Decades of Scrutiny, but Tech Giants Play On

Over the past few decades, Europe's regulators have challenged the practices of some of the titans of U.S. technology, including Microsoft, Intel and now Google.

And despite years of legal wrangling and in some cases, multibillion-dollar fines, the companies have conducted their businesses virtually unchanged.

Microsoft paid $3.4 billion in fines to European regulators over a decade, but its Windows software didn't lose its dominant position in personal computers. Intel is still appealing its antitrust case, which began 15 years ago, even as it has become more powerful than ever in PC chips.

And despite five years of scrutiny by European regulators, Google showcases its own services prominently, such as maps and reviews, in its search results.

In the formal antitrust charges filed Wednesday, the European Commission complained only about Google's the results of shopping searches, noting that investigators were examining other types of search. The agency also began an investigation into how Google bundles its apps with its Android smartphone software, an inquiry that also isn't likely to reach a quick resolution.

"The remedy issues are great challenges for antitrust," said Harry First, a law professor at New York University who has written a book about Microsoft's antitrust troubles. "These companies are big and smart, and they know their businesses better than the regulators do."

The slow process of regulatory enforcement is often at odds with the speed at which tech companies must move, which means that even the $1.4 billion fine faced by Intel can seem like a tolerable cost of business to a company that has $14 billion in cash and liquid assets.

Antitrust issues aren't the only legal challenges facing U.S. tech companies in Europe. Regulators and lawmakers are reviewing low-tax arrangements granted to Apple in Ireland and Amazon in Luxembourg, and privacy watchdogs are looking into how Facebook protects people's online data. Policymakers are also investigating whether U.S. Internet platforms like Amazon have too much control over how Europeans gain access to online services.

Even if regulators do not require substantial changes in how these companies do business, all of these fights impose a cost. In addition to negative publicity, legal costs and possible penalties, the cases are a distraction, forcing companies to defend an existing business model to regulators when perhaps they should be abandoning it because of a changing market.

Rapidly changing technology - rather than regulatory pressure - has been far more important historically in weakening the dominance of big tech companies. Microsoft and Intel, focused with PCs, both missed the rise of tablet computers and smartphones, allowing companies like Apple, Google and Qualcomm to become dominant players in mobile devices.

"All the successful firms in the PC and early Web businesses missed mobile or were late to it," said Timothy Bresnahan, a professor of economics at Stanford who worked for the Justice Department on antitrust matters and has also consulted for Microsoft, Intel and Google.

For Google, mobile apps are now nipping at the primacy of its lucrative Web searches as cellphone users fire up Amazon or Yelp to search directly for products or restaurant reviews.

In a blog post responding to Europe's charges, Google noted, "Today seven out of every eight minutes on mobile devices is spent within apps - in other words, consumers are going to whichever websites or apps serve them best. And they face no friction or costs in switching between them."

Still, the watchful eyes of regulators play an important role in keeping companies' power in check, and Google's competitors cheered the European Commission's actions, which have been much tougher than those of U.S. regulators.

"Google engages in preferencing and manipulates search results so that consumers see content that benefits Google, not the best content for consumers," Stephen Kaufer, chief executive of TripAdvisor, a travel review site, said in a statement. "Today's announcement by the commissioner is the first step to making search on Google better for consumers."

Microsoft, which has played a leading role in organizing industry opposition to Google in Europe, was similarly pleased.

"Clearly every company needs to obey the same legal rules of the road," the company said in a statement. "Today's decision provides to Google a full opportunity to explain its views at a hearing, and the commission will then have the opportunity to decide whether European legal rules have been respected."

Of course, as Microsoft well knows, that's just the beginning of a long process. Microsoft tangled with European regulators off and on for 20 years, starting in 1993, before finally paying its last fine and ending its appeals. Some U.S. tech companies have chosen an alternative approach.

Facebook put itself under European regulatory scrutiny in 2010 by establishing a regional headquarters in Dublin. That means the privacy practices of the social network are generally overseen by Irish regulators, who have traditionally been less confrontational than those in other countries.

"We have an ongoing dialogue with our regulator, the Irish data protection commissioner, who oversees our compliance with the EU data protection directive as implemented under Irish law," said Sally Aldous, a Facebook spokeswoman in London. "We routinely review product and policy updates with them."

Europe has stricter privacy laws than the United States, and Facebook says that its conversations with Irish regulators have led to improvements for all of its 1.3 billion global users, including better tools to review and delete individual posts and clearer explanations of the company's privacy practices.

Facebook argues that under European law, it is insulated from separate oversight by other European countries. Despite that, government watchdogs in at least six nations - France, Germany, Italy, Spain, Belgium and the Netherlands - have opened investigations into whether the company's new privacy policies comply with local rules.

"We have investigated Google. Now, it's time to focus on Facebook," said Mathias Moulin, deputy director of enforcement at the French data protection regulator. "They are the leader in social networks."

Europe's highest court is also hearing a case that focuses on how Facebook moved European data outside the region. And a class-action lawsuit in Austria, which could lead to a fine of around $12 million, contends that Facebook has not respected the online privacy rights of its users.

Amazon, bowing to concerns raised by Edward J. Snowden's revelations of U.S. government surveillance of U.S. tech companies, decided last fall to open a data center in Germany for its Web services division. The company already had a data center in Ireland, but both German and EU regulations have restrictions on storing some of their citizens' personal data across a national or regional boundary.

"German customers wanted a location on German soil, either for perception or legal reasons," Adam Selipsky, a vice president at Amazon Web Services, said at the time.

So Amazon complied.

© 2015 New York Times News Service