Antitrust_Investigation_Against_Google

  Introduction “Timeline: Google vs. the regulators” Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies with over 23,000 employees and revenue of US$ 23.651 billion (2009). The company's stated mission from the outset was "to organize the world's information and make it universally accessible and useful”. The decision by the European Commission to launch a full investigation into Google after allegations by smaller search providers of market abuse underlines regulators’ growing interest in the increasingly powerful company. Here is a timeline of European, US, and other regulators’ recent dealings with the Internet giant: (FT.com, 2010) July 2007: The Australian competition regulator takes Google to court over alleged misleading and deceptive conduct in relation to sponsored links on the search engine’s website. The case is thought to be the first trading standards lawsuit against Google. March 2008: The European Union joins US regulators in clearing Google’s $3.1bn deal to acquire DoubleClick, which sets the stage for the search giant’s push into the broader online advertising market. February 2009: The European Commission sets up a preliminary review over complaints that Google allegedly manually adjusted algorithmic search results when paying customers complained. September 2009: The German government becomes the first non-US administration to ask a US court to block a deal between Google and US authors and publishers granting web access to old books, saying it will “irrevocably” weaken global copyright law. February 2010: US and European antitrust regulators approve an internet search alliance between Microsoft and Yahoo in a decision that backs the view of many big advertisers that the combination would give kingpin Google more competition. February 2010: The European Commission says it has contacted Google about three complaints regarding the US internet company’s search engine and search-advertising service. The Commission, the European Union’s executive body, says its officials are examining the complaints in a preliminary antitrust review.    November 2010: European antitrust authorities open a full investigation into the company after allegations from smaller online search service providers that Google had abused its dominant market position The case   The European Commission announced that it has opened an antitrust investigation into Google over allegations that the company has abused its dominant position in online search. The investigation, which follows eight months of more informal inquiries by competition officials, will centre on claims that the US search company gave preferential treatment to its own services when ranking search results, and discriminated against competitors. It will also probe the contractual relationship, which Google has with advertisers. In particular, it will explore allegations that Google imposes exclusivity obligations and restricts advertisers from moving their data to competing platforms. (ft.com, 2010) The probe comes after other search service providers complained about "unfavorable treatment of their services" in Google's unpaid and and sponsored search results, as well as alleged preferential placement of Google's own services, the commission said in a statement. The commission investigation stems from complaints by three companies: Foundem, a British price comparison service; Ciao, a price comparison service in Germany owned by Microsoft; and eJustice, a French legal search tool. People with direct knowledge of the case, who were not authorized to comment publicly, said at least one additional complaint had been filed. Foundem said that it suffered big financial losses when Google downgraded it in search results and that Google unfairly favored its other online services, which include mapping, translation and video. The announcement does not mean that the EU has reached any conclusions; only that it will conduct an "in-depth investigation" into the matter, it said. Procedural rules linked to the case The European Commission is an independent institution made up of commissioners - who act collectively - and officials, whose’ mission it is to represent and uphold the interests of the Community. It is the body that proposes legislation, implements EU policies and the budget and makes sure the Treaties are properly applied. In addition, it shares executive powers with the Council of Ministers. The legal base of this procedural step above mentioned is Article 11(6) of Council Regulation No 1/2003 and article 2(1) of Commission Regulation No 773/2004.    Article 11(6) – Council Regulation 1/2003 “The initiation by the Commission of proceedings for the adoption of a decision under Chapter III shall relieve the competition authorities of the Member States of their competence to apply Articles 81 and 82 of the Treaty. If a competition authority of a Member State is already acting on a case, the Commission shall only initiate proceedings after consulting with that national competition authority.” 1 Article 2(1) – Commission Regulation 773/2004 “The Commission may decide to initiate proceedings with a view to adopting a decision pursuant to Chapter III of Regulation (EC) No 1/2003 at any point in time, but no later than the date on which it issues a preliminary assessment as referred to in Article 9(1) of that Regulation or a statement of objections or the date on which a notice pursuant to Article 27(4) of that Regulation is published, whichever is the earlier.” 2 Proceedings concerning Articles 101 and 102 TFEU   In this regard, the next chapter seeks to increase understanding of the investigation process and thereby to further enhance the efficiency of investigations and to ensure a high degree of transparency and predictability of the process. The chapter covers the main proceedings concerning alleged infringements of Articles 101 and 102 TFEU. The Investigative Phase A case concerning an alleged infringement of Article 101 or 102 TFEU may be based on a complaint by an undertaking, an individual or exceptionally a Member State.   