Also, why do companies need to "compete"? There's no reason that core software like internet browsers or operating systems need to be commercial in the first place. I will happily continue using Firefox.
Let me give an example, suppose no countries on earth had nuclear weapons. We all know how deadly and devastating its effects can be to humankind. Let's say initially all nations agreed that it's bad for all of us and nobody should pursue it. However, if ONE country broke the contract and started developing nuclear weapons on their own. Do you think the remaining countries can afford to stay at their same positions and not start developing it too? Once someone starts doing it, all bets are off! You can apply the same logic to any unethical technological experiment, such as cloning human. Google really had no choice, if they don't adapt they will be out of the game within the next 10 years.
The public needs to start changing their mindsets and begins to accept that all information in your private life is being recorded. The only important aspect that needs to be questioned is to what extend the data is going to be used. Are some companies not going to hire you simply because of something you did in your private life three years ago that they may not agree with? That would be unacceptable to me as it would definitely cross the line. It is what I consider similar to the "social credit" system being implemented in China, in which everyone is under surveillance at all times and given scores for activities such as grocery shopping. There are always two sides of the extremes, and the balance we should strive for is somewhere in the middle.
It's impossible to ask U.S companies like Google not to conduct data mining on their users. How do you expect them to compete with companies in other countries that monitor their users 24/7 and have access to larger and more accurate data? In the age of information and artificial intelligent, those companies will win the battles simply because they will have better insights that Google won't ever have. Companies in the West cannot readily admit what they're doing because the public mindset is not yet ready for this change. It's too drastic and against many values we have been familiar with our entire life. But our world is changing very quickly, it is not the same world as before, it's understandably very difficult for most people to wrap their head around this but we need to update our mindsets even if that means changing our values. Companies like Google cannot disclose what they do because of public backlash they will receive. If people are just going to switch to another company, all their investments will have been lost, and the next company will be forced to do the same anyway. Google's recent move was probably the best way to test out public water, and it is already not looking very good. I don't know if governments from the West will ever be able to crack this issue.