Coyote Blog

Step 1:  Large, high-profile company has business practice that ticks lots of people off -- e.g. Facebook slammed for selling user data to Cambridge Analytica

Step 2:  Regulation results -- e.g. European GDPR (though it predates the most recent Facebook snafu, it was triggered by similar outrages in the past we have forgotten by now so I use the more recent example)

Step 3:  Large, high-profile companies that triggered the regulation by their actions in the first place are the major beneficiaries (because they have the scale and power to comply the easiest).

GDPR, the European Union’s new privacy law, is drawing advertising money toward Google’s online-ad services and away from competitors that are straining to show they’re complying with the sweeping regulation.

The reason: the Alphabet Inc. ad giant is gathering individuals’ consent for targeted advertising at far higher rates than many competing online-ad services, early data show. That means the new law, the General Data Protection Regulation, is reinforcing—at least initially—the strength of the biggest online-ad players, led by Google and Facebook Inc.

This is utterly predictable, so much so that many folks were predicting exactly this outcome months ago.

My "favorite" example of this phenomenon is toy regulation that was triggered a decade ago by a massive scandal and subsequent recall by toy giant Mattel of toys with lead paint sourced from China.

Remember the sloppily written "for the children" toy testing law that went into effect last year? The Consumer Product Safety Improvement Act (CPSIA) requires third-party testing of nearly every object intended for a child's use, and was passed in response to several toy recalls in 2007 for lead and other chemicals. Six of those recalls were on toys made by Mattel, or its subsidiary Fisher Price.

Small toymakers were blindsided by the expensive requirement, which made no exception for small domestic companies working with materials that posed no threat. Makers of books, jewelry, and clothes for kids were also caught in the net. Enforcement of the law was delayed by a year—that grace period ended last week—and many particular exceptions have been carved out, but despite an outcry, there has been no wholesale re-evaluation of the law. Once might think that large toy manufacturers would have made common cause with the little guys begging for mercy. After all, Mattel also stood to gain if the law was repealed, right?

Turns out, when Mattel got lemons, it decided to make lead-tainted lemonade (leadonade?). As luck would have it, Mattel already operates several of its own toy testing labs, including those in Mexico, China, Malaysia, Indonesia and California.

The million bucks was well spent, as Mattel gained approval late last week to test its own toys in the sites listed above—just as the window for delayed enforcement closed.

Instead of winding up hurting, Mattel now has a cost advantage on mandatory testing, and a handy new government-sponsored barrier to entry for its competitors.

Google was (and is) a big supporter of Net Neutrality.  Content providers like Google (Google owns Youtube, among other large content sites) want to make sure that other content providers are not somehow given special treatment by the ISP's that provide the bandwidth for consumers to view these sites.  In particular, sites like Youtube and Netflix, which consume a HUGE percentage of the bandwidth at many ISP's, don't want to somehow pay any extra costs that might be imposed on content sites that use a lot of bandwidth.   I wrote this on net neutrality a few years ago:

Net Neutrality is one of those Orwellian words that mean exactly the opposite of what they sound like.  There is a battle that goes on in the marketplace in virtually every communication medium between content creators and content deliverers.  We can certainly see this in cable TV, as media companies and the cable companies that deliver their product occasionally have battles that break out in public.   But one could argue similar things go on even in, say, shipping, where magazine publishers push for special postal rates and Amazon negotiates special bulk UPS rates.

In fact, this fight for rents across a vertical supply chain exists in virtually every industry.  Consumers will pay so much for a finished product.  Any vertical supply chain is constantly battling over how much each step in the chain gets of the final consumer price.

What "net neutrality" actually means is that certain people, including apparently the President, want to tip the balance in this negotiation towards the content creators (no surprise given Hollywood's support for Democrats).  Netflix, for example, takes a huge amount of bandwidth that costs ISP's a lot of money to provide.  But Netflix doesn't want the ISP's to be be able to charge for this extra bandwidth Netflix uses - Netflix wants to get all the benefit of taking up the lion's share of ISP bandwidth investments without having to pay for it.  Net Neutrality is corporate welfare for content creators.

A typical ISP would see this relative usage of its bandwidth.  You can be assured everyone on this list is a huge net neutrality supporter.

Essentially, Google wanted to force ISP's to be common carriers, to be legally required to carry all traffic equally, even if certain traffic (like Google's Youtube) is about a million times more expensive to serve than other people's content.

But the point of this story is not about my issues with Net Neutrality.   The point of this story is Karma, or as we used to say it in the South, what "goes around, comes around."

The European Union’s antitrust watchdog in the coming weeks is set to hit Alphabet Inc.’s Google with a record fine for manipulating its search results to favor its own comparison-shopping service, according to people familiar with the matter.

The penalty against Google is expected to top the EU’s previous record fine levied on a company allegedly abusing its dominance: €1.06 billion (about $1.18 billion) against Intel Corp.in 2009.

The fine could reach as high as 10% of the company’s yearly revenue, which stood at $90.27 billion last year.

But more painful to Google than a sizable fine could be other consequences that come with the European Commission’s decision, including changes not only to the tech giant’s business practices with its shopping service but with other services as well. The EU’s decision could also embolden private litigants to seek compensation for damages at national courts.

The EU is likely to demand Google treat its own comparison shopping service equally with those of its competitors, such as Foundem.co.uk and Kelkoo.com Ltd., possibly requiring the search giant to make rival services more visible on its own platform than they are at present. Such companies rely on traffic to their site from search engines like Google’s.

Hah!  I think this is a terrible decision that has nothing to do with economic sanity or even right and wrong -- it has to do with the EU's frequent historic use of anti-trust law as a way to bash foreign competition of its domestic providers, to the detriment of its consumers.  But it certainly is Karma for Google.  The EU is demanding that Google's search engine become a common carrier, showing content from shopping sites equally and without favor or preference.  The EU is demanding of Google exactly what Google is demanding of ISP's, and wouldn't you know it, I don't think they are going to like it.