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BUSINESS GUARDIAN www.guardian.co.tt DECEMBER 2014 • WEEK ONE
Although no company is mentioned by
name, it is clear which American Internet
giant the European Parliament has in mind
in a resolution that has been making the
rounds in the run-up to a vote on Novem-
ber 27. One draft calls for "unbundling
search engines from other commercial
services" to ensure a level playing field for European companies
This is, in short, the latest and most dramatic outbreak of
Googlephobia in Europe.
This year Europe s former competition commissioner, Joaquin
Almunia, brokered a series of settlements requiring Google to
give more prominence to rivals shopping and map services
alongside its own in search results. Members of the European
Parliament want his successor, Margrethe Vestager, to take a
firmer line. Hence the calls to dismember the company.
The parliament does not actually have the power to carry
out this threat. However, it touches on a question that has
been raised by politicians from Washington to Seoul and brings
together all sorts of issues from privacy to industrial policy:
How worrying is the dominance of the Internet by Google
and a handful of other firms?
Google has 68 per cent of the market of Web searches in
America and more than 90% in many European countries.
Like Amazon, Facebook and other tech giants, it benefits from
the network effect, whereby the popularity of a service attracts
more users and thus becomes self-perpetuating. It collects
more data than any other company and is better at mining
those data for insights. Once people start using Google s search,
and its email, maps and digital storage, they rarely move on.
Small advertisers find switching to another platform too bur-
densome to bother.
Google is clearly dominant, then, but whether it abuses that
dominance is another matter.
It stands accused of favoring its own services in search
results, making it hard for advertisers to manage campaigns
across several online platforms, and presenting answers on
some search pages directly rather than referring users to other
Web sites. However, its behaviour is not in the same class as
Microsoft s systematic campaign against the Netscape browser
in the late 1990s: There are no emails talking about "cutting
off" competitors "air supply."
What s more, some of the features that hurt Google s com-
petitors benefit its consumers. Giving people flight details,
dictionary definitions or a map right away saves them time.
While advertisers often pay hefty rates for clicks, users get
Google s service for nothing, rather as plumbers and florists
fork out to be listed in Yellow Pages which are given to readers
gratis and nightclubs charge men steep entry prices but let
women in free.
There are also good reasons why governments should regulate
Internet monopolies less energetically than offline ones. First,
barriers to entry are lower in the digital realm. It has never
been easier to launch a new online product or service: Consider
the rapid rise of Instagram, Whatsapp and Slack. Building a
rival infrastructure to a physical incumbent is far more expen-
sive---ask telecommunications operators or energy firms---and,
as a result, there is much less competition and more need for
regulation in the real world. True, big firms always can buy
upstart rivals, as Facebook did with Instagram and Whatsapp,
and Google has with Waze, Apture and many more, but such
acquisitions encourage the formation of even more start-ups,
creating even more competition for incumbents.
Second, although switching from Google and other online
giants is not costless, their products do not lock in customers
as Windows, Microsoft s operating system, did. Although net-
work effects may persist awhile, moreover, they do not confer
a lasting advantage: Consider the decline of Myspace, or more
recently of Orkut, Google s once-dominant social network in
Brazil, both eclipsed by Facebook, itself threatened by a wave
of messaging apps.
Finally, the lesson of recent decades is that technology
monopolists---think of IBM in mainframes or Microsoft in
personal-computer operating systems---may be dominant for
a period, but eventually they are toppled when they fail to
move with the times or when new technologies expand the
market in unexpected ways, exposing them to new rivals.
Facebook is eating into Google s advertising revenue. Despite
the success of Android, Google s mobile platform, the rise of
smartphones may undermine Google: Users now spend more
time on apps than on the Web, and Google gradually is losing
control of Android as other firms build their own mobile
ecosystems on top of its open-source underpinnings.
So far no company has remained information technology s
top dog from one cycle to the next. Sometimes former monop-
olies end up with a lucrative franchise in a legacy area, as
Microsoft and I.B.M. have, but the kingdoms they rule turn
out to be only part of a much larger map.
The European Parliament s Googlephobia seems to be a
mask for two concerns, one worthier than the other.
The lamentable one, which American politicians pointed
out this week, is a desire to protect European companies.
