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French Court Calls Free Google Maps Unfair Competition

Posted by timothy on from the protecting-people-from-benefits dept.

jfruh writes "A French court has ruled that Google is unfairly subsidizing its free mapping products, making for unfair competition with paid services. This might seem ridiculous, but keep in mind that Google started charging for use of its mapping API once the free version had come to dominate the market."

18 of 238 comments (clear)

  1. This was predicted to happen two years ago by bonch · · Score: 5, Insightful

    This might seem ridiculous

    Why would it?

    Microsoft was punished for pumping a market with a free product, with its development supported by revenues from a monopoly product, so that they could afford to give it away where competitors could not. If Google offers something for free, kills off its competitors who were charging for their version, and then starts charging when they're the only ones left, then the French court has a point.

    Even the headline in the linked article is absurd: "French court protectionism fines Google Maps for succeeding". No, that's not what they were fined for. They were fined for what French competitor Bottin claimed would happen two years ago--Google would offer Maps for free, make their competitors go bankrupt, and then start charging for Maps once they controlled the market. That's precisely what ended up happening!

    1. Re:This was predicted to happen two years ago by JoshuaZ · · Score: 5, Insightful

      Is Linux unfair competition for Windows because it's given away for free?

      There's no danger that everyone using Linux will have to pay Linus Torvalds to keep using it after it gains market ascendancy.

    2. Re:This was predicted to happen two years ago by BradleyUffner · · Score: 4, Insightful

      I don't see how that's fine-worthy. That's the market working. If the consumers of those products are not smart enough to read between the lines, and recognize that building products on top of free services is a bad idea, then Google deserves the win in my book - they bought into a system where they're beholden to someone, and that someone ought to be able to monetize that situation at some point or another.

      If people get fed up with Google, and there is a demand for another service, then one will come along and fight them for it - it's not like Google didn't unseat the original kings of search by simply creating a better product.

      One of the principles of a free market is that people have perfect information and act rationally on it. If people lack information then it isn't an example of a free market working properly. So no, taking advantage of people who aren't smart enough to read between the lines is not a good example of the market working. It may be profitable, but it isn't a "free market".

    3. Re:This was predicted to happen two years ago by tripleevenfall · · Score: 5, Insightful

      More to the point, certainly Linux is not anywhere near making Apple or Microsoft worry but Google is. And every day on Slashdot, it seems, there's another story where Google is behaving in ways we'd expect from the nefarious Microsoft but not from our loving friends at Google.

    4. Re:This was predicted to happen two years ago by Anthony+Mouse · · Score: 5, Insightful

      If a company is generating massive revenues from a dominant product (in this case web search advertising), using that revenue to fund development of a free product in another market can be viewed as an anticompetitive abuse of monopoly position.

      No, it can't. The source of the money isn't the thing that matters. If Warren Buffet is preposterously wealth, but has no dominant market position in anything (just a lot of money), and he decides he wants to start giving away eyeglasses for free (i.e. below cost) until all competing eyeglass makers go out of business so that he can subsequently monopolize the market, he's going to be in trouble. It has nothing to do with the source of the money used to sell things below cost.

      By contrast, Google, who wasn't selling below cost (because free + ads is profitable and therefore not below cost), wasn't doing anything wrong. They were doing exactly what competitors in a free market are supposed to do: Providing a competitive product for a low price while still making a profit. The fact that some of their competitors couldn't hack it in a market with aggressive competition is not the fault of the company offering the best product for the lowest price.

      This is made blatantly obvious by the fact that they raised their prices before they had anything close to a monopoly in the market in question. They still compete with Microsoft, OSM and others. If customers don't want to use Google Maps or decide that the higher rates are too high, they still have multiple alternatives.

      France is just butthurt that the French competitors were among those who couldn't compete.

    5. Re:This was predicted to happen two years ago by s73v3r · · Score: 5, Insightful

      That's horseshit and you know it. Google was the dominant player in that space, period. To deny it is to stick your head in the sand and go "LALALALALALALALALA".

      And yes, Google was giving away use of Google Maps FOR FREE. Not Free+Ads, but FREE. If you were a developer, you were allowed to use the Maps API for free. And now that they have achieved a dominant market position, mainly because their API was free, they are charging for its use. That is the very definition of anticompetitive: Artificially lower your rates through subsidies from your other departments, then once you've achieved dominance, raise your rates.

    6. Re:This was predicted to happen two years ago by Missing.Matter · · Score: 3, Insightful

      The way the term "free market" is used in the article is just to indicate government has no intervention or at best a neutral position. When people espouse the virtues of a "free market" they're usually talking a market where there is perfect competition. That is, the company with the best product gets the most customers, prices follow the laws of supply and demand, etc. The only way these laws actually work is if it meets several conditions, one of which is perfect information and rational buyers. Otherwise you have failures in the system and you end up with collusion, scams, monopolies, etc. Sure the government isn't involved, but it's a far cry from a properly functioning "free" market. So I think it's safe to say there is no such thing as "free" market without a perfect market.

    7. Re:This was predicted to happen two years ago by Missing.Matter · · Score: 5, Insightful

      What gave you the idea that people think free=perfect?

      Because an imperfect free market is what we saw during the industrial revolution. When most people say they want a free market, they don't have child labor, unsafe working condition, rampant and unfettered pollution in mind. Profit-seeking entities actively try to move away from the equilibrium price predicted by perfect market economics by violating the tenants of a perfect market economy. They collude with each other, price fix, employ unsafe labor practices, pollute the environment, etc. The only reason they can do these things is because of information imbalances.

