Legacy regulatory practices will not rein in tech giants

The French Competition Authority hit Google with a $593 million fine this week for failing to negotiate with publishers over news content it uses and profits from. But one expert said what the fine reveals about regulation is bigger than the fine itself. 

For tech giants like Google that earn hundreds of billions of dollars in revenue annually, $593 million is insignificant, said Thomas Jungbauer, assistant professor at the Cornell University SC Johnson College of Business. Jungbauer added that fines like this suggest tried-and-true practices for keeping business monopolies in check may have worked for railroad and telecommunications companies 40 years ago but don’t work to keep tech giants in line.

“There is no company in the world that is not hurt by a fine of half a billion dollars, but it’s not a number that’s going to affect Google and its livelihood as a company,” Jungbauer said. “What we just saw in France is part of a much, much larger problem that, everywhere in the world: We don’t really know how to regulate digital monopolies.”

Indeed, Jungbauer said the U.S., the European Union and other countries tackling tech giants should consider creating new regulatory bodies made up of economic experts and legal scholars to better inform regulatory efforts moving forward.

“We have to think more fundamentally about how do we regulate this new economy, which 70% of the people who actually make the decisions about regulations don’t even partially understand,” he said.

New regulation struggles

The French Competition Authority issued the fine to Google for failing to adhere to injunctions imposed on the company in April 2020 requiring Google to negotiate deals with publishers to use snippets of news content in Google searches.

According to a news release from the French Competition Authority, Google has delayed adhering to the law in various ways, including restricting the scope of negotiation with publishers.

France is not alone in its push to get tech giants to compensate news publishers. Australia and the U.S. are also beginning to negotiate with Google as well as Facebook to pay for the content news outlets create that the companies feature and earn advertisement revenue from.

However, asking Google and Facebook to pay publishers for content is a relatively new effort, and the current structure offers tech giants a lot of wiggle room, which Jungbauer said could leave small publishers in the lurch.

“If I’m Google in this situation and I know it’s not well-regulated, I might go to the big French outlets which I know people care more about, and I might pay them a little more than the smaller outlets,” he said. “Those things are not well regulated and trying them case-by-case is not going to lead to a much better future.”

For Ray Wang, founder and principal analyst at Constellation Research, the issue is less about the money and more about what the precedent of requiring Google to negotiate with news publishers and the subsequent fine sets, which he believes goes against universal business practices

“There’s really no reason why Google should have to pay these fines,” Wang said. “If you owned a store and someone wanted to sell their goods in your store, they’d have to pay you for stocking fees, placement, advertising and promotions.”

Also this week

  • On July 9, the Federal Trade Commission (FTC) and the Department of Justice announced they are planning to launch a review of merger guidelines and update them to reflect “current economic realities” and ensure they “guide enforcers to review mergers with the skepticism the law demands,” FTC Chair Lina Khan said in a statement. Khan released the statement after President Joe Biden signed an executive order last week calling for greater scrutiny of mergers and acquisitions by powerful companies.
  • On Wednesday, Facebook filed a petition asking that Khan be recused from decisions regarding whether the FTC continues its antitrust case against the company. Amazon filed a similar petition earlier this month asking for Khan’s recusal from any investigations of the company, alleging bias based on Khan’s previous statements regarding Amazon’s business practices.
  • On Thursday, U.S. Surgeon General Vivek Murthy called on tech giants to take responsibility for the spread of misinformation about COVID-19 vaccinations. The White House echoed the plea and cited a statistic from research shared in May by the Center for Countering Digital Hate that only 12 people are responsible for producing 65% of vaccine misinformation. Murthy’s call to action comes in the middle of growing debate at the federal level regarding platforms’ content censorship.

Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.

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