European Competition Commissioner Joaquin Almunia issued a statement this morning offering “preliminary conclusions” of the EU’s investigation of numerous antitrust complaints against Google. It lays out “concerns” about Google’s market power in four areas.
Almunia acknowledges Google’s prior statements about a willingness to settle and suggests that if a settlement can be reached Europe and Google will be able to put the matter behind them:
I believe that these fast-moving markets would particularly benefit from a quick resolution of the competition issues identified. Restoring competition swiftly to the benefit of users at an early stage is always preferable to lengthy proceedings, although these sometimes become indispensable to competition enforcement
Almunia clearly doesn’t want years of litigation and he’s banking that Google doesn’t either. I’m not an antitrust expert and even less familiar with European antitrust law. However it’s not clear that Europe has a conclusive case against the company. It is clear, however, that the European legal system is somewhat more sympathetic than US law to the various antitrust arguments against Google (e.g., search neutrality).
The four areas of “concern”
Here are the four areas of concern from Almunia that involve a potential “abuse” of market power by Google:
- Almunia does buy into the “search bias” or “search neutrality” idea. He says, “In general search results, Google displays links to its own vertical search services differently than it does for links to competitors. We are concerned that this may result in preferential treatment compared to those of competing services, which may be hurt as a consequence.”
- The second area concerns Google indexing reviews that “it uses in its own offerings” (e.g., Places). Almunia characterizes this as plagiarism of a sort: “Google may be copying original material from the websites of its competitors such as user reviews and using that material on its own sites without their prior authorisation. In this way they are appropriating the benefits of the investments of competitors.”
- If I understood it correctly, the third area of “abuse” involves AdSense: “The agreements [with publishers displaying Google ads] result in de facto exclusivity requiring them to obtain all or most of their requirements of search advertisements from Google, thus shutting out competing providers of search advertising intermediation services.”
- The fourth area is one that Microsoft has been arguing for some time. This involves the “portability” of ad campaigns from AdWords to adCenter: “We are concerned that Google imposes contractual restrictions on software developers which prevent them from offering tools that allow the seamless transfer of search advertising campaigns across AdWords and other platforms for search advertising.”
Anti-Google lobbying group FairSearch.org welcomed these findings. It issued an upbeat statement attributed to its European attorney Thomas Vinje:
Today’s statement by European Commission Vice President Joaquín Almunia, identifying four concerns where Google business practices may be considered as abuses of dominance in violation of competition and consumer protection laws, is a welcome development. We are pleased that Commissioner Almunia’s investigation has validated the concern that FairSearch members and many other businesses and consumer advocates have raised about Google’s practices that distort the free market and deprive consumers of the transparency and real choice that only results from competitive markets.
As for Google, it gave us this statement:
We’ve only just started to look through the Commission’s arguments. We disagree with the conclusions but we’re happy to discuss any concerns they might have. Competition on the web has increased dramatically in the last 2 years since the Commission started looking at this and the competitive pressures Google faces are tremendous. Innovation online has never been greater.
Some matters more easily resolved
Google can relatively easily address items 3 & 4 above on the list. These are largely contractual issues and don’t implicate Google’s presentation of search results. Number 2 above also appears relatively easy to resolve. Google can refrain from indexing third party reviews for display in its vertical services (and general search results if necessary).
It does raise a question, however, about whether Google would need to obtain authorization to index other kinds of content ahead of time. Google would have to agree to all of this of course.
A more difficult issue is the first item, where Google is being asked not to display its own “vertical” content (think Maps) in a way that’s more elaborate or otherwise different than competitors’ products. This goes to Google’s ability to innovate with its UI and could have very broad implications for “universal search” and its subsequent iterations (SPYW, knowledge graph, etc). This is the potential stumbling block for any early resolution and the issue that could prevent a complete settlement of the case.
Settlement might not happen across the board
If Google and the European Commission fail to reach a settlement across all areas, it’s not clear to me whether it has the immediate power to start imposing fines or would have to successfully litigate against Google — as the FTC would in the US. While in the US the FTC only has access to “injunctive relief” (non-monetary remedies), the European Commission can impose financial penalties of up to 10 percent of a company’s annual global revenue. In this case that would about to nearly $4 billion.
Both the European Commission and Google have clear incentives to settle. The question is what will they do about the “search neutrality” issue (#1 above)?
Postscript From Danny Sullivan: I’m in agreement with Greg’s analysis here. It’s difficult to see how Google is supposed to resolve the first issue, especially when Bing and Yahoo have done exactly the same things with their vertical search results. For more about this, see:
- Dear Congress: It’s Not OK Not To Know How Search Engines Work, Either
- Bing’s Travel Search & Kayak Favoritism Angers No One, While Google’s Gets Headline Attention From WSJ
However, it could be that if Google agrees to settle over the other concerns, the EU will suddenly discover that the first point is no longer a worrisome issue. Alternatively, I’ve found governments around the world seem to have some fundamental misunderstandings of how search works. Given this, Google could provide some token agreement that makes the EU believe the “problem” here is solved.
It’s also important to note there’s not a fifth finding — that ad spend had any impact on search results. That was one of the questions that the EU raised during its “fishing expedition” survey last year. Clearly it didn’t find enough evidence to raise this as a fifth point to resolve.
Like Greg, I tend to view this letter as a sign of weakness, that the EU isn’t sure that it has a strong enough case to win, so telling Google what its concerns are, and getting back some promises of resolution of any type might allow it to move on.