“I Discipline Google”

May 16, 2014


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In response to Mathias Döpfner’s letter in the Frankfurter Allgemeine Zeitung (http://blog.pacaoffice.org/?p=1904), Joaquin Almunia, Vice-President of the European Commission and Commissioner responsible for competition, retorts some of the allegations as the Google anti-trust investigation continues to heat up.

“It is not true that the European Commission lets Google continue its abusive business practices. Under the Commission’s pressure, Google has made concessions, which – should they become legally binding – will significantly hit the corporation’s monopolistic practice.”

By Joaquín Almunia

Dear Mr Döpfner,

In your open letter to Eric Schmidt, Google’s CEO, published on April 16 in the , you made some comments directed explicitly at the European Commission and myself. Basically, you accuse the Commission of not acting against Google’s abuse of its dominant position in the online search market. I do not agree with you and in the following, I will explain why.

Let me first remind you of the facts. In November 2010, the Commission decided, upon my suggestion, to initiate an anti-trust investigation against Google. After thorough examination, especially after having analyzed a great number of formal complaints, I expressed serious concerns with regard to several of Google’s business practices. One of them is Google’s prominent display of its own specialized (or “vertical”) online search services within its normal search results without the user being informed about this kind of privileged display. It is indeed true that such methods may serve to unlawfully redirect Internet traffic towards Google’s services and are capable of discriminating against services of competitors, which might be equally or even more relevant to the user.

In the interest of all users, the Commission questioned Google’s methods and asked the company’s executives to propose concrete solutions in order to prevent malpractice. After long and difficult negotiations, Google finally granted us substantial concessions. In a few months, the Commission has to decide if these propositions become legally binding or not. In case the Commission accepts Google’s proposal, effective competition will be restored and users can make qualified decisions when they use the company’s search engine.

Accepting the proposals would in fact result in three major changes. Firstly, users would be informed about which links exactly are marketed by Google and are not generated by the normal search. Secondly, a distinct separation between Google’s specialized services and the standard search results on Google’s website would be introduced. Thirdly, Google would, when presenting its own services, present the specialized services of three competitors in a way that makes them clearly visible for the user. These competing links would additionally be presented in a comparable visual format.

In your open letter you describe these concessions as if ‘a new window for advertisements was installed at the top of the search result list’, which allows Googles to make some ‘additional income’. This interpretation is completely wrong. The proposed measures provide for that the links of three competitors are presented whenever Google is marketing its own services. If merchants don’t have to pay for being displayed (e.g. restaurants in Google Local), then competitors wouldn’t have to pay for that either. The three competitors would simply be chosen on the basis of their ranking in the ‘normal’ search results. In other cases, Google asks merchants for fees in order to be displayed in the specialized services, e.g. the price-comparing service Google Shopping. According to the proposed measures, Google would in these cases be forced to give up a significant part of the space they’re currently using to market their own services. This means that whenever Google decides to offer a – as you would call it – ‘new window for advertisement’, they would be forced to share the space with their competitors and allocate a comparable space to them.

Since Google would normally be generating income by charging merchants for that space, competitors would now have to pay likewise to be displayed in that space, according to Google’s proposal. To be picked, Google’s competitors would have to bid against each other at an auction to which only providers of specialized services are admitted. Instead of selling the space to their customers, Google would have to offer it to competitors. This would therefore not generate any ‘additional income’ for Google.

Furthermore, you purport that users won’t always find the result ‘that’s the most important and best, but the most profitable for Google’. The proposed measures achieve exactly the opposite result. Whenever Google is marketing their own specialized services and is displaying them in an accentuated manner – as it is the case today – the proposal would oblige Google to display the links of three competitors clearly visible and in a comparable visual format. This would give users a real option of choosing between different alternatives. Today, the privileged commercialization of its own products by Google has as the consequence that consumers don’t necessarily perceive the competitors’ products, since they are not part of the best search results and not listed at those spots that costumers look at the most. The proposals would therefore give competitors a direct possibility of attracting online traffic and hence protecting incentives to innovation in specialized search. It would then be up to the users to decide which service he prefers.

