EC Prepared to Accept Binding Commitments to End Google Antitrust Probe, Official Says
European Commission antitrust concerns about Google’s online search and search advertising practices will be resolved by accepting binding commitments from the company rather than via an antitrust case, said EU Competition Commissioner Joaquín Almunia at a Wednesday press briefing. Google’s third offer to settle the competition case, which began in 2010, is capable of addressing the problems, and binding commitments are a faster way to achieve consumer benefits than going through drawn-out litigation, he said. A final decision, applicable only in the European Economic Area, on the matter will come later, and there will be no further market-testing of Google’s proposal, he said. Reaction to Almunia’s announcement was uniformly negative.
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"We will be making significant changes to the way Google operates in Europe,” said Senior Vice President-General Counsel Kent Walker. Google has been working with the EC to address the issues it raised and looks forward to resolving the matter, he said.
The EC had four issues with Google’s business practices, it said in a memo (bit.ly/1fHcPax). One is the way the company displays specialized search services, such as hotel or flight search engines, on its own Web search results pages. Google displays its own specialized search services more favorably than those of rivals, often making competing services harder for users to find, the EC said.
To address the concern, Google said it will put in place a three-part remedy for all current and future specialized search services and all search entry points: (1) Users will be notified by a label that Google’s own specialized search services are being promoted. (2) Those services will be graphically separated from other search results so the distinction with normal search results will be clear. (3) For relevant specialized search services, Google will display prominent links to three rival services in a format that’s visually comparable to that of the links to its own services. For example, if the Google links have images, so will rival links. Competitors will control how they want their offerings presented. The rules will apply to mobile screens as well.
In cases where Google doesn’t charge for inclusion in its specialized search service, rivals won’t be charged to participate in the competing links, and will be chosen from a pool of eligible specialized search competitors using Google’s normal Web search algorithm, the EC said. Where Google charges for inclusion in its specialized search service, the three competitors will be selected from a pool of eligible rivals based on an auction mechanism.
EC Objections
The EC also objected to how Google uses content from competing specialized search services in its own offerings without authorization and sometimes against their explicit wishes. The company has now proposed to let third parties opt out from the use of their content in Google’s specialized search service without being penalized in Google’s general search results rankings in the AdWords program, the EC said. A general opt-out will be available to all websites, on a subdomain-by-subdomain basis, it said. News publishers will get a more specific opt-out so they can control the use of their material in Google News.
The third EC concern related to Google’s imposition of exclusivity requirements in agreements with publishers for providing Google search ads on their websites, the EC said. The agreements resulted in de facto exclusivity, forcing publishers to obtain all or most of the search advertisements they displayed from Google. Google agreed to do away with all written and unwritten obligations on publishers to source online search advertisements from Google, the EC said.
The antitrust investigation also found that Google prevented software developers from offering tools that make it easy to manage and transfer search advertising campaigns across AdWords and rival platforms such as Microsoft’s AdCenter. Google promised to do away with obligations barring advertisers from porting or managing their search advertising campaigns across competing platforms, the EC said.
Google’s concessions are “far-reaching,” Almunia said. No antitrust authority in the world has wrung such commitments from the company, he said. “Remember that our colleagues from the FTC in the US investigated the same issues. Whilst it is true that they faced a different market situation, they did not require such far-reaching action from Google,” his written comments said. After rejecting the company’s first two settlement offers, Almunia warned that its third try would be the last before an antitrust case was filed, he said.
Almunia rejected calls for market-testing. There have already been two market tests, which proved very useful to the EC’s analysis of the case, and the positions of relevant stakeholders are well-known, Almunia said. There’s no legal requirement that a market test be carried out, he said. Instead, the next step will involve draft letters to all 18 complainants explaining why the EC proposes to accept Google’s commitments and why they won’t be market-tested, he said. Complainants will be allowed to respond, after which Almunia will ask the EC to make a final decision making the company’s offer binding, he said.
Compliance with the commitments, which will be in effect for five years from the final decision date, will be overseen by an independent monitoring trustee, the EC said. The trustee will be appointed by, but independent from, the commission, Almunia said.
Almunia said he’s unlikely to change his mind about Google’s concessions. His acceptance of the proposals rests on “solid ground,” he said at the briefing. But the next step, sending explanatory letters to complainants, “is not empty,” he said. Strong arguments against his approach from complainants could influence him, he said.
Rivals Upset
The refusal to do a third market test is a continuing sore point, representatives of the search industry said. “A settlement without third party review is a massive failure,” said the Initiative for a Competitive Online Marketplace, which is partially funded by Microsoft. Complainants and others must see the proposed commitment, not just the EC’s analysis of why it will work, it said. Earlier market-testing provided hard data that proved previous settlement offers weren’t effective, it said. Without such testing, “Almunia risks having the wool pulled over his eyes by Google."
The proposal is “worse than doing nothing,” said FairSearch Europe Legal Counsel Thomas Vinje after a preliminary review. The worry is that the proposed commitments “lock in discrimination and raise rivals’ costs instead of solving the problem of Google’s anti-competitive practices,” he said. Under the proposal, competitors must pay for placement similar to that of Google’s own material, undercutting their ability to compete and offer consumer choice, he said. The auction mechanism will require participating companies to “hand the vast majority of their profits to Google.” FairSearch members include Microsoft and Oracle.
The EC “has fallen far short” of its goal to ensure fair consumer choice in online searches, said European Consumer Organisation Director General Monique Goyens. She called the tentative settlement a “deeply disappointing conclusion to the process” that “would appear to have tripped over itself in a rush to a summer political deadline.” Of key concern is how price comparison search results will be presented, she said. Consumers will now have three product price options alongside those preferred by Google, but those prime positions will be decided via a qualified auction. That will most likely operate in favor of companies with the biggest commercial clout, giving Google a second revenue stream beyond those who pay to be a “preferred service,” she said.
Consumer Watchdog said the plan to end the antitrust probe is unacceptable and urged the EC to make the third settlement proposal public. “A settlement of this importance must face public scrutiny,” said Consumer Watchdog Privacy Project Director John Simpson. His organization contends that Google has a conflict of interest because it no longer has any incentive to steer users to sites and services other than its own.
"Although far from final, the decision to proceed on the basis set out today is fundamentally defective,” European Publishers Council Executive Director Angela Mills Wade told us. Nothing announced Wednesday deals with the original abusive practices the EC found, she said. The latest changes are “trivial” and the EPC and others have already provided solid evidence that shows how they are inadequate, she said. Publishers will raise their concerns about the process and implications of the package directly with EC members before the final decision is made, she said.
It’s likely Google’s rivals will be able to contest the settlement decision in court, said Vincent Brophy, an EU antitrust lawyer in Jones Day’s Brussels office who isn’t involved in the case. If that happens, the court involved would be the European Court of Justice, and the case could take several years to resolve, he said in a press release.