Recently, we saw that Google GOOG has once again been charged with breaching the EU's antitrust regulations.

In this article, I want to examine this in more detail and answer four questions that are pertinent for investors in Google and in other major global corporations.

These four questions are firstly-;

1. What exactly are these antitrust regulations?
2. What are the differences between the EU vs the US regimes and are we likely to see a gradual convergence in global antitrust regulations?
3. Do these regulations pursue a legitimate legal aim or are they a penalty for a superior business model?
4. Finally, what does this mean for investors in Google and what trends can we extrapolate from this to create some forward looking guidance for investors.

While each of these questions can easily be studied as a PhD thesis, I will like to boil the pertinent facts down to provide the most relevant guidance particularly for Google investors.

I will also highlight that this will not be the last case in this area or in the area of privacy and it is likely that divergent rules on privacy and competition in the major economic regions is likely to drive the company to split the company into individual companies with a tailor made legal regime for each jurisdiction.

This will also apply to other tech giants like Microsoft MSFT, Apple AAPL, Amazon AMZN and Facebook FB. This outcome is the most likely because it will be at least one decade before governments around the world will be able to agree on a global digital framework that will address these very issues and until then, it will create a global multi layered digital marketplace

The European Competition Commission has always been very bold and robust on what it believes is its duty as a competition watchdog.

In the past, it has gone after global companies like Microsoft, Apple, GE and most recently Google.

Nevertheless, it has opened up accusations that its divergence from US antitrust regulations is because it is a weapon used by the European Commission to weaken US companies in Europe in favour of European companies which ultimately will weaken global progress in this sphere.

Let us begin with a timeline about the EU Commission's battle with Google.

This five and a half years battle started in 2010 when the European commission alleged that Google had breached competition law by abusing its dominant position through using its search engine to push users towards its own services and reduced the visibility of competing websites.

This was based on complaints by a number of other companies including Foundem a British price comparison site, eJustice which is a French legal search tool and Ciao a German Microsoft owned price comparison site and eventually Microsoft Bing also added its own complaints.

In 2012, Google agreed to clearly differentiate its services from natural search results, further it agreed to display links to three other rival services and address allegations that it stole restaurant and travel reviews by allowing sites to opt out of Google searches.

The Commission invited comments and as a result, it emerged that many were not satisfied including TripAdvisor and Expedia who also added their own complaints.

Google made two settlement offers that were knocked back by the European Commission.

In 2014, some of Google's offers of settlement were accepted by the Commission but this did not satisfy the complainants who argue that they were not consulted before the settlement was agreed.

Commissioner Almunia transferred the case to his successor Commissioner Vestager who took over the talks especially as pressure was coming from the European Parliament to break up dominant search engines.

The next stage was that the EU filed a formal complaint against Google objecting to its promotion of its own shopping links. Google responded that it strongly disagrees with the allegations.

In addition to the antitrust allegations, they also went against the Android iOS. One of the many accusations was that Google had required device manufacturers to bundle its services and applications with Android, the Commission asserted that this was an anticompetitive measure.

While the firm has been given until August to respond, in June, the Commission asserted that Google had committed the infringement intentionally or at the most basic negligently.

News Corp files another complaint alleging that Google news pushes its news to the readers preventing them from clicking through to News Corps website.

In April 2016, formal charges were filed by the Competition Commissioner against the Android platform alleging that Google prefers its own apps and service over others available to mobile and tablet users.

They further alleged that by requiring manufacturers to pre load their bundled apps and services; they have effectively cut off one of the main ways new apps can reach customers.

It has been suggested that a fine could reach $7.1 billion or 10% of the revenues generated in 2015.

Google responded forcefully denied that they forced manufacturers to prioritise their bundle of apps and services, they strongly reiterated that they were an open source operating system.

In June 2016, it is alleged that the Commission is about to file another charge against Google, this time over Adwords. They have asked Google's rivals to share information relating to search engine advertising with the tech giant.

Thus far, there are three outstanding charges, first one relating to Google search, the second relating to Android and a possible third related to Adwords.

This all points to a very ominous and uncertain time for Google because rather than just the possibility of a fine, it has the potential to significantly reduce Google's earning power.

This is because it is accurate that Google does have a market monopoly as it can offer an integrated bundle of apps and services across devices.

This ability is rooted in its search engine and is buttressed by its Android platform and Adwords. These provides it with its competitive advantage and earning power, if these were endangered then it will be a significant blow to the company and its shareholders.

Competition and Antitrust Laws

The laws in this area of law is designed to prevent market collusion through its various manifestations like monopolies, anti-competitive prices and cartels that will result in one firm or a group of firms having an overly dominant position in the market.

In many ways, this legal definition goes against the dream and instinct of every business owner in the market today, it almost sounds anti-capitalist.

Nevertheless, this is the bedrock on which capitalism can be built because the test is the effect on market prices and market access to goods.

