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Opinion: Google pays the price for French connection

Alistair Fairweather

After years of threats and lawsuits, the French publishing industry has essentially blackmailed Google into paying for linking to its websites.

After years of threats and lawsuits, the French publishing industry has essentially blackmailed Google into paying for linking to its websites. (AFP)

Of course Google isn't spinning it that way. According to Eric Schmidt, Google's executive chairperson, the €60-million is for a "Digital Publishing Innovation Fund to help support transformative digital publishing initiatives for French readers".

In many ways Google has gotten off lightly. The company allegedly offered French media firms a €50-million settlement in January, only to have them demand double that amount. And while €60-million is an enormous amount of money, it is relatively small by comparison to the open-ended "link tax" that the French government was mooting.

This tax would have been levied every time Google linked to the websites of any French publishers. By indexing these sites and displaying snippets of their news on its search results pages, Google is essentially profiting from their copyright without paying for the right to do so. Or so the Gallic logic goes.

Nevermind the fact that news websites (and indeed all websites) rely on Google and other search engines for a large chunk of their traffic (typically between 25-50%), from which they make their own revenue. Or that this content is often repeated by several different news providers without much material difference in substance.

But Google has been doing this for years, so why has this come to a head now? Simple, the French government has found its coffers bare and is casting about for ways to extract more revenues. And who better to target than the big, "crass" American corporation swallowing up the profits of the beloved French press?

Google is also an easy target because of its tax policies. By channelling all its foreign revenue through its Irish office, which enjoys one of Europe's lowest corporate tax rates, Google avoids paying large amounts of tax on its operations in France.

Earlier in the decade, when times were good, European governments looked the other way. But with tax revenues shrinking and public anger growing, they are being pressured into acting. It doesn't help that Google's profits are growing healthily while Europe struggles to stay afloat.

The thing is, Google isn't doing anything illegal, and it isn't doing anything that other multinational corporations don't do.

Late last year protesters picketed Starbucks' UK operations when it was discovered that the company had avoided paying corporation tax using a scheme similar to Google's. Starbucks has since agreed to pay £20-million over two years in restitution.

Squeezing corporations is a great lark. Governments get to look tough, tax revenues rise and voters are thrilled. But is this really the message that Europe wants to send out: "Invest in France! Our brand of extortion is so much more stylish than China's."

By capitulating to the French, Google has given clear directive to meddling governments around the world. Already the European Publishers Council has demanded that Google pay the rest of the continent's publishers the way it has France's. What's next after Europe? Japan? South America? This Pandora's box is not easily closed.

Regardless of how we feel about Google, the company has done an incalculable amount to advance the internet around the world. Its search engine is still the first port of call for billions of people around the world.

Taxing Google will not fix what is fundamentally broken in the publishing industry nor will it help solve the world's sovereign debt crisis.

By bashing Google, publishers and governments send a clear message to investors around the world: "We do not want your innovations or your disruptive business models. We want your money – as much of it as we can get. And we're prepared to play as dirty as we need to to get our way."


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