So you’d sod off to China to escape the EU, Google? Really?
Baidu awaits, then
Analysis Google structures its entire organisation to avoid privacy laws, minimise taxes and de-risk itself from competition oversight*. Today Google’s European supremo hinted that being in China might be less of a hassle, and that losing Google would serve us Europeans right for being so backward.
Of course, it’s a sheer coincidence that Google exec Matt Brittin’s aggressive comments follow the news that the European Commission is likely to file a formal complaint into the bundling of Google applications with its dominant Android platform this week.
“If the services and products they are using are not made in Europe then they will be made in China, and Asia-Pacific and Silicon Valley, and that will be a big missed opportunity,” Brittin told the FT in a tirade against ignorant European regulators, who aren’t “digital” enough. (That’s the FT’s shorthand for what he was getting at).
The reason for Brittin's hostility was the EU's “red tape”. By “red tape” we presume he means things like taxation, privacy and competition law. The kind of “red tape” that is harder for some to avoid than others.
Let’s have a look at the latest bit of “red tape” to tie up Google – the small business of its mobile dominance.
The curious case of Android
Android presents an interesting challenge for competition authorities, as the licensing is carefully structured to appear to be at arm’s length.
On the surface it’s a straightforward tying case, very similar to Microsoft’s bundling of browsers and media players in Windows, and its OEM contracts. The argument is that you couldn’t make a competitive Android without Google’s services, even the Google services you didn’t want. This, the argument goes, unfairly closed the market to promising alternatives such as HERE Maps. Isn’t history simply repeating itself?
But a closer examination shows some nuances that mean EU competition lawyers have some work to do. Once Microsoft’s OEM contracts became public, much of the picture became clear. Per-processor licensing (note for younger readers: back then, computers had just one CPU) and draconian conditions removed the incentives for OEMs to sell PCs with alternative operating systems, or develop their brand with custom shells, or bundle useful software (that might compete with Microsoft’s offerings). Microsoft focussed its arguments on whether the consumer was actually harmed.
Android is more complex. The base platform is open source, and anyone can download the AOSP code, compile it, and make a phone or tablet. Google wouldn’t even know that you’d done it. But the value is increasingly in the services layer, and this in turn has become conditional on what Google dictates.
If you want fast accurate location data, your device needs Google Play Services. If you want the best app store, that’s Google’s. Some apps will just refuse to run. They’re all part of the proprietary binary package that comes from Google, called Google Mobile Services (GMS). The conditions for meeting this are nominally administered by a third party. Such conditions are specified in the contract called a Mobile Application Distribution Agreement.
"Android GMS is a big binary blob that you must integrate. Google has ratcheted it up over the past year. When you sign a MADA, you know it will change,” one OEM told us.
There were further complications to this antitrust investigation: nobody wanted to talk. The European Commission had to threaten phone makers with fines if they didn’t submit answers to the EU's questions, specifically about the MADAs.
“We are using compatibility as a club to make them [OEMs] do things we want”, a Google manager blurted out in 2010, in an email that later surfaced in a lawsuit.
Evidently the Commission finally feels it has enough evidence to proceed. But the threat from Matt Brittin isn’t a convincing one.
Wait. Would Google really be more “free” in a country where Chairman Mao beams out from the bank notes? Google maintains a subsidiary in China, but has found its access to its services cut off by the Great Firewall None of the available remedies available to the Commission would go quite so far.
And in a straight fight between Google and Baidu, it isn't clear who the winner would be. Here are two anecdotes, not widely known in the West.
On a recent visit, your correspondent noted private hire taxi drivers' reliance on Baidu for directions on where to go. That’s because so many roads open in China every month, Baidu is the "only map". Paper ones are useless. On the same visit, Chinese hardware maker Huawei showed off an Apple TV competitor, a box more capable that was being retailed at a fraction of the price (roughly one-fifth). Like Apple TV, the Huawei box/remote combo performed the apparently unique (to Apple) trick of voice navigating through TV schedules. The voice search was powered by Baidu.
Brittin isn't the first Western tech executive to underestimate just how rapidly Chinese technology has advanced in five years. But if he thinks Google will get an easy ride in China, a nation that’s proud of its own technology companies and does what it can to ensure they succeed, we’ll gladly have some of what he’s smoking. There’s European protectionism and then there’s Chinese protectionism. ®
In the 2014 Gonzalez vs Google Spain case – which gave us the so-called “Right to be Forgotten” ruling – Google argued that it was that it was an offshore data processing business, and was not therefore subject to EU privacy rules. The actual computation took place somewhere else, outside the EU.