Good Tuesday Morning welcome to squawk alley. Were at the New York Stock Exchange joining us this morning from palo alto, cofounder roger m k mackname is google hit by this fine by unfavoring the search results over rivals . We talked to the eus commissioner for competition earlier this morning heres what she said well, the fine is a reflection of the abuse and how long the abuse has taken place and, of course, the importance of the Different Actors in this market and we find this abuse has been taking place since 2008. But also that it has taken place in every european country where google shopping has been ruled out. And that, of course, is a very serious matter and that is reflected in the level of the fine. Our google, roger, would argue it is also serious although they say they respectful respectfully disagree and are considering option onz appeal. What did z. This mean . I think, carl, there is an interesting sest tests coming in front of us. First of all, google, facebook, amazon are increasingly just super monopolies, especially google and facebook. The share of the markets they operate in is literally on the same scale that standard oil had 100 years or more than 100 years ago with the big differences that their reach is now global, not just within a single country. Ill give you a frame of reference. Facebooks monthly user count is roughly equal to the scale of christianity globally and googles is roughly the size of islam. The difference is people are checking their smart phones 150 times a day. So theyre actually people are far more engaged in these service thanksgiving they are in religion and when you by this that level of reach, obviously the opportunity to behave the way google abeing accused of behaving in europe, the temptation to do that overpowering that is the Business Model the reality is this fine is not large enough to change googles behavior the only thing it will change is regulation thats actually say can you or cannot do something the fines just arent large enough to move the needle. And in the United States roger there is no prayer of regulation so europe is the only place that can happen roger, john fort. So its not just this case theres also an android case forthcoming and google is acting one might argue differently than facebook or that amazon. Its hard to argue you go on google and search for a camera they show you first ads that theyre going to make money off of before they show you prominent retailers who have that item on sale. And theyre trying to compare themselves to amazon saying if you search on amazon, youre getting its apples and oranges, isnt it . A Search Engine versus a store if im searching for something zshgs that mean i want to give google a cut no. I think thats a fair point. I would make the following observation. The way that googles product works makes it their anticompetitive behavior much more obvious but do not underestimate how powerful facebooks monopoly has been to boosting instagram and whatsap and the other thing tharz doing. The ability to cross sell cross promote these products is overwhelming on a global basis the but i think your point is right on i think that, you know, googles been caught here doing something that is their Business Model and the challenge for the European Union and i think what should be the challenge in the United States but wont be is to ask the question of, you know, to what degree do you want monopolys to flourish they do stifle creativity. They do stifle innovation. They stifle entrepreneurship and theres you can see this even in Silicon Valley its very hard for any of the unicorn generation of companies to actually reach successful Critical Mass because, you know, one of their competitors gets acquired by google and facebook and then the category is over. I think its a big policy question the world is going to have to deal with over the next few years. You say stifle innovation, roger. Maybe thats true if you want to run your own company but innovation survives even if youre run by google thats a fair point the core question is, you know, what happens if they make a mistake . What happens if they stop being innovative the history of really large companies, john, as we both know, is that eventually they lose their Creative Edge and so i think history suggests that letting 1,000 flowers bloom, having lots and lots of competitors in a marketplace trying to change things and trying to improve things over the long run works better for consumers. It works better for the economy. It works better for employment and that is my point its just a policy question f youre a shareholder of google or facebook, these are the good ole days, right . This is they have their ability to do whatever they choose to do and other than in europe, theres really no one to stop them and even in europe the fine is being imposed arent large enough to change the behavior. So shareholder of google, youre saying, hey, we won again. Its tiny fraction of the cash pile, roger my question is whether its europes responsibility. Even if youre right on the claims youre making i get theyre doing business overseas. But this business of europe being extra harsh to select Technology Companies in the United States doesnt it just enflame transatlantic tensions at a time where were already worried about trade rising protectionism and other types of trade warfare . Well, sayery, i would respectfully push back on that i look at it and suggest that i think in fact what europe is doing is less than what we should be doing this country i dont think having companies with that market dominance is the american