The Commission may also open a case on its own initiative (ex officio), for instance when certain facts have been brought to its attention, or further to information gathered in the context of sector enquiries. All cases, irrespective of their origin, are subject to an initial assessment phase. During this phase DG Competition examines whether the case merits further investigation20 and, if so, preliminarily defines the orientation of such investigation, in particular with regard to the parties, the markets and the conduct to be investigated. Regulation 1/2003 introduced the possibility of re-allocating cases to other network members if they are well placed to deal with them. Accordingly, the Commission may reallocate a case to a national competition authority and vice versa. The Commission will open proceedings under Article 11(6) of Regulation 1/2003 when the initial assessment phase has been concluded and it has been decided that the case merits further investigation and the scope of the investigation has been sufficiently defined. 3                                                                                                                 1  http://eur-lex.europa.eu/LexUriServ/LexUriServ.do'uri=CELEX:32003R0001:EN:HTML 2  http://eur-lex.europa.eu/LexUriServ/LexUriServ.do'uri=CELEX:32004R0773:EN:HTML   3  Under the authority of Mr Joaquín Almunia, Commissioner responsible for Competition Policy, the mission of the Directorate General for Competition is to enforce the competition rules of the Community Treaties, in order to ensure that competition in the EU market is not distorted and that markets operate as efficiently as possible, thereby contributing to the welfare of consumers and to the competitiveness of the European economy      Once the DG Competition has reached a preliminary view of the main issues raised by a case, different procedural paths may be envisaged: • The Commission may decide to proceed towards the adoption of a Statement of Objections with a view to adopting a prohibition decision with regard to all or several of the issues identified at the opening of proceedings • The parties subject to the investigation may consider offering commitments suitable to address the competition concerns arising from the investigation, or at least show their willingness to discuss such possibility; in that case, the Commission may decide to engage in proceedings leading to a commitment decision • The Commission may also decide that there are no grounds to continue the proceedings and close it with regard to all or some of the parties. If the case originated via a complaint, the Commission shall, before closing the case, give the complainant the possibility to express its views Procedures leading to a prohibition decision Before adopting a decision adverse to the interests of the addressees, in particular, a decision finding an infringement of Article 101 and 102 TFEU and ordering its termination (Article 7 of Regulation 1/2003) and/or imposing fines (Article 23), the Commission shall give the parties subject to the proceedings the opportunity to be heard on the matters to which the Commission has objected. The Commission shall thus adopt a Statement of Objections and notify it to each of the parties subject to the proceedings.   The Statement of Objections sets out the preliminary position of the Commission regarding the alleged infringement of Articles 101 and/or 102 TFEU, after its in-depth investigation. Its purpose is to inform the parties concerned of the objections raised against them with a view to enabling them to exercise their rights of defence in writing and orally. If, having regard to the parties’ replies given in writing and/or at the oral hearing and on the basis of a thorough assessment of all information obtained up to this stage the objections are substantiated, the Commission will proceed towards adopting a prohibition decision. If, however, the objections at this stage are not substantiated, the Commission will close the case. In this case, the information measures described above in paragraph 62 would also apply. The Commission could also decide to withdraw certain objections and to continue towards a prohibition decision for the remaining part. Commitment procedures The main difference between a prohibition decision pursuant to Article 7 and a commitment decision pursuant to Article 9 of Regulation 1/2003 is that the former contains a finding of an infringement while the latter makes the commitments binding without concluding on whether there was or is still an infringement.    Procedure for rejection of complaints Complaints can be rejected for a number of different reasons. If the Commission, after careful examination of the case, comes to the conclusion not to pursue the case for any of the reasons mentioned above, it will first inform the complainant in a meeting or by phone that it has come to the preliminary view that either (i) the case lacks "community interest", (ii) the complaint has not been adequately substantiated or (iii) after a thorough consideration the Commission concludes that there is no evidence of an infringement. The complainant may then withdraw the complaint. Otherwise, the Commission shall inform the complainant by a formal letter that there are insufficient grounds for acting and set a time-limit for written observations. Adoption, notification and publication of decisions All final decisions pursuant to Article 7, Article 9 and Article 23 of Regulation 1/2003 are adopted by the Commission, upon proposal of the Commissioner responsible for competition policy. A press-release will be published after the adoption of the decision by the Commission. The press-release describes the scope of the case and the nature of the infringement. It also indicates (if appropriate) the amount of fines for each undertaking concerned and/or the remedies or commitments accepted. 