      Here's how the argument usually goes. I say "In a free market unregulated by government, companies create unsafe products. This is why we need the FDA." The free market proponent in turn says "In a free market, a competitor will enter the marketplace that does not create unsafe products, and people will buy that product instead. Thus, through the miracles of the free market, the irresponsible company will go out of business and the economy will regulate itself." But again, this does NOT happen in an imperfect free market because of barriers of entry, imperfect information, geographic conditions, etc.

      So I still maintain that when people talk about the "free market" they're talking about this ideal economy that can regulate itself without the need for government intervention. The perfect market exists on this very unstable equilibrium where if any of the assumptions are violated, you slide in the direction of a monopolistic, oligopolistic, monopsonistic, etc. market. It's not always that bad, but in the worst cases you need government intervention and thus no such thing as a "free market" without a perfect market.

    8. Re:This was predicted to happen two years ago by Bill_the_Engineer · · Score: 3, Insightful

      Please show me how Google has the ability to fix prices in the Search market, AND how they grow their market share in that market through means other than normal business operation. ... Note that being dominant in an area has very little to do with being a monopoly, and even less to do with monopolization of your market position.

      Google is able to provide for their many web services for free from all the advertising revenue that they earn with Google Adwords, DoubleClick and AdMob. They've pretty much cornered the advertising market with their dominate share of the search engine market and web applications. They secured their top spot with their purchases of Sprinks (2003), Applied Semantics (2003), dMarc Broadcasting (2006), YouTube (2006), AdScape(2007), DoubleClick (2007), AdMob (2009), Teracent (2009), Invite Media (2010), and Admeld (2011). This doesn't include all the other purchases of search technology companies, review sites (including Zagats), web applications, voice of IP providers, social media analytic services, and shopping sites.

      They are basically buying out potential competitors, potential technology that they can use for their advantage, or high traffic websites that would suddenly use one or more Google advertising subsidiaries.

      This is similar to the tactics used by Microsoft in the late 80's early 90's to secure their dominate position.

      --
      These comments are my own and do not necessarily reflect the views or opinions of my employer or colleagues...
    9. Re:This was predicted to happen two years ago by Missing.Matter · · Score: 5, Insightful

      Are you seriously not getting this? Google Maps API was introduced into the market free of charge to everyone. Customers who used to pay companies like Bottin Cartographes for their map service switch to Google Maps since it's free. After stealing marketshare and customers, in October 2011 Google begins charging for its service. How is this not textbook antitrust?

    10. Re:This was predicted to happen two years ago by Grishnakh · · Score: 4, Insightful

      It's a pretty big stretch to call a company logo an "advertisement". If that were the case, then why do TV networks carry ads for other companies? Why don't they just put their own logo everywhere, and advertise themselves only?

      Expecting tons of people to click on a Google logo on a website's embedded map is a bit silly.

    11. Re:This was predicted to happen two years ago by symbolset · · Score: 3, Insightful

      Oh boo fricken hoo. I remember when Google was trying to pay these map weasles for access to their map data, but they wouldn't let Google use it for what they wanted at any price. They were a bunch of jerks and you couldn't post a hand-drawn map to your yard sale but they'd threaten to sue you for IP theft. They were relics holding onto rent-seeking behaviors and holding back progress. So in 2004 Google bought Keyhole and Where2 and a bunch of other assets and liberated the map data. And now those jerks are out of business, or going there. Cry me a fucking river.

      --
      Help stamp out iliturcy.
  2. Airbus by Anonymous Coward · · Score: 2, Insightful

    Just sayin. France is being hypocritical.

  3. Loss Leader by Aladrin · · Score: 3, Insightful

    Are they going to make all loss leaders illegal? Seems to me it works the same for everyone, regardless of the industry.

    --
    "If you make people think they're thinking, they'll love you; But if you really make them think, they'll hate you." - DM
    1. Re:Loss Leader by DaveGod · · Score: 3, Insightful

      A loss-leader is where the long term strategy is to have one product/service always being sold at a loss (or anyway "not enough" profit), in order to attract custom to a profitable product. An example for a manufacturer is razors (money's in the blades), an example of an outlet is milk (money is in the other stuff the customer picks up).

      The argument is more that Google is using penetrative pricing. This is where you have a short term strategy to introduce a product/service at a loss in order to gain a foothold in the market, whereupon you can raise the pricing to competitive levels.

      Penetrative pricing pricing becomes uncompetitive when the objective isn't to gain just a foothold, but to dominate the market. Regular penetrative pricing increases competition in the market over the long term while monopoly abuse decreases it. One indicator, not definitive, that the line has been crossed is when the amount of losses being racked up is so disproportionate that monopoly rents would be required to obtain a reasonable return on all that financing.

      This is also why the charge tends to apply to existing companies moving into a new market and not a new up-start. If an up-start can obtain that kind of financing then the incumbents and other up-starts should be able to find it too - it's all just an action of a free and competitive market. Google on the other hand can throw so much resource at something that economic principles of "free" or "competitive" market forces do not apply.

  4. Is everything you wish were different unfair? by ScentCone · · Score: 3, Insightful

    Duh! That's certainly UNFAIR.

    If you meant that a huge publicly traded company under enormous scrutiny somehow directly or through arrangements with other people violeted contracts to which you were a party, then, sure. But you don't seem to be saying that. You seem to be saying that the marketplace has changed, and that you wish it hadn't.

    --
    Don't disappoint your bird dog. Go to the range.
  5. Is network TV, or Radio, free? by walterbyrd · · Score: 3, Insightful

    If something is supported by advertisements, is it "free?"

  6. What about Mapquest, and others? by walterbyrd · · Score: 3, Insightful

    Other free map services were around for years before google maps. Why weren't they monopolies?

    Google may be dominate, but that does tie anybody to google. I can easily switch to another free map service.