way historic lit country is always acted against monopoly and in favor of entrepreneurship. And, you know, if you look at it, new Company Formation in the United States peaked in the 70s in 1978. And, you know, that happens to map almost precisely to this era of deregulation, of lower tax rates and a reduction in things like antitrust protection. And so roger i look at this and my suggestion is if youre a shareholder of google and facebook this is great you love this situation. But i think the europeans are totally entitled to have a different value system candidly, if i were they, id be turning up the heat and not turning it down. How does amazon avoid getting cooked in this same antitrust bottom i guess amazon could argue, yes, we have big business in ecommerce but in terms of commerce overall, were still relatively small. What argument do they need to make in order to keep from being the next target in this time of inaction interestingly enough, i think that amazon situations is marketedly different because the strategy is different. If we look at what is going on with whole foods, it really clarifies amazons strategy of being effectively the supplier to the whole industries. I think theyre less interested to being in the grocery business than to being the backbone of all food oriented retail restaurants, grossy and Convenience Stores and the like to do the same thing for that industry that they have done for technology with Amazon Web Services and, you know, i think that amazons strategy is going to ultimately create huge antitrust issues. But they have a long way to go theyre going to wind up aligning themselves in improving the cost structure of a lot of existing players while they do what theyre doing the reality is Whole Foods Market share and grocery is tiny i dont expect it to become suddenly, you know, bigger than the biggest Grocery Stores i think the more likely strategy is amazon will use it to get more successful at doing the Backbone Services required for the whole industry and then theyll go to albertsons and safeway and try to provide the services. Is your point then that antistrust is a longer term concern or less of a concern as long as the scale that youre building is disinflationary rather than inflationary i think the way i look at the issue is i dont think theres any chance of there being any antitrust regulation in the United States in the foreseeable future so if youre a shareholder of the companies, i think you can literally put it in a box and not worry about it for now and, you know, i it this trends in the United States are for more deregulation, for less concern about issues like market concentration. And in europe, there is heightened concern but its still not at a level thats slowing these guys down at all so, you know, i just look at this and go, to me if youre a shareholder, its a cost of doing business you move on. You dont worry about it i think as a policy matter, we really should be looking at it our economy does best when entrepreneurship flourishes. I think having this level of scale in the tech world is not going to be good for entrepreneurship in the long run. Its not you know, you can start a million companies. Youre not going to be able to take them very far understood. Roger, stay with us. We do want to mention one other story, its a wave of Cyber Attacks around the world today the Worlds LargestAdvertising Agency, wpp, Ukrainian Government agencies are among those hit. Were watching a global story today. Thats right, carl. Looks like the Cyber Attacks report sod far stretch from britain to russia. They call the attacks unprecedented but saying theyre able to handle it in the ukraine. Let me give you a list of companies and entities that have reported the cyber attack so far. That includes Ukrainian Government agencies, kiev airport, british Advertising Agency wpp, the Danish Shipping Company maersk, and a Russian Oil Company reporting sib area tacks this morning the National Bank of ukraine out with a statement this morning, they say, as a result of the Cyber Attacks, banks experienced difficulty in Services Customers and performing banking operations all the Financial Market participants have taken steps to tighten security measures to counteract these hacker attacks. The National Bank of ukraine is confident that banking infrastructure is protected from Cyber Attacks so through hear officials expressing confidence theyre able to deal with this there are reports the Cyber Attacks include ransomware is where they hold on to the data and demand payment in order to release it no reaction so far from here at the white house or the department of homeland security. Ive asked them for their comments or insights into what might be going on here but i can tell you, guys, just as a general matter, when you talk to cybersecurity experts, there is some likely suspects for activities like this you talk about hitting the ukraine, the likely suspect would often be the russian government or russian hackers. When you talk about ransomware, lately people are talking more about north korea getting into that business. No indication yet of who it might be though, carl, in this particular case. Yeah, i was just going to ask you whether there were any patterns this idea that its going global, its hitting multiple industries and companies. Is that a ransomware thing yeah, ransomware is a fascinating trend. It doesnt work if people dont pay. But clearly people are paying. Companies are paying possibly, governments are paying somebody is paying to get their data back. And thats what makes it economically worth while for