As Britain sweltered during the hottest July in decades, few people noticed business news stories. Instead, minds tended to be occupied by the World Cup, President Trump’s visit to the UK, Love Island and Brexit.
A record fine goes almost unnoticed
One major story that went almost unnoticed was the EU’s record €4.3bn fine against Google. The penalty, the largest ever levied by Europe’s competition authority against a single company, was for anti-competitive practices associated with the tech titan’s Android mobile operating system and came just a year after Brussels punished the company with a separate €2.4bn fine for abusing its market dominance.
Does it matter?
Though substantial, the sanction doesn’t really dent the Google money-making machine. The business shrugged off the fine. Its parent company, Alphabet, delivered revenues of $26.24bn for the quarter, comfortably beating analysts’ expectations, and increased its share price by 6%. In fact, Alphabet presented the EU’s fines, alongside R&D, marketing and administration, as regular costs of doing business in its latest accounts, rather than as one-off extraordinary items – a pragmatic move for investors, but one which sets an uncomfortable tone.
Of course, the ruling, which Google is appealing, has wider implications. It forces the search giant to open up its Android software to greater competition and hampers its ability to garner revenue from online advertising, if consumers move to other platforms. However, Google doesn’t seem that worried, suggesting that it may start to charge phonemakers for access to its version of Android, apparently confident that consumers are prepared to pay for any costs that are passed downstream.
Maybe not now…
Perhaps consumers would be willing to pay and maybe that’s why so few people seem to care about the fine. Perhaps they don’t care, because they know that, despite unsavoury monopolistic behaviour, they don’t want to change their usage of Google services.
… but beware of reputational erosion
However, there is reputational risk for Google in this apparent business-as-usual approach to major anti-trust fines. Most people see breaking the law as unacceptable. By treating EU fines as simply a cost of doing business, the tech giant appears to be normalising law breaking. This strains the goodwill of the public, particularly when the company has quietly ditched the first paragraph of its code of conduct which begins with the well-known motto “Don’t do evil” and includes the sentence:
“[Don’t do evil] is also about doing the right thing more generally — following the law, acting honorably, and treating co-workers with courtesy and respect.”
The timing of this change to its code of conduct is probably no more than coincidence, but it doesn’t look good.
Maintaining a robust reputation is often about the way that you handle setbacks, adopting an appropriate tone when communicating business challenges and being mindful of the timing of policy changes. Google must be more careful with its hard won public goodwill, because reputation is lost piecemeal and once gone, is incredibly difficult to recover.