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Google accused of abusing market power in landmark US case

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The U.S. Justice Department sued Alphabet Inc.’s Google, accusing it of abusing its monopoly in search in the most significant antitrust action against an American company in more than two decades, with more action by states likely to follow.

Google, which controls about 90 per cent of the online search market in the U.S., is the “unchallenged gateway” to the internet and engaged in a variety of anticompetitive practices to maintain and extend its monopoly, the government said in a complaint filed Tuesday in Washington. The company has used exclusive deals costing billions of dollars to dominate search and lock out competition from rivals, the U.S. said.

“No one can feasibly challenge Google’s dominance in search and search advertising,” Attorney General William Barr said. “If we let Google continue its anticompetitive ways, we will lose the next wave of innovators and Americans may never get to benefit from the ‘next Google.’”

The complaint is the first phase of what’s shaping up as a multi-pronged attack against Google. Texas Attorney General Ken Paxton is preparing a complaint against the company over its conduct in the digital-advertising market, where it controls much of the technology used by advertisers and publishers to buy and sell display ads across the web. A separate group of states, including Colorado and Iowa, is investigating Google’s search practices and said their probe will conclude in the coming weeks.

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Investors brushed off the complaint, which has been expected for weeks. Alphabet shares rose 2.6 per cent to US$1,569.73 at 3:02 p.m. in New York trading. Mark Shmulik, an analyst at Sanford C. Bernstein, told investors that the firm sees “limited risk” to Google from the suit.

Google’s search business generates most of the company’s revenue and has funded its expansion into email, online video, smartphone software, maps, cloud computing, autonomous vehicles and display advertising. The search engine influences the fates of thousands of businesses online, which depend on Google to get in front of users.

Google called the government’s case “deeply flawed” and said it would actually hurt consumers because it would “artificially prop up” lower-quality search options and raise phone prices.

“People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives,” Google Chief Legal Officer Kent Walker said in a blog post in response to the complaint.

Walker likened Google’s distribution agreements with phone makers and wireless carriers to the way a cereal brand would pay a supermarket to stock its products on a shelf at eye level. Other search engines are able to compete with Google for those deals, he said. Users can also easily switch to other search engines on desktops and phones, Walker wrote.

“This isn’t the dial-up 1990s, when changing services was slow and difficult, and often required you to buy and install software with a CD-ROM,” he said. “Today, you can easily download your choice of apps or change your default settings in a matter of seconds—faster than you can walk to another aisle in the grocery store.”

Google began dominating online search 20 years ago with an algorithm that delivered better results than those of its rivals. Since then it has also relied on its own products, like its Android mobile operating system, and exclusive agreements with device makers and mobile carriers to be the default search option for millions of users. That’s given it an insurmountable advantage over rivals, according to the government.

The exclusive agreements with phone makers like Apple Inc. and wireless carriers like Verizon Communications Inc. deny rivals the scale and distribution they need to compete against Google in search, the U.S. said. Google monetizes its dominance in search by selling advertising, which it uses to pay for the exclusive deals. Those payments create a strong disincentive for distributors to switch to another service, according to the complaint.

“Through these exclusionary payoffs, and the other anticompetitive conduct described below, Google has created continuous and self-reinforcing monopolies in multiple markets,” the U.S. said.

In a briefing with reporters, Justice Department officials declined to discuss what specific remedies the government would seek. It would be up to a federal court judge to decide what remedy to impose, including whether to order a breakup of Google’s businesses.

“At a minimum this would require stopping that conduct, but additional relief may be necessary,” said Alex Okuliar, the department’s deputy for civil antitrust.

The Justice Department’s case, which Texas and 10 other states joined, is the first to emerge from an investigation of some of the largest technology companies initiated by Barr 15 months ago. It’s the most significant antitrust lawsuit since the U.S. filed a case against Microsoft Corp. in 1998 and marks a seismic shift away from the government’s mostly laissez-faire approach toward America’s tech giants.

While it’s not illegal to be a monopoly under U.S. law, it’s a violation for a dominant company to engage in exclusionary conduct to protect or strengthen its market power.

Barr had championed the Google case by giving it a high priority and assigning his No. 2 to oversee it. Yet as his department filed the long-awaited lawsuit in federal court, Barr was off preparing to speak on law and order in Marco Island, Florida. Barr has taken a low profile since President Donald Trump, starting about two weeks ago, began pushing him to prosecute his political enemies. On Tuesday, Trump demanded that Barr investigate Hunter Biden.

