Introduction
The main focus of this paper is on Google, which is facing a lawsuit from the Department of Justice. This case examines the company’s illegal activity, which consists of non-compliance with antitrust legislation. Google used various levers that contributed to limiting the development of competition in the field of search engines. This problem leads to the fact that various companies are forced to face the high cost of advertising, which means an increase in prices for consumers. Google’s activities put at risk the development of market competition, as the vast capabilities of the IT giant are used to achieve their benefits. However, it is worth noting that the company has various reasons for such actions, as it strives to provide the highest quality service for users. In this case, an ethical dilemma arises, limiting the company’s ability to act according to the law. On the other hand, preventing the development of healthy market competition creates tension, which limits and worsens the opportunities for all participants.
The Nature of Its Business and Corporate Business Environment
As a first step towards this goal, Google founders Larry Page and Sergey Brin developed a new approach to web search, quickly becoming popular among Internet users worldwide. Today, Google’s search engine is widely recognized as one of the largest in the world and is a free and easy-to-use service that usually shows relevant search results that take only a fraction of a second to get. As with everything related to technology, Google does not adhere to traditional solutions when developing its business (Case, 2022). The company is unique in that its focus on innovation and commitment to cost containment means that each employee must make a personal contribution to the company’s work. Using the example of Google, it can be argued that smart companies – which are both innovative and profitable – have three qualities: they hire talented people and provide a space for creativity; carefully monitor progress and results; quickly regulate emerging problems.
The Legal Issues and Regulatory Environment for The Company’s Consumer Issue
The US Department of Justice filed an antitrust lawsuit against Google on October 20, 2020, alleging that the company used anti-competitive methods to dominate the search and advertising market (Cherney, 2021). The government claims Google is using billions of dollars from advertising to pay mobile phone manufacturers, telecom operators, and browsers like Apple’s Safari to keep Google as the default search engine. It is worth mentioning another antitrust lawsuit against Google was filed in the District Court of the Northern District of California. On May 1, 2014, by private individuals – Gary Feitelson and Daniel McKee (Cherney, 2021). They accused Google of pressuring smartphone manufacturers Samsung and other manufacturers to install their apps and search engine by default, thereby hindering free competition. However, on February 20, 2015, the court rejected the claim in this case (Case, 2022). This incident is only part of the overall picture of the problems that the company is experiencing with the antimonopoly legislation.
As a case law, it is worth mentioning that this is the most significant monopoly lawsuit since the Justice Department and the attorneys general of 21 states filed a lawsuit against Microsoft in 1998 (White, 2022). In 2000, the company was found guilty of violating antitrust laws and attempting to suppress competitors’ actions. A federal judge divided the company into two parts: one would continue to develop Windows, the other — application software, including Office. However, in 2001, the company filed an appeal and agreed with the Ministry of Justice (White, 2022). Microsoft has pledged to disclose some of the secret APIs (previously used only in its products) to stop repressions against sellers and PC manufacturers who want to install an operating system other than MS Windows on their computers or to supplement it with alternative programs.
Part of the agreement was a promise to make it easier for ordinary users to choose, install and operate alternative tools. This solution has contributed to the development of various companies involved in the creation of browsers and search engines (Ventura, 2022). This factor also allowed Google to gain its market share, as competition in this area of programs has noticeably decreased. It is worth mentioning that in 2020 the legal committee published a report on the results of a 16-month investigation (Case, 2022). In it, members of Congress recognized Amazon, Apple, Facebook, and Google as monopolists who violate the laws and norms of free competition. In February 2015, the US Federal Telecommunications Commission adopted special rules on applying the principle of absolute neutrality.
After adopting these rules, Internet companies can be considered regulated providers of telecommunications services – in a certain sense, similar to regulated physical infrastructure networks (for example, power lines or gas pipelines). This decision once again confirmed regulators’ conviction that platforms in the market with multilateral network effects and the ability to create additional usefulness for market participants can also limit competition (Melugin, 2020). It is difficult to find a smartphone manufacturer or other business entity that will refuse the considerable sums offered by Google as remuneration under the RSA and MIA agreements (White, 2022). The only exception here is that large companies that have their search engines and, therefore, can claim significantly more income from their use, even in the future. An example of such a company is Microsoft’s Bing search engine, which ranks second (7%) after Google (Case, 2022). Thus, the RSA and MIA agreements obviously have the same purpose as the MADA agreements; they enhance the anti-competitive effect of the latter.