the attackers to go out and hold that data. You can see a regime like a north korea that is desperate for hard dollars looking at that and saying thats for me because people are paying. The general cybersecurity procedures are always they always tell ceos when the company is hit, dont pay. You just encourage them again. But the temptation is so great because whatever is stolen is so valuable to the on going operations of the country, the temptation is really to pavement were seeing people doing that and we might be seeing that again today. Well have to take a look. All right reinforcing behavior, thank you for that roger, you mentioned a moment ago the cost of doing business s this another form of that . Absolutely. But i think the thing we really should be paying attention to as americans is this notion that cyber warfare has become far more prevalent than Ground Combat as an issue for our Defense Industry and for our, you know, for the pentagon and i dont think as a country we treat that way. I think were still debating what happened during the election last year weve got what i would characterize in these cases as relatively low intensity attacks, you know, going after old versions of microsoft operating systems and the like i think we have to wake up to the fact that theres a much greater threat to our National Security in the cyber realm than there is in the combat realm and that reallocating our Defense Budgets away, from you know, fighter jets and submarines and aircraft carriers towards having the systems that we run the country on be better defended that that would be a really good conversation to have and even good policy change to implement. Yeah. Cost one fighter jet will get you quite a bit of information it will get you a lot of antivirus software. Roger, good to talk you to. Thank you for a great conversation again my pleasure good luck out there. When we come back, kroger ceo sitting down with us earlier his comments in an exclusive interview and thoughts on amazons purchase of whole foods. But first, take a look at shares of sprint today. The Wireless Service provider entering exclusive talks with charter and our Parent Company comcast to bolster the Service Capabilities sprint is up 5. 5 . Comcast and charter under pressure verizon weighing down the dow. baby crying minutes old. A babys skin is never more delicate. What do hospitals use to wash and protect it . Johnsons® the number 1 choices in hospitals. Walmart stocks, food suppliers, supermarkets all dropped on the news of amazon entering the market number one stock was hit harder than kroger, though, which dropped 9 on the day it came after weaker than expected earnings. Krogers ceo just joined us in the last hour to respond for the first time heres his reaction when we asked him what he thought when he heard that amazon is buying whole foods. For me, it wasnt as much of a surprise as it was for others. You know, you can tell that amazon wanted to do something from a physical assets standpoint i think whole foods is a great fit for them were up for, you know, all challenges kroger has been in business for 134 years. Weve been through many, many changes. And we really see this change as well and what we find is when we help the customer fall in love with food and we deliver it at a great value, the customers reward us with that business so heres how i would sum up his defense to the whole amazonwhole foods deal. Number one, we werent that surprised. Look, they had been preparing for battle with amazon for years. All of our previous interviews always had a question about amazon entering the on line food delivery business. And number two, theyre always preparing to compete on price. Thats how kroger led to the upswing over the last few years. They just slashed Profit Margins and prices to fight walmart which is doing it again in terms of lowering prices theyre prepared to do so again. So from their perspective, theyve been in this business for a while. They got the Consumer Insights they need to understand their consumer they got a growing organic and Healthy Business i think the question though for investors is nobody really knows what amazon and whole foods is going to look like what amazon is going to do, how its going to use the data and warehouses and Everything Else and that has scared a lot of investors. Whether kroger can make the case successfully or not, we will see. Amazon should be careful. Crowinger is a good company. Its a good grocery company. They seem to be focused on customers. You dont folk ounce competitors, focus on your competitors weechlt see how much ground they can continue to take whether they can get smarter in digital and get people to download the app and get smarter in that area even as amazon is trying to catch up to them dont count the likes of kroger out. Theyve been battling years and walmart. The disclaimer youve been skeptical on amazonwhole foods since the moment it was announced. They might very well blow it up and change the world. But they might not its not a sure thing with them. I think thats a fair point lets talk more about what amazon plans to do, how it could affect the entire Retail IndustrySenior Research analyst from Piper Jaffray joins us are you getting any indication or sense of the amazon vision for whole foods and what it is and how worried grocers like kroger should be, mike were not at this point its still pretty early as weve all heard. This is something that really started in the last couple months here as far as the two even getting together to talk about it so be honest, im not sure amazon knows what the vision s i kn