Antitrust Commissioner Michal Halperin vowed Monday to dedicate this year to examining the business activities of Facebook and Google in Israel, to ensure they were not undermining competition.
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“We will look closely at the activity of the internet giants to see whether they are abusing their power and breaching the Antitrust Authority’s rules,” she told a crowded session of the Knesset Economic Affairs Committee. “The big internet companies, such as Google and Facebook, have a sufficient presence in Israel in terms of antitrust laws. ... The law applies to them even if they are not registered in Israel.”
Halperin said the authority would examine whether the web giants were abusing their size advantage to push other players out and monopolize the market.
“The giants exist because of the economics of the network, which awards a clear advantage to size: The more users you have, the stronger you are – and that attracts even more users,” she explained. “You enter an empowering circle, which is what has happened to Google and Facebook. ... They have obtained monopoly power, so no new player can succeed in entering the market.”
She added that the internet giants also have access to vast amounts of data on consumer preferences and behavior, which they use extremely effectively. However, because the companies provide their services for free, regulators have to take a new approach to the problem. “Usually we use the price parameter – what is a cheap product, what is the market – none of which is relevant in the internet world because the product is given away for free,” Halperin said. However, she added that she saw no need the amend Israel’s antitrust legislation.
Representatives from Facebook and Google at the meeting said they were law-abiding and provided a platform for Israeli businesses to thrive.
As in other countries, Israel’s traditional media market faces a crisis in the digital age as advertising shrinks and revenues fall.
Google and Facebook take an estimated 80% of online advertising revenues in Israel – somewhere between 1.5 billion and 1.7 billion shekels ($436 million and $494 million) a year.
“The problems in the Israeli advertising market did not start with Google,” Noa Elefant, Google’s head of public policy in Israel, told the meeting.
Moshe Asher, the head of the Israel Tax Authority, said his office was in the process of making tax assessments on the internet giants, but declined to provide any details. Last November, he said Israel had joined efforts by the European Union and several countries to get the internet giants to pay more tax.
Corporate taxation has become a hot topic in the wake of revelations of tax-avoidance schemes by multinationals, leading to calls for companies to pay more tax.
Facebook said last December it would start booking advertising revenue locally, instead of rerouting it via its international headquarters in Dublin.
“We’ll pay tax in Israel for revenue that comes from Israel,” said Jordana Cutler, head of policy and communications at Facebook Israel, without elaborating.