Consumer Group, Search Competitors Press EC to Reject Google Proposals to End Antitrust Probe

Four of Google’s business practices might violate EU antitrust laws against the abuse of a dominant position, the EC said in an April 25 memo (http://bit.ly/12Kmkzj). Those activities were: (1) Favorable treatment within Google’s search results of links to its own specialized Web search services such as Google Shopping, compared to links of rival services. (2) Use by Google without permission of original content from third-party websites in its own specialized search services. (3) Agreements requiring third-party websites (publishers) to buy all or most of their online search ads from Google. (4) Contract restrictions on transferring online search ad campaigns to competitors’ ad platforms, and on managing such campaigns across Google’s AdWords and rival search ad platforms.

In response, Google offered a series of commitments (http://bit.ly/11n1X8p). Among other things, it promised, for five years, to label promoted links to its own specialized services to allow users to distinguish them from natural search results; clearly separate the promoted links from other results by clear graphical features such as a frame; and show links to three rival specialized search services close to its own services, in a spot clearly visible to users. On April 25, the EC began a market test to help it decide whether to make the commitments binding or go ahead with a full antitrust investigation (WID April 25 p3). The comment period ended May 27.

The EC should throw out Google’s commitments because they will hurt consumers, stifle innovations and further narrow market competition for online search services, BEUC said (http://xrl.us/bo6fba). Instead of fixing the situation in a market in which the company is clearly dominant and has been discriminating against alternative providers in vertical search, Google’s proposals will legitimize its anticompetitive practices and give it additional tools to increase its dominance, BEUC said.

Google’s labeling proposals will continue to mislead consumers, the consumer group said. Making the company indicate that Google Specialized results have been added by Google won’t help, because users will have to click on an icon for more information, it said. “The similarity with an icon-based system developed by the advertising industry for online behavioural ads is remarkable,” BEUC said, apparently referring to the AdChoices icon system developed by the Digital Advertising Alliance (WID April 25 p1). A recent U.S. privacy management service TRUSTe study showed how ineffective such icons are, it said: Out of around 20 million consumers (seven million unique visitors), the icon was accessed only 56,000 times with 44,000 unique views.

The proposal to use graphical frames to display the promoted links actually aims to boost traffic to Google’s own vertical results, BEUC said. That would amount to special advertising of Google’s own services, it said. Google’s control of format and placement allows it to influence consumers’ searches and site visits, it said. Consumers are more likely to click on the promoted links because their design will be more prominent and attractive, it said. But they will actually have less choice of other vertical search results because those will be less visible, it said.

BEUC also attacked Google’s promises as being against EU case law because they failed to offer objective justification for anti-competitive behavior that would allow the company to escape the prohibition against abuse of dominant position. If the EC accepts the commitments as they are, it will “send an ill-advised signal to dominant companies in other markets that immunity from competition rules on the basis of poor evidence is possible,” BEUC said. Moreover, if the EC endorses the proposals, Google will have a five-year immunity period during which it will be able to shape the online vertical search marketplace according to its own commercial interests, further strengthening its dominance, it said.

BEUC accused Google of trying to divert attention from manipulation of natural search results by focusing on universal search. Universal search was established to prominently insert links to Google’s own vertical search service and take traffic away from competitors, it said. The commitments won’t do anything to stop Google from doing that, and will allow the search engine to profit not only from the traffic it shifts from other websites but also from new chances to charge for inclusion on the rival links, BEUC said. It would also be unacceptable if only the three links that offered the highest bid for inclusion will appear, it said.

"Overall, the remedies proposed by Google fall short of meeting the even-handed principle, according to which Google should be obliged to hold all services, including its own, to exactly the same standards, using the same crawling, indexing, ranking, display and penalty algorithms,” said BEUC. The EC should look to the computerized reservation systems for air transport products such as flights for the standards to impose on Google, it said.

It’s “difficult to imagine a Competition case where the stakes for consumers and businesses could be any higher,” said Foundem. The importance of ending Google’s ability to manipulate its unprecedented power over what people discover, read, use and purchase online to its own ends “cannot be overstated,” it said. The hopes of a digital-led economic recovery may depend on what the EC does, it said.

Google’s proposals are full of problems but “one fundamental flaw undermines every clause: the proposals ignore the natural search results and AdWords listings that Google is being charged with manipulating,” said Foundem. Google has offered minor alterations to its self-serving Universal Search inserts which will have no effect on its ability to systematically penalize rivals in natural search results and do nothing to curtail the “unassailable advantage that Universal Search affords Google’s own services,” it said. The proposals “are so ill-suited to the problems at hand and so far removed from anything that could solve them that the Commission cannot knowingly accept them,” it said.

If adopted, the paid rival links elements of the proposals would give Google a strong incentive to transition its vertical services over to the new paid placement model, directly harming consumers and killing rivals, Foundem said. The merchant who pays the most to advertise on Google isn’t often the one offering the best value to consumers, it said. Foundem speculated that Google floated this and other proposals, such as the bidding process for paid rival links, as being “deliberately ludicrous” and designed “to draw criticism” that allows Google to withdraw them under the guise of a major concession.

In recent months, a strong consensus has emerged that the most straightforward way to end Google’s abusive practices and level the playing field among rival search engines would be to force the search giant to hold all services, including its own, to exactly the same standards, Foundem said. Google’s proposals fall far short of that even-handed principle, and seek to legitimize existing abuses, it said.

If the proposals “don’t clearly set out non-discrimination principles and the means to deal with the restoration of effective competition, plus effective enforcement and compliance, it’s very difficult to see how they can be satisfactory,” ICOMP’s April 25 preliminary take on the commitments said (http://xrl.us/bo6fem). It’s clear that mere labeling isn’t any kind of a solution and that Google should implement the same ranking policy to all websites, it said. ICOMP identifies itself as an industry initiative whose members advocate for “a more competitive, transparent, privacy friendly, and secure online marketplace,” and which is sponsored by Microsoft.