FairSearch - for the right result

FairSearch Press Conference – 27 June

With Thomas Vinje, spokesman for FairSearch; Shivaun Raff, founder of Foundem, and Elizabeth DeBony, executive director of FairSearch, commenting on Google decision.


Statement by Thomas Vinje, Spokesman and Legal Counsel to FairSearch

Partner & Chairman of Clifford Chance’s Global Antitrust Practice

Commission condemns Google for search manipulation practices violating EU competition law

Brussels, 27 June 2017 – Today, the European Commission took action to prohibit Google’s illegal search manipulation practices and to restore competition on the merits to Google’s search results for a key online sector, comparison shopping – a service that allows users to compare product features, prices, and availability from a wide selection of online retailers.

FairSearch warmly welcomes the Commission’s decision, which sets a powerful precedent that the Commission can use immediately to restore competition on the merits to other specialised online search services such as those for travel, local and maps.  European Competition Commissioner Margrethe Vestager is proving she means business by pursuing the matter vigorously in the face of nearly seven years of foot-dragging by Google. This landmark decision demonstrates the decisive role that competition policy can play in addressing conduct by online platforms, and we are confident the European Commission will prevail on the law and the facts in any appeal Google may file.

For over a decade Google has abused and leveraged its monopoly power in search – where it has a 95% market share in Europe — to both undermine rival comparison shopping sites and to preference its own online shopping business. The Commission’s decision will finally put a stop to that abusive conduct, and it will enable those competitors that have survived despite Google’s behaviour, as well as new entrants, to compete on the merits and offer results that serve European consumers and not just Google.

Google search results are not designed to deliver the most relevant results (and best prices) to consumers, but rather to make the most money for Google. Consumers have therefore faced reduced choice of goods and services and ultimately paid higher prices than they would have done had Google provided objective results and not those that line its own pockets.  This decision will mean that consumers receive comparison shopping results that offer genuinely the best purchasing options.

Google’s abuse of its dominance continues in other areas which must be addressed by the Commission.   FairSearch urges the Commission to issue a decision in relation to its investigation of Google’s practices regarding its dominant Android mobile operating system – an investigation triggered by a complaint submitted by Fairsearch in 2013.  Without swift and forceful action in relation to Android, Google will continue to restrict competition in software running on mobile devices, the primary means through which consumers access the Web.

Finally, FairSearch rejects any suggestion that this decision is motivated by anti-American sentiment.  The European Commission pursues US tech companies because they are the ones who dominate their industry.  In industries where European companies dominate – for example energy, transportation and often financial services – the Commission pursues them, not American companies.  The determining factors are dominance and abusive conduct, not nationality.  Look at the cases — the facts speak for themselves.

Link to press statement: http://fairsearch.org/search-decision/

Press Contacts

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The Google Comparison Shopping Case – Background

Introduction

The European Commission is nearing its most important antitrust decision in more than a decade — the first of three crucial antitrust cases asserting Google abuses its dominant position in Europe, in this case manipulating search results to damage competitors to its comparison shopping services.

The last comparable decision was in 2004, when the Commission found Microsoft had illegally leveraged its dominance to put competitors out of business, a precedent-setting case upheld by European Union courts in 2007. Some of the European Commission experts who worked on the Microsoft case applied their knowledge and experience to Google.

This note briefly sets out facts, history, timing and terminology for the comparison shopping case, and our view of its importance. As everyone knows, today Google’s search engine is a gatekeeper to the internet. Google’s anti-competitive search practices can effectively keep out innovative business and consumer services.

Why it matters

The three Google antitrust decisions will be the most important since the European Commission required Microsoft to end anti-competitive competitive practices 13 years ago. While the antitrust case against Intel, a maker of computer chips, was significant among a small group of hardware companies in 2009, the Google cases – like the Microsoft case – affect a wide swath of industry. Google’s market dominance has given the company power to decide the fate of all but the biggest online service providers – in other words nearly every company.

The search case could require major changes in Google’s business practices on comparison shopping services. A European Commission prohibition decision imposing a non-discriminatory remedy would open the way for other comparison shopping services to innovate, compete and grow.

