The Spanish Google tax, or (twice) the perfect cartel
(again by Pablo Ibañez Colomo, who’s covering up for me this week)
It is always tempting for firms in sectors in decline to collude. But a cartel may not always be feasible or successful. Sometimes, major competitors have no interest in playing the game (this may be so for various reasons; competitors may have a different cost structure, may be more efficient or use a different technology). The next trick is well known. If private collusion does not work, turn to the State to enforce an official cartel or to (bluntly) eliminate competition from other players. You want a well-functioning and sustainable cartel? Make sure that anti-dumping duties are imposed on your heartless competitors from other parts of the world.
Montebourg, who has become an endless source of competition-related stories, has been quite open (I admit he is very candid, both in the English and the Spanish sense of the word) about his dislike for Free Mobile and has even taken active steps to make its life more difficult. The operator has emerged as a phenomenal maverick, bringing much needed dynamism to the French mobile market. But apparently prices are too low for Monsieur le Ministre’s taste and French consumers, as responsible and forward-looking citizens of the Republic, should pay more for their calls (he has in fact referred to the ‘excesses of low-cost’). Needless to say, the three incumbent mobile operators are not particularly unhappy about the whole deal.
The proposed Google tax in Spain provides yet another example of State-enforced collusion, albeit a more subtle one (which is not difficult given that our dear Arnaud is leading the way in the abovementioned example). Traditional newspapers struggle to survive in Spain. Advertising revenues have been in steep decline for years and media groups are heavily indebted. The solution? Charge Google, which has become the default cash-cow (and access-cow), for the use of non-significant excerpts (which, I would mention in passing, sounds oxymoronic from a copyright law perspective).
For the Google tax to work in the interest of traditional newspapers, all media, including Internet-based papers (which have become very popular in Spain) need to play by the rules. How can this be achieved? Centralise the negotiation of the compensation and, more important, make it impossible for newspapers to opt-out of the regime. That is correct. A key feature of the proposed legislation, as I understand it, is that Internet-based papers will benefit from the system even if they do not want to (and some of them have already been quite open about their opposition). The government seeks to create, in other words, a watertight cartel protecting old media models from competition and slowing down their (inevitable) decline. Who knows, maybe the new Spanish super-quango will do something about it (this is a joke).
Why do I say that this proposed legislation is twice the perfect cartel? Those who are interested, as I am, in media law and freedom of expression issues, will have quickly understood. Governmental action cannot be expected to be subject to effective scrutiny and criticism (which, going back to yesterday’s post, is a precondition for progress to occur) when the media need legislative and financial protection to survive (centralising the negotiation of the compensation makes traditional newspapers even more vulnerable to pressures from the executive).