With the advent of competing for online auctions, where advertisers and publishers of websites buy and sell advertising space, Google began to fear that the company’s marginality in this area would fall to about 5% (Case, 2022). Then Google decided to try to convince publishers of websites that using third-party advertising exchanges would create excessive loading on servers. Facebook also entered into agreements with Google, under which Facebook gained access to some sectors of online advertising, and Google maintained its leading position in the market. The companies have jointly managed online auctions where advertising orders are distributed. The company also uses AMP technology, and it allows sites to work faster, but, according to the complaint, it was created to expand an advantage for Google’s advertising services.
Ethical Dilemma and Two Ethical Frameworks
The ethical dilemma for the company is the desire to preserve the convenience of its own search engine to provide useful services to a large number of users without reducing the level of competitiveness. Considering the first ethical framework, attention should be paid to the company’s actions that led to the problem. Google receives a significant portion of its revenue through the provision of advertising services using Google Search (Melugin, 2020). Google is a vertically integrated company that owns the infrastructure and uses it as a developer of Android programs, primarily GMS. Consequently, Google, the copyright holder of the Android OS, can provide Google, the software developer, with preferential access to the infrastructure. Google has no right to conduct such discrimination in favor of anyone, even itself, because:
- it occupies a dominant position in the OS market, where at least the original Android OS and its forks are used;
- such discrimination will negatively affect competition and constitute an abuse of a dominant position.
However, for the company, its actions are an effort to provide users with the best solution in search engines. In this way, the company exerts implicit pressure, limiting the opportunities for the development of competition.
Considering an alternative ethical framework, it should be pointed out that the company could act in order to provide more opportunities for competitive developers. This decision could genuinely contribute to improving the ethical image of the company, as well as become the basis for the development of healthy competition. However, in this case, the ethical dilemma lies in the fact that Google, like any company, strives for constant development and profit hanging (White, 2022). This aspect of the activity is inextricably linked with the company’s responsibility to its employees and users. This question may be limited to several aspects that affect users’ choices. It is worth noting that from the company’s perspective, people use Google because they choose these services themselves, not because they are forced or cannot find any alternatives. However, this statement also cannot be true since the company artificially creates a situation where users initially have limited options in choosing search engines.
Other Legal Topics
It is worth noting that Google faces various other legal problems that significantly affect the company’s reputation. First of all, invasion of privacy should be considered since various applications involve the authorization system of the company itself. The system creates an individual user profile based on the data they provide themselves without noticing. Location, age, hobbies, career, relationship status, and even weight can be the basis for targeted advertising (Kang, 2022). Many third-party services allow users to link an account to a Google profile. Information about each application, additional extensions, and payments is saved. In addition to the names, the system knows how often users use these programs, where they turn apps on, and with whom they communicate (Kang, 2022). The corporation collects data through Google Ad Manager, Google Analytics, and other services, including smartphone applications. This happens even when using the “incognito” mode in the browser.
Situations of defamation – accusations and dissemination of information – happen in different spheres. Among ordinary citizens and ordinary people, among journalists, people in business or entrepreneurs, art or pop culture workers, politicians, among people who are socially active. Among the participants and members of various communities and professional fields. The use of various Google services exposes the company to the danger that it needs to be held responsible for such cases (CNBC, 2022). In this case, it is possible to cite an illustrative case law, which served as the basis for regulating the Internet sphere in case of dissemination of defamatory information. The Federal Court of Australia has found the company guilty of publishing defamatory videos on its YouTube platform. Google was ordered to pay former Deputy Prime Minister of New South Wales John Barilaro more than 700,000 Australian dollars (about $500,000) for a series of racist and offensive videos posted on the YouTube channel Friendlyjordies (CNBC, 2022). Such situations force the company to carry out various changes in the field of service policy and regulation of various rules for the use of platforms.
Moreover, it is worth noting that companies such as Google often face legal problems with intellectual property. A significant case is a lengthy trial associated with using other people’s development methods. When developing the Android mobile operating system, Oracle believed that Google constantly and intentionally used intellectual property related to the Java programming language. It all started in 2005 when Google acquired the raw Android operating system. At first, the system was developed for digital cameras, and now it is installed in about 2.5 billion smartphones (Kohli, 2021). Google engineers then took as a basis the Apache Harmony open-source project, which worked in the Java programming language. This language was provided by subscription, but Google did not make any deductions to the copyright holder, Sun Microsystems (Kohli, 2021). The Internet giant is accused of violating at least seven Oracle patents related to the Java platform. Oracle claims that protected technologies are illegally used in the increasingly popular Android mobile operating system.
