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DIARY / DUKEFERGUS // Posted at 4:21 pm on May 12, 2016 by dukefergus
Google’s announcement yesterday that they will prohibit online short term lenders from advertising will hurt middle and low income Americans and might be an attempt for Google to help out a company they have invested in that provides short term loans. Many complain that Google has so much power that they are effectively a monopoly when it comes to search engines, although Bing and Yahoo provides some competition.
On May 11, 2016, Google announced that beginning in early July, they will prohibit advertising from lenders that offer loans over 36% as well as instituting a ban on advertising for loans with repayment terms of less than 60 days. According to aWashington Post story – “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 problem is that when Google decides to ban certain type of legal businesses from advertising, they have such market power that they can make or break a whole industry.
Right now that is happening. Remember Operation Choke Point? That was a program pushed by the Obama Department of Justice that was designed to “attack Internet, telemarketing, mail and other mass marketing fraud against consumer, by chioking frudsters’ access to the banking system” as reported byThe Daily Signal. The truth of the matter is that this was a way for President Obama to put a financial squeeze on legal businesses like firearms sales and online lenders, because the Obama Administration wanted to regulate them out of existence.
There have been conservative heros who have fought this misuse of government power. Sens. Ted Cruz (R-TX) and Mike Lee (R-UT) on April 13, 2016 introduced a bill to curb regulatory abuse from federal agencies toward legal businesses through the DOJ’s Operation Choke Point. This legislation seeks to unconstitunally bully banking services to stop services for online lenders, gun dealers and other lawful businesses. Rep. Blaine Leutkemeyer (R-MO) has the House companion to this bill to protect consumers of these legal products. Now Google is implementing the idea of Operation Choke Point through a discriminatory policy that only applies to certain online lenders.
Rep. Darrel Issa (R-CA) released a staff report on May 29, 2014, titled “The Department of Justice’s ‘Operation Choke Point’: Illegally Choking Off Legitimate Businesses?” Reps. Issa and Jim Jordan (R-OH) issued a letter to the Federal Deposit Insurance Corporation on June 9, 2014, asking if they were implementing elements of Operation Choke Point. Rep. Jason Chaffetz has also been working to end the program as part of the oversight functions of the House of Representatives.
This is not the first time Google has found themselves in hot water. Sen. Lee held a hearing in the Senate Judiciary Subcommittee on Anti Trust Oversight and argued “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.”
Lee went on to argue “Google’s search ranking therefore has enormous power over the information users find, whichwebsites receive traffic, and the amount businesses must pay to be found on the Internet.” Lee cited a former Reagan Administration official who said that Google’s market power makes them a “monopoly gatekeeper to the Internet.” Abusing that power raises serious issues and Google has more power that the federal government to implement the idea behind Operation Choke Point.
One red flag that has been raised in this fight is that Google is invested in loan facilities like Lending Club and LendUp. If Google is taking this action for competitive reasons, or even if there is the appearance of favoritism, that is something that needs to be investigated – maybe by the Federal Trade Commission (FTC).
Politico reported on May 11, 2016 “Federal Trade Commission officials are asking questions again about whether Google has abused its dominance in the Internet search market, a sign that the agency may be taking steps to reopen an investigation it closed more than three years ago, according to sources familiar with the discussions. Senior antitrust officials at the FTC have discussed the matter in recent months with representatives of a major U.S. company that objects to Google’s practices, according to sources with the company. While the inquiry appears to be in the early, information-gathering stage, it signals renewed agency interest in the kind of search case it examined — but ultimately closed without charges — in 2013.” This story shows that Google has been the subject of investigations as to whether they are abusing dominance in the search market on the Internet.
The Washington Post published a column by Caitlin Dewey on May 11, 2016 where Dewey argued “where history was once written by its victors, and later by its nerds, it’s now being shaped by its algorithms.” Google is also seeminly motivated by politics, and possibly competitive impulses, to burry an industry that caters to the needs of middle and low income consumers. Short term online loans are legal and regulated state by state, therefore the long and omnipresent arm of Google should not be playing favorites or meddling in the politics of discrimination against an industry that provides an important service for individuals in need of a small dollar short term loan to avoid late fees on a bank account or mortgage payment.
Furthermore, this is a precedent for firearms sellers and other frowned upon industries to be the next subjects of Google’s ire and discrimination. If this new rule is allowed to proceed to implementation, this will allow a giant corporate interest to use market power for political, and competitive, purposes.