The Google cases by the Justice Department and the state attorneys general could be followed by a Federal Trade Commission case later this year against Facebook Inc. joined by state attorneys general. In Congress, Representative David Cicilline intends to push legislation to curb the dominance of tech giants following findings of an investigation that Google, Facebook, Apple and Amazon.com Inc. abused their power as gatekeepers in the digital economy.

Cicilline, the Rhode Island Democrat who led the House’s investigation of competition in big tech, called the action “long overdue.”

The combined challenges could upend how the companies do business. If the government prevails, one or more of the tech goliaths could even be broken up — reminiscent of the way the antitrust crusades of the early 20th century led to the breakup of Standard Oil in 1911.

Trump has repeatedly railed against U.S. tech firms, exposing the Justice Department to criticism that the case against Google is politically motivated. Trump economic adviser Larry Kudlow said Tuesday the White House has been “consulting” with the Justice Department about the Google case.

It will likely be more than a year before the lawsuit goes to trial — if it’s not settled first. That could mean a Joe Biden administration will be responsible for continuing the case if the former vice president defeats Trump in November. While Biden has yet to detail his thinking on antitrust, his campaign is talking to proponents of more aggressive enforcement than existed under former President Barack Obama. Many Democratic lawmakers are also concerned about the need for stepped-up antitrust enforcement of large technology companies.

Google is expected to put up a fight and will be able to spare no expense with its defense. Its parent, Alphabet, is one of the world’s wealthiest companies with a market value of about US$1 trillion and projected 2020 sales of US$142 billion.

In hearings and court filings, the company has said it faces robust rivals in all its markets. It has argued that competition has helped lower the cost of online ads in recent years, and it has highlighted the money it makes for publishers and small businesses.

The House antitrust report found that Google has been able to build barriers to competition by becoming the default search engine on desktop and mobile internet browsers. In desktop browsers, Google search has default placement on Google Chrome, Apple’s Safari and Mozilla Corp.’s Firefox, amounting to 87 per cent of the market, according to the report.

In mobile, Google search controls essentially the entire market because it’s the default search on its Android operating system and Apple’s iOS operating system. It pays Apple roughly US$8 billion a year for the privilege, according to estimates by analysts at Sanford C. Bernstein & Co. And that’s not the only such agreement. Google also has deals with Mozilla’s Firefox as well as phone makers including Samsung Electronics Co.

While Europe has aggressively targeted the U.S.’s tech champions, particularly Google, for anticompetitive behavior, American enforcers have largely given them free rein. The FTC closed a previous Google inquiry in 2013 after two years without taking action. Google, Facebook, Amazon, Apple and Microsoft have completed hundreds of acquisitions over the last decade, none of which have been blocked by merger cops.

The case against Microsoft, which accused the software giant of illegally monopolizing the market for computer operating systems, was brought under former president Bill Clinton and nearly led to the company’s breakup.

A federal district court judge ruled that Microsoft should be split up for having tied its internet browser to its Windows operating system — strangling competitors. But an appeals court reversed that ruling and the Justice Department settled the case under the George W. Bush administration.

Still, legal experts have said that by pinning Microsoft down for several years with the investigation and ensuing litigation, the U.S. made it possible for a new crop of tech companies like Google to emerge and thrive.

There are parallels between today’s widespread anti-big-tech sentiment and the Progressive Era push that lead to the breakup of Standard Oil. Oil was to the industrial base of the economy in the early 20th century, what data is to the 21st century economy.

The John D. Rockefeller empire began as a small refinery, but grew through acquisitions to control 90 per cent of U.S. oil production, refining and transportation. Along the way, Rockefeller amassed huge amounts of economic power, as did steel and railroad magnates. That also led to the passage of the Sherman Antitrust Act of 1890 and ultimately Standard Oil’s dissolution.

Google, likewise, began as a small search engine and grew quickly through acquisitions such as YouTube in 2006 and the DoubleClick digital advertising company in 2007 to control vast swaths of the digital advertising ecosystem. Google also stockpiled immense troves of data — decades’ worth of consumer and business buying preferences and surfing habits — deepening its economic grip and making it harder for new entrants to challenge it.

