Brussels reaches antitrust deal with Google, gets scolded

Google Eric Schmidt_smaller.jpg

The EU’s competition commissioner, Joaquín Almunia, announced yesterday (5 February) that he had reached a deal with Google, solving a longstanding dispute over alleged abuse of its dominant market position for internet searches. Plaintiffs dismissed the effort, demanding a say before the agreement is confirmed.

Google has agreed to make concessions in how it displays its rivals on Google search pages.

“These alternatives will be attractive: for instance, if Google has a picture to promote its services, which is a key element in attracting users, rival services will also have such a picture,” said Joaquín  Almunia, the EU's competition commissioner.

Since November 2010, the European Commission is investigating possible violations of antitrust regulation by Google. For instance, the company promotes results of Google Maps or Google Shopping when users enter a search query on the main Google website, but has warded off rivals from such promo spots on its pages.

Kent Walker, senior vice-president of Google, said: “We will be making significant changes to the way Google operates in Europe. We have been working with the European Commission to address issues they raised and look forward to resolving this matter.” 

By agreeing to the concessions, Google avoids several more years of legal wrangling with the Commission, which could have eventually led to a multi-billion euro fine (see background).

As part of the arrangement, Google agreed to a ‘monitoring trustee’, a watchdog to keep a close eye on the internet giant’s practices when promoting services. While the European Commission is responsible for nominating the watchdog, it is unclear who it could be.

The deal also allows Google’s competitors to opt-out. If rivals do not want to feature in the advertised parts of Google’s pages, they will not be demoted in Google’s search results nor via Google’s algorithm determining top searches.

The agreement affects European users, entering the search engine from IP-addresses (which track the location of a computer) within the EU.

European competitors rally against deal

The announcement by the Commission triggered a series of criticisms by stakeholders.

FairSearch Europe, which represents the interests of companies including Microsoft and Tripadvisor, stated that “the proposed commitments lock in discrimination and raise rivals’ costs instead of solving the problem”.

The deal “requires rivals to pay Google for placement similar to that of Google’s own material, undercutting the ability of others to compete and provide consumer choice,” according to FairSearch.

The agreement is partially based on visual elements, which ensure a mix of Google services and rival services in the promoted boxes on search pages. Competitors fear Google will simply build around these restrictions, making the deal obsolete.

Chris Sherwood of the Allegro Group, a rival of Google’s in the Central and East European market, told EURACTIV: “The solutions that the European Commission presented could be out of date in no more than a few weeks.”

Almunia brushed aside those criticisms, saying “the concessions made by Google eliminate those concerns”. The Commission has to send letters of rejection to 18 complaints it received in the investigation. The aim is to defend the concessions, and Almunia stressed that he did no see how he would change his mind. “I know their arguments and these issues are resolved in the proposed concessions.”

A protracted investigation

The European Union started investigating Google’s activities, based on the antitrust regulation, in November 2010. The Commission then reached out to stakeholders in the online shopping market and other online markets.

Two rounds of negotiations preceded this final deal. Last December, Almunia presented a package of changes proposed by Google to the affected European business representatives who rejected it, saying it did not suffice.

The deal will enter into force as soon as it is adopted in a meeting of all 28 commissioners. Stakeholders and rival companies are preparing to rally publicly and lobby privately for the college of commissioners to reject the agreement.

Google has agreed to the deal for a period of five years, starting from the moment it is adopted by the Commission. 

The executive director of the European Publishers Association (EPC), Angela Mills Wade, said: "Although far from final, the decision to proceed on the basis set out today is fundamentally defective. Nothing announced today deals with the original abusive practices identified by the Commission. The latest changes offered by Google are trivial and EPC and others have already provided solid evidence that shows how they are ineffective. We are raising our concerns about the process and implications of such a package directly with the members of the European Commission before a final decision is taken."

Monique Goyens, director general of The European Consumer Organisation (BEUC), said: “The Commission has today fallen far short of the aim of ensuring fair consumer choice in relation to online search in Europe. Consumers should be able to expect neutral search results. This is not a reality today due the nature of Google’s business model and we expected the Commission to remedy this.” 

“After several years of work, this is a deeply disappointing conclusion to the process. It would appear to have tripped over itself in a rush to a summer political deadline.”

President of the European Newspaper Publishers Association (ENPA), Ivar Rusdal, said: “If the Commission were to endorse Google’s anti-competitive behaviour of Google, it would be a devastating blow to the future development and sustainability not only of the independent press sector, but European creative industries as a whole. Legitimising Google’s practices would seriously threaten Europe’s core democratic values, such as press freedom, media pluralism and consumer access to information.”

President of the ?European Magazine Media Association (EMMA), David Hanger, said: “It is essential for the legacy of the Barroso II Commission that this case seriously considers the economic impact on European businesses, including our sector. We have continuously criticised the lack of acceptable solutions proposed by Google’s commitments, which would even increase the level of infringement of EU competition rules and therefore further entrench Google’s abuse of its dominant position on the European digital market.”

Thomas Vinje, FairSearch Europe’s legal counsel, said: “The European Commission has tentatively accepted a proposal by Google which is worse than doing nothing. These proposed commitments have not been subjected to any form of consultation, although it was thanks to market testing of industry participants that the Commission had condemned two previous packages of proposed commitments as fatally flawed.”

“Given the broad impact of such a settlement on consumers, competitors, innovation and Europe’s digital economy, it is vital that the latest package of Google’s proposed commitments be subject to a broad a consultation of stakeholders. Sadly, this does not seem to be the case.”

Chris Sherwood, head of public policy at the Allegro Group, said: “We are very disappointed with the announcement made in the competition case against Google as the solution proposed does not address the fundamental issue of ensuring a level playing field for the European Internet economy.

“We extensively tested user interface solutions similar to the ones presented by the Commissioner today in the Autumn of 2013, and results clearly showed that they do not address the unfair competition issue. They fix Google’s market share in a new segment at no cost to its business and requires rivals to pay for access of a far smaller share of the market.

In November 2010, the European Commission opened an investigation into Google’s activities in the EU market for internet search, after complaints by rivals that its dominant position was in breach of fair competition and antitrust regulations.

The Commission negotiated a “commitment decision” with Google (also called “Article 9 decision”), demanding concessions and testing those concessions in market tests and questionnaires involving rival companies. Such a deal must be confirmed by all 28 EU commissioners.

After two unsuccessful bids by Google, the Commission accepted the third proposal of concessions, thus avoiding a legal spat (under the Article 7 procedure). The latter would have lasted for years and potentially lead to a fine on previous breaches of antitrust regulation. Such a fine is set at a maximum of 10% of a company’s one-year revenue on EU-based activities.

  • 12 Feb.: Next meeting of college of commissioners in Brussels

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