European Affairs

EU Antitrust Action against Google: High Stakes for Europe's digital landscape     Print
By James D. Spellman, Strategic Communications LLC

Spellman 1Rumored for months as the five-year antitrust investigation was finishing, the European Union has formally accused Google of skewing its search results to those companies participating in the search engine’s shopping services. Brussels is also continuing its pursuit of other anti-competitive charges against Google businesses, including the mobile operating system Android, which U.S. rivals have been pressing Washington to launch antitrust litigation against.

“I am concerned that the company has given an unfair advantage to its own comparison shopping service, in breach of EU antitrust rules," said EU Competition Commissioner Margrethe Vestager. “The result [is] that consumers do not see what’s relevant for them,” she added, stressing the commission’s concern for maximizing “consumer choice and innovation” on the Internet. “We are not here to take the side of rivals — we are here to take the side of competition.”[1]

At a Washington, D.C. press conference (April 16), she emphasized the need for the EU to act quickly and deliberately. “It is important to be more speedy in getting the question out, to be able for Google, for competitors, but most of all for consumers to see our concern.”

Triggered by a complaint filed in 2007 by a husband-and-wife team, founders of the small U.K.-based price-comparison website Foundem, the EU’s charges focus on four areas: potential bias in Google’s search results; scraping content from rival websites; agreements with adveertisers that may exclude rival search-advertising services; and, contracts that limit marketers from using other platforms. [2] EU authority is granted through Article 102 of the Treaty. [3]

(The pie charts below show how Google dominates search usage in Europe and digital advertising worldwide.) 

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Source: Matt Rosoff, “Here's How Dominant Google Is In Europe.” Business Insider, November 29, 2014. http://www.businessinsider.com/heres-how-dominant-google-is-in-europe-2014-11#ixzz3XQdSdxyw 

When you search “Samsung television,” as the Daily Telegraph (UK) did using Google.uk, the retailers who appear first are those who pay Google for directing people to their websites to buy products and services.[4] Such practices by a dominant player can be anticompetitive by forcing rivals out of business, the EU contends.

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If the investigation confirms the EU’s charges, “Google would have to face the legal consequences and change the way it does business in Europe,” she said. [5]

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Google has ten weeks to respond. If the EU isn’t dissuaded by Google’s counter-arguments, it could immediately impose injunctions to halt any anticompetitive behaviors of Google and impose fines as high as $6.6 billion (10 percent of its $66 billion in annual sales). Google could challenge the commission’s decision in the EU appeals court in Luxembourg, but that court has typically ruled in support of commission actions, as it did with the Microsoft case in 2007.[6]

In its memo to employees, the shape of Google’s defense – “competition is just one click away” -- can be discerned. The communique notes the plethora of search “assistants,” from Apple’s Siri to Microsoft’s Cortana and Bing. Usage of the Internet is changing rapidly through mobile phones and their “apps.” “Today 7 out of every 8 minutes on mobile devices is spent within apps, Google says. Further, “it’s clear that there’s a ton of competition (including from Amazon and eBay) that has not been harmed by Google’s own shopping service.” Google points to the graphs below as evidence.

Germany (unique visitors, ‘000s)

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Shopping Sites in France (unique visitors, ‘000s)

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Shopping Sites in the UK (unique visitors, ‘000s)

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One argument in Google’s defense, that of efficiency, some legal scholars say, is not a strong one in terms of how the EU antitrust law is applied, as noted by Herbert Hovenkamp, a law professor at the University of Iowa. “The Europeans tend to use competition law to level the playing field more than is the case in the United States . . . ” [7]

Other scholars suggest that antitrust concepts and procedures need to evolve with technology, which changes rapidly. The concerns the EU has now about Google’s search engine may not be relevant in a year or two as “apps” replace search engines for consumer and business transactions. They point to the slide in Microsoft’s dominant position for softwar, after the EU’s action against Microsoft, as tablets and smartphones cut laptop usage sharply.

