Google Comes Out Swinging, Denies All Antitrust Charges In Shopping Search

In a formal filing and in a companion blog post by Google SVP and General Counsel Kent Walker, Google has vigorously denied that it has abused its market position in search. Instead, it characterized its actions and UI changes as directed toward quality and improving the user experience.

In the blog post entitled “improving quality isn’t anti-competitive,” Walker said that the European Commission’s (EC) Statement of Objections (SO) were without specific proof and “unfounded”:

Google has always worked to improve its services, creating new ways to provide better answers and show more useful ads. We’ve taken seriously the concerns in the European Commission’s Statement of Objections (SO) that our innovations are anti-competitive. The response we filed today shows why we believe those allegations are incorrect, and why we believe that Google increases choice for European consumers and offers valuable opportunities for businesses of all sizes.

The SO says that Google’s displays of paid ads from merchants (and, previously, of specialized groups of organic search results) “diverted” traffic away from shopping services. But the SO doesn’t back up that claim, doesn’t counter the significant benefits to consumers and advertisers, and doesn’t provide a clear legal theory to connect its claims with its proposed remedy.

My assumption is that that the blog post lays out the core elements of Google’s defense, which are more formally articulated in the filing.

While the EC is looking narrowly at the “search market,” Walker seeks to expand the competitive landscape discussion to include Amazon and eBay: “we show why the SO is incorrect in failing to consider the impact of major shopping services like Amazon and eBay, who are the largest players in this space.”

Walker further argues that “The universe of shopping services has seen an enormous increase in traffic from Google, diverse new players, new investments, and expanding consumer choice.” (The current SO only focuses on Google shopping search results.) He says that Google has delivered “more than 20 billion free clicks to aggregators over the last decade” in European markets.

His larger point is that rather than limit consumer choice and generate harm, Google has shown a “commitment to quality” with its evolving UI and search results:

[W]e knew we needed to go beyond the old-fashioned “10 blue links” model to keep up with our competitors and better serve our users and advertisers. We developed new ways to organize and rank product information and to present it to users in useful formats in search and ads. In 2012, as part of that effort, in addition to our traditional ads, we introduced the Google Shopping Unit as a new ad format . . .

We don’t think this format is anti-competitive. On the contrary, showing ads based on structured data provided by merchants demonstrably improves ad quality and makes it easier for consumers to find what they’re looking for.

Finally, Walker attacks the proposed EC remedy: “requiring that Google show ads sourced and ranked by other companies within our advertising space.” He argues that “would harm the quality and relevance our results.”

It’s very unlikely that the EC will be persuaded by any of Google’s arguments; it has heard similar things before. If unpersuaded, the EC has the power to impose fines and other penalties that could amount to billions of dollars:

The fines reflect the gravity and duration of the infringement . . . The starting point for the fine is the percentage of the company’s annual sales of the product concerned in the infringement (up to 30%). This is then multiplied by the number of years and months the infringement lasted. The fine can be increased (e.g., repeat offender) or decreased (e.g., limited involvement). The maximum level of fine is capped at 10% of the overall annual turnover of the company.

If penalties are imposed, which we should expect, there are two levels of available appeals for Google, the last of which would be before the European Court of Justice in Luxembourg.

Postscript: We asked Google for a copy of the full response it sent to the European Union but it declined to provide that.