Source: – BNN

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This business owner brought most of her manufacturing home from China — and feels punished for it

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A Canadian company that manufactures children’s toy couches finds itself facing a stiff bill for import tariffs after bringing production home to this country.

While Barumba Play is no longer importing a majority of its product, a single component of the couches has been reclassified by the Canada Border Services Agency and is no longer tariff-free.

The company’s flagship product is a couch for children made of pieces that can be easily taken apart and reassembled for play. Sara Feldstein founded the company in Markham, Ont., in 2021 and initially produced the couches entirely in China.

As the couches were classified as a children’s toy, Feldstein told CBC News they were not subject to tariffs and were brought into Canada without import fees. Tariffs can be used by the Canadian government as a form of taxation on imports to protect Canadian economic development.

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Trouble started for her in 2023, when Feldstein opted to move production of the couches to Canada from China.

“I on-shored my manufacturing to Canada from China and have been penalized for it,” she said.

A woman is sitting on a pink toy couch.
Business owner Sara Feldstein sits on a Barumba Play couch. ‘I on-shored my manufacturing to Canada from China and have been penalized for it,’ she said. (Anis Heydari/CBC)

Feldstein was able to manufacture every part of the couch in Canada except for cloth slipcovers, which she had to keep producing in China.

She received a letter from the Canada Border Services Agency in the summer of 2023 indicating it felt classifying the slipcovers as part of a toy was incorrect. This contradicted what Feldstein was told to expect from business advisors and industry experts that she turned to for advice before opting to transfer manufacturing most of her product to Canada.

Instead, Feldstein says the slipcovers have been lumped in with textiles such as carpets, bed linens and table linens — and now she’s expected to pay 18 per cent duty on imports.

Three cloth slipcovers are pictured on the floor.
These are some of the play couch slip covers that the Canada Border Services Agency has classified as textiles, rather than a component part of a toy. (Submitted by Sara Feldstein)

The CBSA declined an interview request from CBC News. After this article was published, it issued a statement that the Customs Act doesn’t allow it to speak about individual cases, but explained that goods are assessed for tariffs based on how they are “presented at the border,” and that changes to what is being imported can result in a change to tariff classifications.

The CBSA also said if someone importing goods disagrees with a tariff decision, they can appeal, but only after they’ve paid all amounts owed, plus interest.

According to Feldstein, her business now owes at least $47,000 in retroactive tariffs, and she expects costs could escalate up to $70,000 while she waits for the appeals process to play out.

WATCH | How a classification change led to surprise tariffs for this Canadian company: 

Ontario company hit with unexpected tariffs for manufacturing in Canada

5 hours ago

Duration 1:54

After bringing home her manufacturing from China to Canada, Barumba Play founder Sara Feldstein received a letter from the Canada Border Services Agency saying they had reclassified her children’s toy couches from the category of toys to textiles, resulting in an 18 per cent duty that they’re applying retroactively to the past several years of operation. She can appeal but would still need to front the full amount of money owed first. 

Businesses must pay, even during appeals

It’s a cost she’s not sure her business can bear, because she must pay the tariffs now even while she tries to appeal the decision.

That appeal process could take close to a year, according to the CBSA’s current processing times.

“It would make me want to tell others, don’t bother bringing your business back to Canada. Do it overseas. It’s safer that way,” she said.

It’s not unusual for businesses to be caught in the complicated web of tariffs, according to lawyer David Rotfleisch of TaxPage.com, a law firm specializing in tax and business.

A bald man with blue geometric eyeglasses is pictured in front of a bookcase, wearing a suit.
Tax lawyer David Rotfleisch says businesses have to pay tariffs as assessed before appeals are heard. (Gary Morton/CBC)

He confirmed that businesses such as Feldstein’s need to pay assessed tariffs even while mounting a legal challenge because collection is not paused or halted when an appeal is launched.

“Tariff classifications are complex and make income tax look relatively simple,” Rotfleisch said.

“Wrong assessments affect a lot of businesses because they can’t pay it, and by the time the appeal process runs its course, it’s going to take time and [businesses] can’t manage it. So they have to literally shut their doors.”

Suspending payments may not be solution

But eliminating the requirement to pay, even before appeals are exhausted, may not be the right solution, according to Jenifer Bartman, a business advisor based in Winnipeg.