“In the Microsoft case, if they’d just waited a while, the problems they thought they saw would have disappeared because technology, consumer behavior and the market demand changed enough to correct those problems,” said Geoffrey A. Manne, executive director of the International Center for Law and Economics, in the New York Times.[8] In a 2013 law review, Manne wrote that “Microsoft’s market position was unassailable ... until it wasn’t. … Internet monopolies are notoriously fleeting.”[9]

Aggressive enforcement of antitrust laws, too, can result in a “false positive which would chill innovation and competition that currently provides immense benefits to consumers.”

However, in a speech on April 14, Günther Oettinger, the European Union’s digital commissioner, outlined a key element of the rationale for the EU’s action. Those sectors that hold the greatest promise for growth and reinvention of Europe’s economy are dominated by American firms. We must “replace today’s web search engines, operating systems and social networks. Our online businesses are today dependent on a few non-EU players. This must not be the case again in the future.” Tomorrow’s digital economy “must be more open and interoperable”…“with a significant contribution from European industry.”[10]

As The Economist pointed out, “scale” is what matters today in the digital economy. The differences in regulations, standards, and other factors among EU member-countries prevent the region from achieving the mass economies of scale needed. Harmonizing those may help more in fostering economic growth than antitrust proceedings, the magazine’s editor speculated. [11]

 

[1]See press release: European Commission, “Antitrust: Commission sends Statement of Objections to Google on comparison shopping service; opens separate formal investigation on Android.” April 15, 2015. http://europa.eu/rapid/press-release_IP-15-4780_en.htm

[2]Valentina Pop and Tom Fairless, “Europe to Pull Trigger on Goggle Antitrust Charges.” Wall Street Journal, April 14, 2015.

[3]Article 102 states: “Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.” Consolidated Version of the Treaty on the Functioning of the European Union art. 102, Oct. 26, 2012, 2012 O.J. (C 326) 47, 89 [hereinafter TFEU]. http://eur-lex.europa.eu/resource.html?uri=cellar:ccccda77-8ac2-4a25-8e66-a5827ecd3459.0010 .02/DOC_1&format=PDF

[4]“Q&A: Why is the EU slapping Google with monopoly charges?” The Daily Telegraph, April 16, 2015. http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/digital-media/11539630/QandA-Why-has-the-EU-slapped-Google-with-monopoly-charges.html

[5]James Kanter and Mark Scott, “Europe Challenges Google, Seeing Violations of Its Antitrust Law.” New York Times, April 15, 2015. http://www.nytimes.com/2015/04/16/business/international/european-union-google-antitrust-case.html

[6]Tom Fairless, “EU Files Formal Antitrust Charges Against Google.” Wall Street Journal, April 15, 2015. http://www.wsj.com/articles/eu-files-formal-charges-against-google-1429092584

[7]As quoted in: Robert Brewington, “A Case for Global Cooperation When Enforcing United States Antitrust and European Union Competition Laws Against Modern Technology Companies.” University of San Francisco Law Journal. 2014, pages 501-532.

[8]Farhad Manjoo, “E.U.’s Google Case May Be Undercut by Rapid Shifts in Tech.” New York Times, April 15, 2015. http://www.nytimes.com/2015/04/16/technology/case-against-google-may-be-undercut-by-rapid-shifts-in-tech.html

[9]Geoffrey A. Manne and William Rinehart, “The Market Realities that Undermined the FTC’s Antitrust Case Against Google.” Harvard Journal of Law & Technology Occasional Paper Series — July 2013. http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CB4QFjAA&url=http%3A%2F%2Fjolt.law.harvard.edu%2Fantitrust%2Farticles%2FManneRinehart.pdf&ei=6RwwVb2bD_aIsQSb_YGoDg&usg=AFQjCNG1HWMNE9UX9E4kw04MbOhI26VyZw&sig2=GC29diBUpZeawTuPEgsFiw&bvm=bv.91071109,d.b2w

[10]Ibid.

[11]The Economist, “Nothing to stand on.” April 18, 2015. http://www.economist.com/news/business-and-finance/21648606-google