FairSearch urges Vestager to require effective Google Shopping remedies

FairSearch sent the following to Executive Vice-President Margrethe Vestager on 15 November 2021:

Dear Executive Vice-President Vestager,

Congratulations to you and your team on the comprehensive victory in Google’s appeal of the Google Comparison Shopping Decision (the “Decision“).

FairSearch takes this opportunity to renew its submission that decisive enforcement of the Decision is overdue.

Following the judgment, Google will no doubt try to limit its effective impact by all means possible, including by obfuscation and misrepresentation.  We urge you to stand firm in the face of such tactics and to hold Google to account.  Reaching this stage has been, undeniably, a long and hard slog for the Commission, but the court victory will only have true meaning as a precedent and to the many sector players and millions of consumers if the Decision is not only upheld, but also effectively implemented in full and without compromise.

You will recall that the Commission enforced its 2004 Server interoperability and media player bundling decision, and that this contributed very significantly to Microsoft’s embrace of a greater degree of competition on the merits in a variety of markets.  Had the Commission not vigorously pursued non-compliance proceedings against Microsoft, its Decision would have been rendered meaningless, just as the Google Shopping decision now risks remaining ineffective despite the Commission’s victory in Luxembourg.

The Court’s judgment provides strong support for a vigorous enforcement of the remedies in the Decision, and fully backs up the concerns we and others have laid out regarding Google’s purported remedies.  In particular:

• The judgment confirms that Google’s abusive conduct “consists in the combination of two practices: the promotion of specialised results from Google’s comparison shopping service and the simultaneous demotion of results from competing comparison services by adjustment algorithms.” (paragraph 187)  Google’s ”remedies” fail to change its demotion practices and the judgment necessitates the conclusion that leaving intact Google’s anti-competitive adjustment algorithms in and of itself constitutes non-compliance with the Decision.  Google has done literally nothing to comply with this critical half of the Commission’s decision (and now the Court’s judgment).

• The judgment further compels the conclusion that Google’s current CSS auction perpetuates rather than remedies its abusive favouring conduct:

• The judgment upholds the finding in Recital 630 of the Decision that “clicks on links within the Shopping Units that lead the user directly to a webpage of a merchant should be counted as visits to Google Shopping.” For example, at paragraph 337 of the judgment, the Court found that “a click in a Shopping Unit was indeed to be regarded as a manifestation of the use of Google’s comparison shopping service from the general results page, that is to say, as traffic for that comparison shopping service from that page.” This important finding, on which the Commission’s calculations of traffic diversion from 2013 onwards are based, equates the diversion of revenue to the diversion of traffic.  Therefore, as amply demonstrated in multiple submissions by Foundem, FairSearch and others (for example, here),[1] Google’s CSS Auction remedy is simply a continuation of the abuse identified by the Decision, and no auction-based mechanism can comply with the equal treatment principle mandated by the Decision.

• Paragraphs 346 to 355 of the judgment further preclude any possibility that Google’s auction-based remedy could address the conduct identified by the Decision. In these paragraphs, the Court confirms the Decision’s finding that allowing rivals to act as intermediaries in Google’s Shopping Units cannot redress Google’s favouring of its own comparison shopping services.  For example, at paragraph 351 the Court finds that “the alternative offered to competing comparison shopping services in order for them to appear in Shopping Units, namely, to act as intermediaries, also requires them to change their business model in that their role then involves placing products on Google’s comparison shopping service as a seller would do, and no longer to compare products. Accordingly, in order to access Shopping Units, competing comparison shopping services would have to become customers of Google’s comparison shopping service and stop being its direct competitors.” (emphasis added)  The judgment thus leads to the inexorable conclusion that Google’s auction-based remedy is non-compliant, as it only affords rivals access to the Shopping Unit if they are willing to relegate themselves to being mere intermediaries who effectively no longer provide an actual comparison shopping service.

In commenting recently on Google’s conduct purporting to comply with the Commission’s decision, you referred to data apparently showing that “around 75 percent … of products come from merchants that work with rivals of Google.” This data does not, however, indicate that Google’s remedy implementation complies with the Decision.  Google’s auction mechanism ensures that Google is the primary beneficiary of any clicks on rivals’ results by retaining 80-100% of the profits generated by these clicks.  As Recital 630 of the Decision found (and has been upheld by the judgment), this proportion of rivals’ profits should be counted as visits to Google Shopping because Google benefits economically from those clicks.  In other words, whichever result a user clicks on, Google wins traffic and revenues.  Further, many of those “rivals” are in fact advertising agencies posing as comparison shopping services, and not genuine comparison shopping services.[2]

In addition, because Google prioritises Shopping ads according to the amount of money it will earn from them rather than by which ones objectively provide the cheapest offer, users inevitably continue to be directly harmed every day by (a) paying more for their products than they need to; (b) being denied access to the most relevant results; and (c) being denied effective access on equal terms to undeniably useful comparison shopping service functionality (given that the ads route the user directly to the highest paying merchant and not to a comparison shopping service).  The fact that “around 75 percent … of products come from merchants that work with rivals of Google” therefore does not render the remedy compliant:  Google continues to harm consumers and continues to favour results that economically benefit it, which is akin to favouring its own results, and starves providers of traffic and hence revenue that would allow them to compete on the merits.

Finally, we continue to be concerned that a failure to reject Google’s so-called “compliance mechanism” undermines an intended effect of the DMA even before it is finalised.  The  developing text of Article 6(1)(d) closely mirrors the non-discrimination principle laid out in the Decision.  A failure to reject Google’s “compliance mechanism” would give Google room to argue that it can comply with the DMA using just such an auction-based mechanism.  Were this to be the case, the DMA would be still-born.

We would welcome the opportunity to exchange views with you on the importance of robustly enforcing the (now comprehensively upheld) Decision.

Yours sincerely,

Thomas Vinje

Legal Counsel to FairSearch

Partner, Chairman Global Antitrust Practice, Clifford Chance

[1] http://www.foundem.co.uk/fmedia/Foundem_Google_CSS_Auction_Revenue_Counts_As_Traffic_Nov_2019

[2] http://www.foundem.com/The_Google_SpendMatch_Debacle.pdf