German Cartel Office Says Google, Other Tech Giants Could Be Regulated Like Utilities

Germany has not been the biggest fan of tech giants that it believes overreach their influence. Now, a report claims that it is considering a new way to deal with them: regulating them like utilities.

The Sunday Times writes that the country’s Federal Cartel Office (Bundeskartellamt) has prepared a 30-page proposal with suggestions of how to cope with the growing power of Google, along with other tech giants. Treating Google as a utility, one of the proposed suggestions, would mean the state having a stronger hand in how services like advertising on the search engine are priced, without diving into questions of how Google needs to alter its search algorithm.

We have contacted both the Federal Cartel Office and Google for comment.

If accurate, it’s worth wondering what other suggestions the Cartel Office has made in addition to the idea of regulating Google and other tech giants. It seems that this is not the first time that the document has been mentioned: it comes up in this Der Spiegel story on Google regulation from July 1, describing that utility-style regulation could be used in an “emergency”, presumably when other routes to ensuring better competition have been exhausted.

The Cartel Office has in the past butted heads with other large tech companies like Amazon, and prevailed. In November 2013 the Cartel Office dropped an investigation into Amazon’s pricing after the e-commerce giant agreed to abandon a policy of barring third-party resellers from offering goods for lower prices on platforms competitive to Amazon.

In any case, it seems like the Federal Ministry of Economic Affairs and Energy (where the Cartel/Antitrust Office sits) is not the only German government body thinking about utility-style regulation. In an interview at the end of June, the Minister of Justice, Heiko Maas, suggested that the company be “unbundled” to break open its monopoly on search services, if it could be demonstrated that Google has abused its market position.

Asked in an interview with Germany’s Frankfurter Allgemeine Zeitung newspaper if he agreed with his political party’s chairman Sigmar Gabriel about “the destruction of Google”, Maas responded like this (via Google Translate and slightly edited):

“Imagine an energy company covering 95 percent of the total market. The antitrust authorities would be quickly on it. Such conditions in a market economy do not make sense, are not healthy. So yes, if Google has abused its dominant market position to exclude competitors systematically, then consideration should be given as a last resort, something like an unbundling.”

(No mention of other areas where Google is active such as in cloud-based applications like Gmail, internet browsing via Chrome or in mobile services with Android, which is the most popular smartphone OS in Germany.)

The news of how a specific country might take action against Google comes at a key time for the company in Europe and its search ads business.

While the most recent Google news concerns how it is implementing the “right to be forgotten” in search results, made in the name of more privacy for individuals, there has been another issue specifically related to search advertising — the same thing that is at issue in these German proposals.

The EU has reached an agreement with Google over how it can modify its search ads and results to make way for more competitors from vertical sectors (eg travel) in its popular search portal. But the settlement has been criticised by competitors, who are now hoping that the incoming European Union president, Jean-Claude Juncker, will block the settlement and re-open the investigation. To complicate things, now Yelp has also moved from being an observer to active participant in the debate with its own formal complaint against Google.

If the reports about the German proposals are accurate, they are a sign that even without a change in that European ruling, Google could potentially face problems in individual countries.

Meanwhile, there are other ways that Google may raise its profile and influence in this part of the world: Last week the company’s investment arm, Google Ventures, confirmed that it would be opening its first office in Europe, in London, with a $100 million fund for startup investments in the region.

That’s not the only investment that Google could be making in Europe. In December, Google revealed that it was earmarking some $20-30 billion of its foreign cash to “fund potential acquisitions of foreign targets and foreign technology rights from U.S. targets in 2013 and beyond.”

In fact, in 2013, Google said it had already looked “pursued but discontinued a potential buyout of a foreign company, with a valuation estimated in the range of $4 to $5 billion,” although it’s not clear whether that was in Europe or another region outside the U.S.

Update: Germany’s Federal Cartel Office has (finally) responded to our questions about the paper with the following statement, confirming that there is a review and that it is ongoing:

“In the last weeks, Federal Minister Gabriel has repeatedly pointed out the changes by living in an increasingly digitalized world,” a spokesperson says. “The Minister has made clear that the technological changes not only affect the commercial field but more and more the private living conditions of citizens. Hence, the government and its institution ought to think about how to deal with such chances. This includes many aspects such as market power, regulation, data protection. It is the question of a new framework for the digital age.

“With respect to competition law, the respective authorities are in charge (Federal Cartel Office, Regional Cartel Offices, EU Commission). The competition control deals with potential risks resulting from a market dominating position. The Federal Ministry of Economics reviews whether a further regulation exceeding current competition law is necessary in case such risks cannot sufficiently be addressed by competition law.”

He adds that because the review is ongoing, he “cannot provide the mentioned paper of the Federal Cartel Office.”

Google, meanwhile, declined to comment.