Google dominates their competitors, Bing and Yahoo, in the internet search engine site market. They have come under fire for abusing their market share dominance, such as their announcement yesterday of prohibiting online advertising from short lenders. The policy, which will hurt lower to middle income Americans, might also bring benefits to Google, given their investments in a short-term loan company.
The new policy will begin in July of this year, Google announced yesterday. It will prohibit advertising from any short-term lenders that charge interest rates higher than 36 percent or offer loans with repayment terms longer than 60 days. The market dominance of Google allows them to make or break an entire industry with a policy like this.
“The decision is the first time Google has announced a global ban on ads for a broad category of financial products. To this point, the search giant has prohibited ads for largely illicit activities such as selling guns, explosives and drugs, and limited those that are sexually explicit or graphic in nature, for example,” The Washington Post reported.
The targeting of short-term lenders in this policy is perhaps like Operation Choke Point where the Obama Administration singled out certain industries, putting the financial squeeze on the likes of firearms sellers and short-term lenders by attempting to regulate them out of business. The Department of Justice that was designed to “attack Internet, telemarketing, mail and other mass marketing fraud against consumer, by choking fraudsters’ access to the banking system,” The Daily Signal reported.
Sens. Ted Cruz (R-TX) and Mike Lee (R-UT), as well as Rep. Blake Leutkemeyer (R-MO), in an effort to stop the abuses of government power such as Operation Choke Point, have introduced the Financial Institution Customer Protection Act to prevent the regulator abuse by federal agencies against legal businesses as occurred under Operation Choke Point, which sought to bully legal businesses, such as gun dealers and short-term lenders, from accessing needed banking services.
“Under President Obama’s reign, the DOJ has abandoned its longstanding tradition of staying out of politics and has instead become a partisan arm of the White House,” Sen. Cruz said. “The Obama administration initiated Operation Choke Point to punish law-abiding small businesses that don’t align with the President’s political leanings. The DOJ should not be abusing its power by trying to bankrupt American citizens for exercising their constitutional rights. I am proud to stand with Sen. Lee and Rep. Luetkemeyer to stop this insidious manipulation by the administration and look forward to sending this legislation to the President’s desk.”
Some see it as a conflict of interest for Google to ban advertising from short-term lenders while at the time having investments in loan facilities such as Lending Club and LendUp. Additionally, Google has been criticized for leveraging its market share in the search engine market to control the knowledge on the internet. Writing for The Washington Post, Caitlin Dewey notes that, “where history was once written by its victors, and later by its nerds, it’s not being shaped by it’s algorithms.” Google appears to have adopted the same political antipathy to short-term lenders, as has the Obama Administration, in their decision to discriminate against them in their advertising policy. Short-term lenders are regulated by the states and offer a legal credit service, so Google should not be playing favorites in targeting this one industry in their advertising policy.
The new Google policy will hurt consumers, by limiting access of millions of Americans to needed credit products they obtain from short-term lenders. The Federal Reserve Board reported last year that 47 percent of all Americans are not prepared for an unexpected expense of $400. Never in the past has Google singled out, for discrimination in this manner, one industry. Google’s investments in Lending Club and LendUp should raise questions with regulators at the Federal Trade Commission about the new advertising policy.
Google has been taken to task in the past for their practices, including before a hearing of the Senate Judiciary Subcommittee on Anti Trust Oversight, whose chairman is Sen. Lee. “…in the United States, Google controls somewhere between 65 and 70 percent of general Internet search, more than 75 percent of paid search advertising, and 95 percent of mobile search. Given its dominant position, most Internet-based businesses rely on Google for a substantial share of their traffic and revenues. As a result, last year Google generated nearly $30 billion in search advertising revenues. Studies show what most of us know from experience: that the first few Google search results attract nearly 90 percent of all user clicks,” Sen. Lee pointed out.
As much power as the federal government abused in Operation Choke Point to discriminate against certain industries, it is arguable that Google’s market dominance allows it to exercise even great power over businesses and industries. Sen. Lee noted that “Google’s search ranking therefore has enormous power over the information users find, which websites receive traffic, and the amount businesses must pay to be found on the Internet.” Lee also cited a former Reagan Administration official who noted that Google’s market power makes them a “monopoly gatekeeper to the Internet.”
If this policy stands, it may not just be short-term lenders facing this kind of discrimination from Google. Other frowned up on businesses and industries, such as gun dealers, could be subject to having their advertisements banned as well. Even advertisers purchasing space for political messages could find their content banned from advertising if the executives as Google find their advertising copy to be politically incorrect. Where will it end?