google’s conduct reveals a pattern of avoiding and undermining regulatory initiatives and ignoring private contractual arrangement.

The company also wants a level playing field, saying any market in which the dominant player is responsible not only for 90 per cent of web searches but also the news we read and what advertising we are ­exposed to is not level.

The company says: “While we recognise that the truly global nature of digital platforms like Google mean that some of the proposed remedies in this submission may require some co-ordination among governments internationally to be truly effective, we do not believe the ACCC should shy away from taking ­action or making such recommendations.’’

The collective might of Google, Facebook and Amazon, in particular, are especially worrying at a time when Australians are connecting smart devices to their homes in record numbers. Everything from smart fridges to light bulbs and Fitbits are now tracking every move and word uttered.

Analyst firm Telsyte predicts there will be 311 million connected devices in homes across Australia by 2021, devices that by and large will be connected back to the US tech giants, feeding them ­precious data about our most intimate ­details.

Big tech fights back

The calls have been met with a predictable backlash by the tech ­giants themselves.

Instagram co-founder Kevin Systrom told the SXSW conference there are many legitimate reasons people are upset with tech firms, including Russian meddling in elections and higher rents near tech hubs.

“We live in a time where I think the anger against big tech has ­increased tenfold. That doesn’t mean that the answer is breaking the companies up,” Systrom said.

“My fear is that a proposal to break up all tech is playing on everyone’s current feeling about anti-tech, rather than doing what politicians should do, which is ­address real problems with real ­solutions.”

The difference between the discourse in the US and News Corp’s proposals is that the ACCC’s proposals are very real, and the ­regulator has a very real opportunity to curb the influence of the tech ­giants that are now too big to fail.

Such a move would have ­precedent.

In the US in 1902, president Teddy Roosevelt sued Northern Securities Company, a railroad trust financed by the country’s two most powerful businessmen, JP Morgan and John D. ­Rockefeller, accused of restraint of trade.

In one of the first anti-trust cases in history, the US Supreme Court agreed with Roosevelt and the company was dismantled.

In 1911, US president William Howard Taft broke Rocke­feller’s Standard Oil empire into 34 separate companies after the US ­Supreme Court ruled the company violated anti-trust laws.

Closer to home and more ­recently, Telstra has undergone a structural separation since 2012, in partnership with the ACCC.

In a move designed to promote competition, Telstra is splitting its network and retail operations amid a shift to the NBN.

It’s a process that is costing Telstra billions in revenue but it will mean more choice and likely cheaper connectivity for consumers over the long term.

Customer outcomes aside, there’s also the question of what a potential tech breakup would look like. As renowned US tech investor and an early backer of Facebook, Roger McNamee, suggested last year, Google should be broken up into eight or 10 different ­monopolies.

“I’m OK with Google being a monopolist in search,” McNamee told CNBC.

“What I don’t want them to do is to use that power to eliminate pricing engines in ­Europe. I don’t want them to use it to make their photo search and all these other things.”

Fine line

It sounds wise in theory, and the unfettered power exercised by Google and the likes of Facebook and Amazon is in need of containment; however, regulators will have to draw a fine line when it comes to balancing enforcement with any detrimental fallout on consumers.

As the inventor of the World Wide Web, Sir Tim Berners-Lee, told The Australian recently, a heavy-handed approach from governments won’t necessarily guarantee success.

The tech giants are powerful but, as Sir Tim said, they do provide useful services, so breaking up big tech would need to be done carefully.

“Companies like Google, Facebook use your data for advertising, which on one hand is very effective and useful for consumers,” Sir Tim said.

“Clearly, there are places where we need change but this is not just about technology, there’s a people problem here as well.”

For the ACCC to begin breaking up the tech giants would be a bold step and one that would ­require persistent work and ­international co-operation.

As persistent as Google and Facebook have been with hoovering up our data and controlling our online lives, any move to counter their market power would need equal dedication.

If anyone is up to the task, it is Sims and his team of regulators. Whether they have the appetite is another question.

Additional reporting: Supratim Adhikari