The three cases together could force a major shift in Google’s conduct to promote competition. Should the European Commission choose to act in the other two cases, in addition to comparison shopping, it could require changes to the company’s business practices across a host of ecosystems, from advertising to makers of mobile devices to travel, insurance and other industries.

Before examining the comparison shopping complaint, it is worth defining the term “dominance”, and explaining two kinds of search.

Definitions: dominance and search

Dominance

European Union competition law puts a special obligation on dominant companies: they may not use their power to distort or destroy competition. Otherwise, consumers may suffer higher prices and less choice of innovative products.

 The Commission noted in a fact sheet accompanying the formal charges it brought against Google in 2015 in the comparison shopping case: “Google has a dominant position in providing general online search services throughout the EEA [European Economic Area], with market shares above 90 per cent in most EEA countries.”   These days more searches are done on mobile devices than anywhere else, and there Google has an even higher share than on desktops. It is effectively a monopoly.

Google chokes off traffic through exclusionary practices that are at the heart of the search complaint, because they injure competition.

Search — horizontal or vertical

Horizontal search: General search based on key words or phrases, and provided by Google, Bing, and Duck Duck Go among others.

Vertical search: Specialized websites for services like flights, hotels, comparison shopping, and local search which often require customers to provide detailed information such as the date of a trip, the city location and desired price for a hotel, or the specific model of a washing machine.

 

The Original Complaint

Foundem’s vertical search service was struck by an algorithmic Google search penalty within weeks of its launch in 2006, effectively excluding it from Google’s search results. Appeals to Google were fruitless. In November 2009 Foundem complained to the European Commission that Google had manipulated search results to promote its own vertical search services while it simultaneously demoted competitors. Such action is illegal for dominant companies.

Then-Competition Commissioner Joaquin Almunia opened a formal investigation and began negotiating a settlement in 2012 but ultimately rejected three sets of Google proposed remedies. FairSearch said the remedies would be worse than nothing, and would penalize complainants and other advertising customers with $1 billion in new annual fees and costs paid to Google.

Once Competition Commissioner Margrethe Vestager took over in 2014 she met with many complainants – who by then numbered more than two dozen — and the then-chairman of Google, Eric Schmidt. Vestager decided to issue formal charges in 2015, known as a Statement of Objections, and issued supplemental charges in the summer of 2016.

The Statement of Objections alleged Google elevated its own comparison shopping site to the top, no matter its objective quality, at the same time it relegated competitors to obscure spots that dramatically reduced their traffic.

 

Complainants

Since 2009 more than 30 complainants have filed search complaints against Google with the European Commission. In addition to Foundem these include the Federation of Germany Newspaper Publishers (BDZV); Association of German Magazine Publishers (VDZ); Ciao.de; Euro-Cities; 1plusV; E-Musicpro.com; Eguides.fr; VfT; Interactive Lab; Elfvoetbal.nl, Hot-Map.com, NNTP.it; Deal du Jour; Spanish Association of Daily Newspaper Publishers (AEDE); Twenga; Odigeo; Expedia; Trip Advisor; Streetmap; Nextag; ICOMP; Visual Meta; Contaxe; Impala; CEPIC; BEUC; Open Internet Project; HolidayCheck; Getty Images. See our website list

 

The remedy

FairSearch and all complainants, notably the European consumer group BEUC, support a prohibition decision requiring Google to end its abusive behaviour. Google should stop boosting its own vertical services to the top of the search screen while pushing down those of others so they effectively disappear, and instead apply the same algorithms to both in the same way.

It would be up to Google to propose ways to bring its behaviour into compliance with EU competition law, likely within three to four months of the decision.

A large fine would send a public message that the European Commission considers the company’s transgressions to be serious.

Additional Cases 

Two additional EU Google cases resulted in further investigation of many complaints filed:

FairSearch filed a complaint in March, 2013, asserting that Google abused its dominance of the mobile operating system Android, and Vestager issued a Statement of Objections in the case in April 2016. Aptoide, Yandex and the Open Internet Project have filed similar complaints.

Others complained that Google abused its dominance in Web advertising, and Vestager issued a Statement of Objections in July 2016, saying Google restricted third-party Websites from displaying ads processed by its competitors.