On a general basis, there seems to be a fundamental misunderstanding that I am pleased to clear up. Article 102 of the contract forbids the misuse of dominant market positions. What is forbidden is the misuse – but not the simple existence – of a dominant market position. The Commission is not allowed to require from a company that it gives in to any requirement by his competitors only because the company has a dominant market position. It is our role to fight against misuse of market power in the interest of consumers, but not in the interest of the competitors. The discretionary power by the Commission in this field is not unlimited. If we require from a company that it changes its behavior, we do so on the basis of an investigation and well-founded concerns regarding competition law that have to comply with strict legal standard and are always subject to the control by the European Courts.

The Commission has analyzed all the claims that it has received. It is important to stress that when there are situations that can be considered as questionable from an antitrust point of view, the Commission cannot request remedial actions that go beyond the necessary steps to resolve the concerns. We cannot dictate Google how it has to design its website. If we would request that Google presents its own specialized services in the exact same way as the services of competitors, this would mean that depending on the algorithm, Google services would not even appear on their own page. This would represent a restriction by an antitrust authority that has never been seen before.

It is not our role to keep Google from introducing innovation and trying to meet the needs of customers by developing and offering new services. This would not be in the user’s best interest. Our role is to ensure that Google does not prevent competitors to do the same. In other words, the role of competition policy in this case is to prevent that Google’s competitors are being restricted from effectively participating in the competition because of the preference that Google gives to its own services. The reason for this is that less competition can negatively affect consumer choices and incentives for innovation by competitors. I would like to reiterate that once alternatives are being presented to users, competition should take place based on the quality of the different services available, and it is then up to the users to click on the option that they prefer. The appearance of competitors’ links in a similar visual format would give Google’s competitors a real opportunity to direct these users to their services.

Furthermore, you claim that “Google could elude any commitments” by simply redirecting users from an Internet address towards an app. I absolutely disagree with that, too. The proposals we have obtained from Google contain all the measures necessary to prevent this from happening. The obligations would not only apply to queries at Internet addresses but also for Google’s Android apps. Moreover, if the Commission decides to declare the proposals legally binding for Google, an independent trustee will ensure that Google duly implements its obligations. As you know, companies that do not comply with the Commission’s anti-trust decisions risk high monetary penalties. In the past few years, non-compliance with two of the Commission’s anti-trust decisions has cost Microsoft fines three times higher than those for the abuse of its dominant market position itself. By the way, one of those decisions was based on commitments the Commission has made legally binding.

In conclusion, please allow me to comment on the particular concerns expressed by news media. I can perfectly understand that the utilization of press articles by European editors within Google News gives rise to concerns. From an anti-trust perspective, the problem consists in Google’s ability to use its market power in the general online search for obtaining content created by others and for integrating this into its specialized search services, including Google News. This is why the commitments we have obtained would allow press editors to prevent Google from showing their content fully or partially in Google News, without such a prohibition having negative effects on their website’s ranking within Google’s general search results. However, copyright issues surfacing in this context need solutions that lie beyond the scope of competition law. The same holds true for questions regarding the protection of personal data. In both cases, rules sanctioning the abuse of a dominant market position cannot substitute appropriate guidelines or regulation measures. Finally, I would like to add that compliance with anti-trust rules is a necessary prerequisite but by far not the only instrument to ensure the well-being of Europe’s digital sector.

Regarding issues that do indeed fall in the realm of competition law, the European Commission will keep a watchful eye on Google’s business conduct. The complainants in the current case will soon get the possibility of laying out their points of view on Google’s settlement proposal as well as to our arguments why we consider these proposals sufficient for addressing our concerns regarding parts of Google’s business conduct in the online search and online advertising market. If the European Commission accepts the proposal at the end of this process, they will become legally binding for Google. It would mean that important aspects of Google’s activities would be effectively regulated for the coming years. Unrelated to the current proceedings, Google’s very high market share and its role as a de-facto gate keeper of the Internet will also mean that the European Commission will continue to keep a close eye on Google’s business practices. This oversight is crucial in a fast moving market, in which problems can arise in a short period of time. And in fact we are already in the process of investigating concerns regarding the Android operating system, even though this investigation is still in a preliminary phase.

There is no question that Google’s market dominance poses a number of challenges for our economy and our society. These challenges span from the way the Android ecosystem functions to the collection and use of enormous amounts of personal data to the usage of third-party content, to the respect for intellectual property, and to tax tactics, to name a few. All of these issues deserve to be looked at with the same intensity by the authorities, and each one of the issues should be addressed with the right political tools. The current competition case against Google is only a part of the puzzle. But it is a part which could solve the specific competition concerns as quickly as possible.

Kind regards,

Joaquìn Almunia