4 allegations by the European Commission 1) Google has abused its dominant market position in online search by giving preferential placement to its own vertical search or price comparison services at the expense of its rivals Google would have abused its search might by selectively lowering the organic search rankings of competing services. Additionally, Google would then have boosted the placement of its own vertical search services, placing them ahead of the competition. Guilty or Not' This kind of thing has long been suspected by some SEO’s but is hard to proof. The best and so far most convincing case was made by Ben Edelman in Hard-Coding Bias in Google "Algorithmic" Search Results where he demonstrates that Google services will rank in very unnatural ways when compared with any other way the search engines seems to rank web pages. Google usual own stance on their organic search product is “No manual intervention”: "Does Google manually edit its results'" Let me just answer that with our third philosophy: no manual intervention. […] The final ordering of the results is decided by our algorithms using    the contributions of the greater Internet community, not manually by us.”– Amit Singhal, Google Fellow 4 Now I emphasized that this is Google’s usual stance because in its official response Google does not, this time, stress that its search results are purely automatic. Susan Wojcicki (Senior VP Product Management) and Udi Manber (VP Engineering) lay out no less than 5 principles that guide Google’s business but fail to mention what Amit called Google’s third philosophy. The case has always been “suspicious” but unless someone in Google would make a really good response explaining why Ben Edelman’s research doesn’t show what it implies, Google sure as hell looks “guilty” here. 2) Google has lowered the “quality score” for sponsored links of competing vertical search services. 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 Quality Score is one of the factors that help set the price for your ad on Google. Lower Quality Score, higher price. The allegation here is that Google selectively the and 5 manually lowered Quality Score of competing vertical search services, driving up their price and lowering their position and thus visibility. Guilty or Not' I alluded to this situation in Google Boutiques & The Improved Google Vertical Model where I showed – unrelated to this story – that Google Adwords advertisement bought by Google for its own products appears frequently and often at the (most expensive) top spot and asked “Quick, here’s an envelope: how much can you bid on your fashion item Adwords term to outbid Google for those top spots'” Harder to demonstrate but it looks “suspicious”. I don’t expect this part of the investigation to go anywhere unless they would have a Wikileaks-style whistle blower who will dump some internal documents showing that this is what was happening. 6                                                                                                                 4 http://googleblog.blogspot.com/2008/07/introduction-to-google-ranking.html 5  http://googlepublicpolicy.blogspot.com/2010/11/our-thoughts-on-european- commission.html'utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+GooglePublicPol icyBlog+(Google+Public+Policy+Blog)   6  http://www.searchenginepeople.com/blog/google-boutiques.html    3) Google imposes exclusivity obligations on advertisers, preventing them from placing certain types of competing adverts on their websites The open-and-shut part of the formal investigation: Google is suspected of forcing competing advertising services out of the market by putting the obligation on ad publishers to not include certain type of other, competing, ads on their web sites. Guilty or Not' Unequivocally guilty as charged. Up to early 2008 the Adsense program policies stated : “If You have elected to receive content or Site-based Ads, You further agree not to display on any Serviced Page any non-Google content-targeted advertisement(s). If You have elected to receive Search Results on any Site(s), You agree that Google will be the exclusive provider of Internet search services on such Site(s).” 4) Google has placed restrictions on the portability of online advert campaign data to competing online advertising platforms By not allowing publishers to export their advertising campaign data to competing services, Google maintains a grip on a number of large advertisers. Guilty or Not' 7 Probably guilty-ish but this seems like an “oh, let’s throw this in there too” kind of allegation. Some data can be exported and if it cannot be exported directly to a competing service, maybe the competing service should make sure to be able to work with it' Conclusion First of all, a monopoly does not always have to be negative in general. Having various possibilities within one site (Google maps, Google books, Google translator, Google search engine etc) it is comfortable and as long as it is free I will use it. The argument that I would not have the best offers on top because they don’t pay that much or they are not connected to Google does not really convince me. It would be the same if I would argue that it is not legal that e.g. retailers promote their “house brands” stronger and put them into better positions amongst others. Equally, if I don’t want to use google, I can just use other search engines in my favor and use it. From a business point of view it is highly alarming. If a company has to pay high fees in future only to have the chance to be on the screens of the people, if companies have to search for partners that are “linked to Google” or the other way round, avoid partners that don’t cooperate with Google it might be harmful for the economy.                                                                                                                 7  http://www.labnol.org/internet/blogging/google-adsense-terms-conditions-summary-important-changes/2404/