“You could have companies not paying attention to the rules, saying, ‘We’ll go ahead and do this, and if it goes wrong, we’re not going to be out of pocket any time soon,'” she said.

A woman with long blonde hair in a blue sweater faces the camera on a video call.
Business advisor Jenifer Bartman says companies must seek out advice before changing supply chains across borders. (Anis Heydari/CBC)

Bartman pointed out that importing products to Canada, whether partial or fully manufactured, requires a lot of preparation and advice.

“It’s really important for business leaders, especially if they’re venturing into a new aspect of their supply chain …  to understand what the rules are in advance because they can save themselves a lot of time and trouble down the line.”

Business owner says she did her research

For her part, business owner Feldstein said she did consult with experts prior to repatriating manufacturing of her couches to Canada. The decision by CBSA to reclassify surprised her.

Feldstein maintains the slipcovers currently being classified as textiles by CBSA should still be considered just a part of the couches she sells as a children’s toy, and not a separate linen that could be used on its own.

If the slipcovers are a part of the toy couch, they would not have the tens of thousands of dollars in tariffs assessed.

According to the CBSA’s website, to be considered a “part,” the item must meet criteria including that it has no alternative function, be marketed and shipped along with other parts of the product, needed for “safe and prudent use” of the item, and be “committed” to use with the unit.

Barumba Play’s founder isn’t sure what comes next, but until the problem is resolved she’s holding off on growing her business.

“I’m very hesitant to spend money on other items right now when this is in limbo,” said Feldstein.

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'Tone-deaf': MPs grill telecom CEOs about wireless prices at committee – The Globe and Mail

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The chief executives of Canada’s three largest telecom companies stressed that phone and internet prices are coming down during an appearance before MPs on Monday, noting that increased data usage and high spectrum costs may be some reasons Canadians feel otherwise.

The three CEOs – Rogers Communications Inc.’s RCI-B-T Tony Staffieri, BCE Inc.’s Mirko Bibic BCE-T and Telus Corp.’s T-T Darren Entwistle – appeared virtually at the House of Commons industry committee meeting.

Committee members voted unanimously last month to summon the trio to testify after a previous invitation to the chief executives resulted in other corporate representatives showing up instead.

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The committee is studying the accessibility and affordability of wireless and broadband services – an issue that came to the forefront in January when Rogers confirmed it was raising prices by an average of $5 for some wireless customers not on contract.

Mr. Staffieri was pressed on the matter Monday, with Liberal MP Francesco Sorbara suggesting the move was “tone-deaf.”

“Would you not admit that the timing was not great?” he asked.

Mr. Staffieri replied that the price hike only affected customers on legacy plans.

“It was important to us to make sure that these customers had choice,” he said. “With two clicks, they could get onto a plan that was in market and give them the best value for money for their circumstance.”

Conservative MP Ryan Williams questioned Mr. Bibic and Mr. Entwistle on whether Bell and Telus would raise their prices in response to Rogers’s move.

Mr. Bibic would not say whether Bell plans to follow suit, insisting the company’s focus is on lowering costs, while Mr. Entwistle said he remained confident Canadians would see price declines but was “not going to talk about price setting in a forum with my two competitors sitting right here.”

Some members of the committee have said they are concerned about cellphone and internet prices in Canada, arguing Canadians pay too much for those services.

But the CEOs cited recent Statistics Canada data showing wireless prices have declined 16 per cent in the past year and 47 per cent over the past five years.

“If you just compare in Canada, 2019 to 2024 alone, we’re offering in some cases 10 times more data for $40 less a month,” Mr. Bibic said. “You can see the massive drop.”

Mr. Entwistle said that “massive increase in data consumption” partly explains why some Canadians may hold the perception that their telecom service prices have gone up. He said Canadians are “amongst the highest data consumers in the world,” which is why the major companies are offering them bigger plans than before.

“If you mathematically cut the cost in half, but the user uses twice as much data as what they did, historically, the cost is going to look the same to the user,” he said.

Mr. Entwistle added the “missing” element of the conversation pertains to the cost of the physical cellphone itself, which he said can make up nearly half of an overall mobile bill.

“That’s an area where we do not control the economics,” he said.

“At the end of the day, those economics are determined by the device manufacturers.”

The three chief executives also each told the committee that the cost they pay in Canada for wireless spectrum – the electromagnetic frequencies that enable smartphone communications – are among the highest in the world and make it more expensive to operate.