Another illustrative case is that one of the largest sites with song lyrics, Genius.com caught Google in the theft of intellectual property. If one types the song’s name and the word “lyrics” into Google, the latter will appear directly in the search results in a window called “wizard”. In these windows appeared texts taken from Genius.com (Kohli, 2021). Due to this, users did not have to click on links. This is the claim of the site to the company. Genius is sure that traffic has been falling in recent years precisely because of the “wizards”. While Genius Media Group Inc. spent money on licenses from copyright holders, Google published texts as its own.
General Recommendations for Business Leadership and Managers
The risks of non-compliance with the requirements of antimonopoly legislation for such companies are quite significant due to significant penalties, high reputational losses, and the possibility of criminal prosecution for the top management of companies. Large business, due to its importance for the market and the economy as a whole, obviously falls into the system of additional monitoring of antimonopoly authorities (Poltarykhin et al., 2020). One of the institutions that make it possible to abandon existing legal stereotypes and ensure compliance with the requirements of competition legislation is a structured set of internal control measures in the form of antitrust compliance procedures.
From the standpoint of strategic management, compliance is one of the directions of effective risk management, which involves the formation of such management technologies and procedures that will comply with the requirements of current legislation and pre-diagnose dangerous risk projects and business practices. Antimonopoly compliance procedures that minimize the risks of violating competition rules must be appropriate for companies, regardless of their turnover (Poltarykhin et al., 2020). However, it is evident that as the business grows and develops, such procedures’ organizational and technological complexity also increases.
In the era of abundance and high competition in which we live, the consumer chooses the seller of the goods or services. Companies must create a high-quality customer experience and improve the level of service in order to stand out from the competition. This will help form and strengthen brand loyalty among potential and existing customers (Poltarykhin et al., 2020). In modern realities, communication with the consumer significantly differs from the effective one a few decades ago. Customers are often technically savvy, understand the issue’s essence, and are demanding; therefore, they need to provide high-quality and qualified assistance, goods with clear benefits and competitive characteristics. It is worth highlighting such methods as conducting training seminars by the antimonopoly authority and, publishing explanations on compliance issues, developing and certifying standard compliance programs for entrepreneurs.
It is necessary to have a clear understanding and recognition of the fact that under the current institutional provisions, antimonopoly regulation applies to the results of economic and financial activities, as well as trading practices of any company, regardless of its capacity and turnover (Poltarykhin et al., 2020). It is necessary to widely inform the business community about the importance of implementing antimonopoly compliance through competition advocacy mechanisms and conducting various training events. The dissemination of information about the most successful practices of the antimonopoly compliance system on the example of large companies may be of undoubted interest.
In addition, the amount of effort and resources required to implement compliance procedures will vary depending on the scale of the business, the diversification of its activities, regional representativeness, and industry affiliation. At the same time, the presence of an antimonopoly compliance system, even in small companies, forms the legal literacy of employees, personalizes the violator, and creates the possibility of forecasting and avoiding antimonopoly risks (Poltarykhin et al., 2020). It should be noted that the key to the success of the compliance program, including the antimonopoly one, is its adaptive inclusion in the substantive concept of the organization’s management and bringing it to such a level that the behavioral policy provided for by the program becomes part of the company’s competitive culture.
Conclusion
A group of U.S. attorneys general filed a lawsuit against Google, accusing the company of illegally monopolizing the digital advertising market. The states that supported the lawsuit said that Google’s share from each advertising transaction is usually two to four times the commission of competing for digital exchanges. The lawsuit alleges that the company used unique strategies to block third-party publishers and advertisers. Because of Google’s strategy, advertising costs increase, and buyers are forced to pay more for the product. In addition, the company suppresses competition by limiting the capabilities of third-party digital advertising platforms. The company faced a rather serious accusation regarding antitrust legislation. All this has led to the fact that Google has significant problems regarding the ethical dilemma. The company’s desire to maintain the quality of its technologies led to the fact that it began to use unfair methods that limit the development of competitors.
It is worth noting that Google has faced other legal problems, including non-compliance with user privacy, difficulties in intellectual property, and the functioning of its services. However, it is worth noting that there are solutions that will allow the company to change the situation in the best way, reducing reputational pressure. Among the main vectors of the implementation of antimonopoly compliance is supported by regulatory documents introduced into the company’s management practice aimed at risk management and prevention and techniques for internal coordination of documents to prevent risks of anti-competitive behavior.
References
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Kohli, E. N. (2021). Software copyright protection after Google v. Oracle. Mondaq. Web.
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Poltarykhin, A. L., Dibrova, Z. N., Kovaleva, I., Vasyutkina, L., Potekhina, E., & Zinisha, O. (2020). World experience in the application of antitrust regulation and compliance system. Entrepreneurship and Sustainability Issues, 7(3), 2313–2325. Web.
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