What Google Can Learn From Microsoft’s Antitrust Problems

By Nicholas Economides

Headshot of Nicholas Economides

The longer the EU’s cases against Google last, the more the damage to Google. Can Google learn from Microsoft’s experience, settle quickly, and, as an adult giant, avoid squashing its rivals?

The European Commission is not playing.

The European Commission’s antitrust lawsuits againstGoogle, which has recently made headlines, threaten to impose an up to $7 billion fine on the tech giant for forcing Android phone manufacturers (OEMs) to use Google Search, among other alleged violations. This comes on top of the EC’s suit against Google for favoring its affiliates in Internet search, and the EC suit on Google’s dominance and exclusive dealing in online advertising. On Android, Google does not allow Android OEMs, such as Samsung, to install “Google Play” unless they also install “Google Search” as the default application for search.

You might ask what’s wrong with Google GOOG 0.21% bundling its applications? And after all, McDonalds MCD 0.02% sells bundles (“meals”) of a big Mac with fries and Coke. The big difference is that Huge difference: McDonalds allows you to buy all parts of the bundle separately. It does not force you to buy the Big Mac if you buy fries (assuming that fries is the best part of the “meal”). Because the parts of the McDonald’s bundle are available a-la-carte, no law is broken when they are also sold as a bundle.

Google’s type of bundling, called “tying” in the law, is exactly what got Microsoft in deep trouble starting in 1998 when the company was bundling Internet Explorer with Windows and later its Media Player with Windows. The United States sued Microsoft and won in 2001, precipitating billions of losses in class action suits against Microsoft MSFT -0.15% . The EU sued Microsoft twice, won both times, and imposed fines totaling $3.4 billion. It even forced Microsoft to create a special version of Windows for European consumers without Windows Media Player!

Read the full article as published in Fortune.

Nicholas Economides is a Professor of Economics.