Following complaints by UK-based price comparison site Foundem and others, the European Commission is to probe whether the order in which Google search results appear is the end-product of practices breaching EU competition laws. Should Google be clicking on “I’m feeling lucky”? Daniel Barnhouse asks.
When: 30 November 2010
Where: European Commission
Law stated as at: 3 December 2010
On 30 November 2010, the European Commission announced that it had opened formal investigation proceedings into alleged abuse of a dominant position by Google, in breach of Article 102 of the Treaty on the Functioning of the European Union (TFEU).
This announcement follows complaints filed in February 2010 by three vertical search providers, UK price comparison site Foundem, French legal search engine ejustice.fr, and shopping comparison engine Ciao (which is owned by Microsoft), in relation to certain alleged anti-competitive practices. Whereas horizontal search providers (like Google, Yahoo! and Bing) scour the whole of the Internet for their results, their vertical counterparts focus solely on the content of price comparison websites such as Go Compare and uSwitch.
The complainants made four principal allegations of anti-competitive practices undertaken by Google, the first two being the complaints of Foundem and ejustice.fr, whilst Ciao brought the remaining two objections:
1. it gave preferential placement to its own vertical search or price comparison services in unpaid searches (commonly referred to as "natural" searches) at the expense of its rivals;
2. it lowered the “quality score” for paid searches (often described as "sponsored links") of its vertical search services competitors. The quality score influences the likelihood of an advertisement being displayed by Google and can affect its ranking, as well as the price paid to Google by advertisers;
3. it imposed exclusivity obligations on publishers, preventing them from placing certain types of competing adverts on its websites; and
4. it placed restrictions on the ability of its previous clients to transfer their online advert campaign data, such as search terms, from Google to competing online advertising platforms.
Google responds in blog
Google has responded to the Commission's announcement with a blog post. Most fundamentally, Google denies that it holds a dominant position in online search, in spite of its high European market share with the European Commission recognising this as being over 90%.
In response to the natural search allegation, Google has stated that it has never intentionally sought to harm competing services through its rankings. Also, it stated that there were “compelling reasons” why e-justice and Foundem services were ranked lowly by its algorithms, notably that much of its content was duplicated, a factor that Google has widely publicised as a negative factor in determining natural rankings.
In relation to the paid search objections, Google noted that it is not the only search engine that uses quality scores to assess the relevance of adverts to certain queries and whether websites provide relevant content. It also stated that the quality score system offers advertisers transparency and that it provides advertisers with information on how to improve their scores.
Google's response to Ciao's complaints was that Google AdWords, its online advertising system, has never required exclusivity in its ad content. As far as those contracts that are directly negotiated with publishers are concerned, it stated that it had ceased using exclusivity provisions nearly two years ago. As for the campaign data transferrability issue, it categorically affirmed that it does allow advertisers to export advert campaigns from Google to other platforms, although it acknowledges that there are some restrictions for ad agencies.
Why this matters:
The investigation will be a highly technical exercise for the Commission to undertake, as to determine Google's culpability, the Commission will have to look closely at Google's search algorithm, a constantly evolving code that governs the rankings of Google's search results. The investigation will no doubt be an expensive one also, with computing specialists being drafted in to analyse the variations of the algorithms during the material period for evidence of any preferential placement.
There has been widespread support for the Commission's decision to commence a formal investigation. Consumer groups see this as an opportunity to test whether consumers are right to place increased faith in Google's search results, whilst publishers recognise the need to safeguard its clients against harmful business practices. If Google is to continue to be the central route to information online, all parties need to be confident that it will lead them to where they want to go and not to where Google wants them to go.
Looking ahead to the investigation, the European Commission's competition watchdog has a track record with technology companies, with Microsoft and Intel having both attempted to fight the Commission's finding and ended up being made an example of through fines over €1 billion. When one considers together the power that the Commission has to impose fines of up to 10% of a company's turnover in antitrust proceedings and the fact that Google is subject to similar proceedings brought by Foundem and other complainants in the Texan courts, it is perhaps unsurprising that Google is adopting a more conciliatory approach to that adopted by its technology counterparts, stating that it is "working with the Commission to address any concerns".
It remains to be seen which side, if either, will come out on top in this heavyweight bout and how long the process might take given that the Commission's tussles with Microsoft, for example, extended over a period of 16 years in total.