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03/12/2016

Google will not benefit from EU antitrust case: Almunia

Digital

Google will not benefit from EU antitrust case: Almunia

European Competition Commissioner Joaquin Almunia [Shutterstock]

The revenues generated by EU remedies proposed in the antitrust case against Google will be shared with competitors, and will not generate further income for the US search giant, the European Commission promised.

“I do not agree with those saying that Google will earn more” from the proposed remedies, said EU Competition commissioner Joaquín Almunia who was speaking yesterday (18 March) during a hearing in the European Parliament’s economic affairs committee.

In February, the EU’s competition commissioner announced a provisional decision in the Google search case, based on a new set of commitments made by the US company.

Google committed to guarantee that “whenever it promotes its own specialised search services on its web page (e.g. for products, hotels, restaurants, etc.), the services of three rivals will also be displayed in a way that is clearly visible to users and comparable to the way in which Google displays its own services,” reads a Commission press release issued on 5 February.

Almunia said at the time that the offer “addresses the Commission concerns” and paved the way for a final settlement with Google after more than three years of negotiation.

But Almunia’s provisional decision triggered a barrage of criticism from Google’s competitors. Complainants in the case explained that the proposed remedy would introduce a new box in Google’s search results, creating a new set of revenues for the search engine, while pushing for-free links further down in the results webpage.

With the remedy in place, Google would make up to $330 million (€237 million) of extra revenues a year only from the hotel and flight sectors, according to a study by FairSearch, a lobbying coalition gathering complainants in the Google case, including Microsoft.

The figure is estimated to reach up to $1 billion annually (around €700 million) when adding the car insurance, mortgage and travel insurance sectors.

Complainants say consumers will lose out as a consequence, since neutral results, with potentially lower prices for hotels or flights, risk disappearing from the first page of Google’s search results. Internet users usually focus on the first results of a search. The top three results receive 88% of the clicks, according to the FairSearch study.

Addressing MEPs, Almunia dismissed this argument, arguing that competitors will also benefit from the search revenues in the paid-for box if the EU remedy is implemented. While revenues currently go 100% to Google, “they will be shared between Google’s services and the rivals’ which appear in the comparing box,” once the remedy is in place, Almunia said.

This argument is unlikely to convince complainants, who argue that the box proposed by the Commission represents an added element in the result page – and therefore a further source of revenue for Google. Meanwhile, the box will only provide minor additional income for competitors, they claim.

Trustee

The Antitrust commissioner tried to quell criticism, providing details on the role that an independent monitoring trustee would play if the Commission decided to make the voluntary commitments legally-binding on Google.

This “referee” would report to the Commission “every three months” on how the commitments are applied and on whether there are fresh complaints, Almunia told MEPs.

To illustrate his point, Almunia referred to the Microsoft Internet Explorer case, saying the trustee was an effective enforcer of the company’s commitments and would perform equally well with Google.

Microsoft was fined an extra €561 million for non-compliance with its own commitment to offer users of the Windows operating system the ability to select a preferred web browser, including competitors to Internet Explorer.

In his Parliament hearing, Almunia defended his decision to solve the Google case with a settlement rather than a punishment, saying it will be quicker and more effective.

The Spanish commissioner told MEPs that his services will reply to all complainants in the case, which include Microsoft and Expedia, following the provisional decision taken in February.

“I cannot rule out that we will receive opinions from the complainants which we will take into consideration,” Almunia acknowledged, adding however that “it is going to be difficult” to change his position.

The commissioner also reiterated his intention to conclude the investigation within the mandate of the current Commission, which expires in November.

Background

Despite cross-border limitations, e-commerce is slowly picking up in Europe and is expected to reach a total volume of over €260 billion by 2015, from €159 billion in 2011.

An increasing share of this activity passes now through online search, which is for many users the main gateway to the Internet and therefore to e-commerce.

Inevitably, this situation poses questions on the dominant role played by Google, which is by far the most important search engine in Europe and in the world. According to some estimates, Google controls 94% of online search in Europe.

The expansion of Google from online search to related areas such as bookings for hotel, travel or restaurants, has raised concerns in Brussels and pushed the European Commission to start an antitrust investigation in November 2010 over a possible abuse of Google’s dominant position.

Timeline

  • July-September 2014: Commission to announce final decision on Google search case
  • 1 Nov. 2014: Target date for new Commission to take office

Further Reading

European Commission

Business & Industry

  • FairSearch Study on search habits online