India is on the cusp of transformation and so is its media industry. But of lately the emergence of Google’s monopoly as an omnipresent entity on the ‘digital real estate’ scene had the old guard worrying, especially when the conventional norms and taxation laws are rather blurred in defining the internet search giant.
In short, the dilemma that we find ourselves in is how to define Google? Is it just a search engine, an aggregator, or a media company using a set of algorithms redefining the rules of advertising and what we consume, or is it all in one with more power than we can imagine, “eluding an externally set responsibility”, as Siddhartha Mishra puts it in his cover story in Outlook magazine.
If yearly revenue generated by the online giant is anything to go by, it is by far India’s third largest media entity after Star India and Bennett Coleman & Company Ltd with an annual revenue of 7,208.99 crore for FY 2017, but paying minuscule taxes over it.
Physical versus digital entities like Google, which can render services without physical presence, is central to this issue. Taxmen across the world, including in India, are trying to figure out appropriate ways to tax entities like Google that have vertual presence rather than relying only on the good old brick and mortar model.
Despite having thousands of employees working in as many as four offices in Indian cities, “Google does not have a ‘permanent establishment’ in the country. Thus, the imposition of equalisation levy of 6 per cent on the digital ad space by the Finance Bill 2016 is considered a good initiative in this regard.
Besides underscoring the unprecedented power the “new big media” wields, “without creating any content”, Mishra makes remarkable observations as to how the internet behemoth is gobbling up the biggest chunk of dissemination and advertising revenue pie with little regard for publishers — the real creator of content — who are actually finding themselves at a receiving end.
Google is not only “deciding the advertising rates for different publications by its own metrics” but is set to go a step beyond by making Chrome, the browser by Google which is inbuilt in around 80 per cent smart phones in India and has an estimated 42 per cent share of browser use in India, start blocking ads on media pages accessed through Google from next month.
Gautam Sinha, CEO, Times Internet Limited, in a recent editorial in Times of India, says, “Google is effectively regulating the entire digital ad industry, including its competitors — a role no company should have the authority to do.”
In order to understand the real implications of how uneven playing field created by Google’s monopoly may play out in future in India, we need to look back at Competition Commission’s direction to investigate four separate cases of abuse of dominance by Google a couple of year back. One of the cases involved the owners of Bharat Matrimony. The allegations included similar to what the popular vertical search engine Foundem accused Google of — favouring its own links in searches.
“In June 2017, after a seven-year probe, Google was handed a penalty of $2.8 billion by the EU for a breach of anti-trust rules that related to search results for shopping comparisons,” writes Mishra.
Though tax laws and definition of digital business entities may evolve over time, it is high time that the media industry stakeholders in India put their heads togther to find amicable ways to tame the internet giant before it’s too late.