Last November, Canadian wireless companies collectively spent about $2.1-billion on chunks of 5G bandwidth in the federal government’s most recent spectrum auction. At the time, experts said the cost of spectrum incurred by the carriers could lead to higher mobile prices as companies recoup their investments.

Mr. Entwistle said that in 2021, spectrum fees accounted for $100 on the annual wireless phone bill of every Canadian.

“That fee reflects the fact that Canadian wireless operators have historically paid the highest prices for spectrum through successive spectrum auctions in the world,” he said.

“That is a significant part of our cost base and I would argue it’s inconsistent with a policy of trying to improve affordability.”

Mr. Bibic added that if government-imposed spectrum prices in Canada followed the global average, “every Canadian’s wireless bill would be $5 per month lower.”

But Conservative MP Rick Perkins suggested the blame also falls on the companies themselves. He said Rogers’s quarterly earnings reports frequently “brag about your average revenue per user going up every year.”

“That’s why Canadians feel they’re paying more, because you’re charging them more,” he said during an exchange with Mr. Staffieri.

“Average revenue per user does not equal price,” Mr. Staffieri replied, noting it is “an accounting metric … and it includes services that the customer can choose to add on.”

“And yours has gone up from $50.75 in 2020, to almost $60 now, in only four years,” Mr. Perkins said.

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Sports Illustrated to continue print editions under reported 10-year deal with new publisher

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Sports Illustrated will resume publishing after its owner reached a new rights deal with digital media company Minute Media, which will reportedly operate the magazine for at least 10 years.

Monday’s announcement comes nearly two months after owner Authentic Brands terminated its publishing deal with The Arena Group, which led to mass layoffs at the venerable sports magazine.

Minute Media, best known for its sports sites The Players’ Tribune and FanSided, said it reached a long-term partnership with Authentic Brands to “usher in the future of the [Sports Illustrated] brand.”

“Sports Illustrated is the gold standard for sports journalism and has been for nearly 70 years across both print and digital media. The weight and power of that distinction cannot be understated,” Minute Media founder and CEO Asaf Peled said in a statement.

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“At Minute Media, our focus will be to take that legacy into new, emerging channels enhancing visibility, commercial viability and sustainable impact, all while ensuring that the [Sports Illustrated] team is inspired to flourish in this new era of media,” he said.

Unclear what deal means for writers

There are plans for the publication’s print edition to continue for at least a decade under its new ownership, according to The New York Times, which first broke the story.

What this means for the writers and others who produce Sports Illustrated remains to be seen. Sports Illustrated co-editor-in-chief Stephen Cannella told employees in a memo to continue operating as though it were business as usual.

“We have said from the start that our top priorities are to keep Sports Illustrated alive, uphold the legacy of the institution and protect our union jobs. We look forward to discussing a future with Minute Media that does that,” said Emma Baccellieri, an SI staff writer and vice-chair of the employee union that the NewsGuild represents.

Authentic Brands split with The Arena Group in late January after the latter missed a $3.75 million US payment for licensing rights.

WATCH | Sports Illustrated announced mass layoffs in January: 

Sports Illustrated lays off most of its staff

2 months ago

Duration 2:02

The owner of Sports Illustrated delivered layoff notices to most of its staff on Friday after nearly 70 years in operation. While it may not mean the end for sure, the future of the magazine is uncertain.At the time, Authentic vowed that the Sports Illustrated brand would continue in some capacity.

“We are confident that going forward, the brand will continue to evolve and grow in a way that serves sports news readers, sports fans and consumers,” the statement said.

As part of the deal, Authentic will also acquire an equity stake in Minute Media.

A challenging period

Sports Illustrated has had a rough six years. It was acquired by Meredith Publishing in 2018 as part of the purchase of Time Inc., which started the magazine in 1954.

Less than a year later, Meredith sold the magazine’s intellectual property to Authentic for $110 million. Authentic owns the intellectual property of many brands and stars, including Marilyn Monroe, Elvis Presley, Muhammad Ali and Reebok.

Once a weekly publication, Sports Illustrated was reduced to biweekly publishing in 2018 and became a monthly in 2020.

In December, it fired chief executive officer Ross Levinsohn when the magazine’s alleged use of AI-generated stories drew a public backlash.

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