Among the loudest voices lobbying against Google are Axel
Springer and Hubert Burda Media, two German media giants.
Instead of attacking successful American companies, Europe s
leaders should ask themselves why their continent has not
produced a Facebook or a Google. Opening the EU s digital-
services market would do more to create one than protecting
The good reason for worrying about the Internet giants is
privacy. It is right to limit the ability of Facebook and Google
to use personal data. Their services should, for instance, come
with default settings guarding privacy, so that companies gath-
ering personal information have to ask consumers to opt in.
Europe s politicians have shown more interest in this than
have American ones.
To address these concerns, though, they should regulate
companies behavior, not their market power. Some clearer
thinking by European politicians would benefit the continent s
@2014 The Economist Newspaper Ltd. Distributed by the New
York Times Syndicate
Manufacturing growth across Asia, Europe
and the Americas eased in November as heavy
price cutting failed to revive demand, surveys
showed on Monday, providing more evidence
that a feeble global economic recovery may be
grinding to a halt.
Worryingly for policymakers at the European
Central Bank, who are struggling to bolster
growth and drive up dangerously low inflation,
factory activity declined in the euro zone s three
biggest economies: Germany, France and Italy.
"The concern is the ongoing lack of any real
growth in the euro zone. We are dealing with
very low price pressures, and when that comes
with weak growth, like in the euro zone, it
raises concerns," TD Securities head of global
strategy, Richard Kelly, said.
Data vendor Markit said its final November
manufacturing Purchasing Managers Index
(PMI) for the euro zone was 50.1, its lowest
reading since June 2013, despite price cutting
made possible by tumbling input costs.
That is barely above the 50 mark that sep-
arates growth from contraction and, in a sign
that there is little prospect of improvement in
December, new orders declined for a third
The growth slowdown comes despite factories
cutting prices at the fastest pace since mid-
2013 although neither factor will likely push
the ECB into loosening monetary policy further
when it meets on Thursday, according to a
Annual euro zone inflation fell to 0.3 per
cent in November, firmly in the ECB s deflation
"danger zone", and as oil prices sank to its
lowest in over five years on Monday with the
industrial bellwether copper not far behind,
there are few reasons to expect any meaningful
Both US crude oil and Brent have now fallen
for five straight months, the longest losing
streak since the 2008 financial crisis and the
rout has spread to gold and silver prices while
the US dollar rose to seven-year peaks against
However, British manufacturing activity unex-
pectedly picked up a little speed as domestic
demand offset falling exports from Europe and
Monday s gloomy news began in Asia with
China s HSBC/Markit PMI touching a six-
month trough of 50.0. The official version was
scarcely better, slipping to 50.3 in November
from October s 50.8.
"This is the lowest reading since March and
highlights downward pressure on China s growth
in the manufacturing sector," Credit Agricole
economist, Dariusz Kowalczyk, said.
China s troubles were felt broadly across the
region, with South Korea reporting exports to
Asia s economic powerhouse falling for the first
time in three months, while its measure of
manufacturing activity stayed stuck in con-
In Indonesia, the PMI was at its lowest since
the survey began in April 2011, while in Japan,
the Markit/JMMA version of the PMI eased.
Japan s economy slipped into recession in the
third quarter as the impact of a hike in sales
taxes lingered longer than anyone expected.
Still, the extent of the contraction may have
been overstated, given figures out on Monday
showed business investment was stronger than
India was a rare bright spot, as it has been
for a few months now, with its PMI climbing
to a 21-month high last month.
Americas slow also
The US manufacturing sector slowed in
November to its lowest rate of growth since
January, according to Markit, with the final
November PMI falling to 54.8 from October s
final reading of 55.9.
In Canada, the pace of growth in manufac-
turing held steady in November, matching an
11-month high from October, as exports jumped
to their highest level in over a year, according
to Markit. The Markit/RBC Canadian Manu-
facturing Purchasing Managers index (PMI)
was at a seasonally adjusted 55.3 last month.
Brazilian manufacturing activity shrank in
November for the seventh time in eight months.
Brazil s economy grew just 0.1 percent in the
third quarter from the second, government data
showed Friday, while annual inflation currently
runs at 6.59 per cent, above the central bank s
tolerance range. Reuters
Factory activity growth slows in Asia, Europe and US
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