If a company is so dominant that it sets the market price for its goods and not the supply and demand dynamics of the market then it is able to easily abuse its position by setting prices which are not a true reflection of healthy supply and demand driven market.

This will have the effect of reducing choices in the market for the consumer as other companies will not be able to enter the market and offer their products.

This is the substance of all of the charges against Google (Alphabet) because the allegation is that the way it has set up its business in Europe.

They allege that the Android operating system does not allow customers freedom of choice as to whether or not to accept android and when studied objectively, that is a correct statement and as a result, they will be found guilty and will need to pay a fine.

Divergences between EU and US policies

On the surface, it does seem like the European Commission is at war with primarily American companies but it could also simply be because of the different goals or purposes for the law.

This is because while competition policies generally concern the prevention of anti-competitive policies , there is also an added dimension of EU competition policy and that is the overriding element of EU wide legal and economic integration and harmonization.

This differs significantly to the US approach of watching and waiting for the industry to mature before taking action that may stifle creativity and progress

The European approach is informed by the fact that there is currently a harmonization effort in Europe to bring about a single digital market place which promises to give customers unrestrained freedom of choice to choose their preferred digital platform.

This initiative is also indicative of the way in which the EU works in that there is a recognition that it is a collection of different nations and cultures and as such, there must be choices in the market that can cater for a diverse range of tastes and needs.

This is why I suggested that it may be that the best way of these companies to do business in Europe is to create a specific European company with a specific European strategy to do business in Europe.

This will be useful because at the moment, the current EU regulations constitutes an additional hoop that American and international companies must jump through in order to operate in Europe especially as the digital Europe rules begin to be implemented.

The effect of this is a narrow definition of Article 102 TFEU (Treaty for the European Union) that it shifts the burden of proof.

It shifts from the Commission to prove that a company is guilty as charged to the company who have to prove that their strategy, prices and policies are not anti-competitive which is infinitely harder.

In order to do so, the company will now need to show the ways and method in which other companies can compete against them successfully. From a business perspective, this will weaken the company and strengthen the competition.

It is almost like two boxers fighting for the world championship belt but before the match begins, the referee turns to the favourite to win and asks him to disclose to everyone including the opponent about his strategy, weaknesses and how he can be beaten.

So he begins to tell everyone how his right hook lets him down and he is susceptible to the right jab and many more then after he has finished, they are then allowed to fight.

Do these regulations pursue a legitimate legal aim or are they a penalty for a superior business model?

The answer to this question depends on who one asks. Certainly the European Commission for competition will argue that it is being done to protect consumer needs.

In this respect, they are correct but as the legal test is based on the effect on the market, there is an argument that Google is paying for clearly being significantly better than its European competitors.

Furthermore, one can also detect a political dimension informed by the age old rivalry between the US and the EU .

This seems to be the case because in the digital marketplace, Android has over 90% of the European market.

At the same time, the EU is seeking to build a strong single market digital market and thus in order to do this, Google's power must be diluted.

It is likely that the objective answer to the question of the legitimate aim of this action will be in how the judgment is structured.

If it is structured in a manner that penalizes Google for seeking to give its customers a seamless experience across devices, then it will be clear that this is merely a political decision penalizing a successful American company.

It will only be a triumph for the customer if it is a decision that narrowly focuses on how Google interacts with hardware providers in that its operating system is one of many that smartphone provider can offer to their customers.

What does this mean for investors in Google and what trends can we extrapolate from this to create some forward looking guidance for investors

Google will most definitely lose the case and will be weaker in Europe as the decision and the wider digital markets union policies will cause a greater fragmentation of the market.

While it will mean that customers have more choice, their experience may not be to the quality enjoyed by their American counterparts.

Google and its fellow American organizations will continue to have significant challenges around the world as each country in the world recognizes the importance of having local digital platforms and will seek to protect their local companies.

In seeking to do this, they will reduce the dominance of international particularly US firms to that of one of many providers as opposed to being the main dominant provider of a digital platform.

In terms of the share price for Google in the short term, the effects will be negligible but in the medium term, the consequences could be more dire as the ruling will mean that it will lose its privilege position with customers.

In the longer term, the effect of working out an alternative strategy that does not fall foul of EU commission rules will begin to take its toll on the company.

This is why I believe that tech companies need to use this opportunity to create a strategic advantage by further localizing their brands for local markets in a more loosely affiliated organizational structure.

Conclusion

In conclusion, I do not agree with this decision to charge Google in all of the instances listed above because the Commission has been very hasty.

The nature of the internet is such that everyone despite their level of resources has fair access to customers even if it will mean that they work harder to topple the incumbent.

That is the nature of business and is what keeps innovation alive; this market dynamic is what will force other companies to create a credible alternative to Google.

If these charges are followed through, it is likely to weaken initiative and progress in this sphere.

Whatever the outcome, Google and others must do more to ensure that they adapt their international businesses over the medium term to maintain their competitive advantage.