The European Commission Secures Modest Concessions from Google in Latest Anti-trust Battle

Google, as part of a settlement with European competition regulators, has conceded some ground in the European search market by agreeing to display competitor results in its search results. These concessions will be the most significant that Google has made in response to an antitrust inquiry to date. The proposed settlement still requires approval from the European Commission (“Commission”). However, it has nonetheless done little to quell the concerns voiced by Google’s competitors that sparked the inquiry.

The inquiry investigated the extent to which, if any, Google abused its ninety percent market share in Europe. As part of the settlement, Google will avoid EU fines and any finding of discrimination against competing sites, much in the same way it did a year earlier following a settlement with the United States Federal Trade Commission (“FTC”).

This case began in 2009 when a price comparison website company, Foundem, filed a complaint with the Commission alleging that Google’s use of its market dominance was harming competing Internet companies and consumers. The Commission began its investigation into Google in 2010.

The primary focus of the complaint and the Commission’s investigation was the allegation that Google favoured its own specialized services in its search rankings to the detriment of its rivals. For example, Google put its own price comparison and review websites front and centre in its search results and relegated its competitors’ parallel services much lower down in the rankings. Many other companies, including Microsoft, shared Foundem’s concern; to date, a total of eighteen complaints have been made to the Commission regarding Google’s search practices.

The Commission’s inquiry was tentatively resolved on February 5, 2014 when Joaquin Almunia, the Vice-President of the Commission and the official responsible for competition matters, accepted Google’s offer to make several changes to its current search practices. Google’s chief concession was agreeing to display results from at least three of its competitors in a grey box labeled “alternatives” beside its own specialized services in search results. Google will be compensated by its competitors for the opportunity to have one of these three spots.

A further element of this settlement is the provision of an independent trustee that will monitor Google’s compliance. However, the trustee will not have the ability to review Google’s search algorithm or the ranking of its search results.

The settlement, which still requires approval from the Commission, is slated to last for five years and would cover all searches and specialized services that Google introduces into Europe.

Spots for Competitors: A New Google Market?

This settlement must be viewed in the context of Google’s stranglehold on the European search market: the Internet giant accounts for approximately ninety percent of the current search market in Europe. This is even greater than its market share in the United States, where it controls about two-thirds of the search market.

Peter Jenkins, an Adjunct Professor at Osgoode Hall Law School who specializes in legal issues involving the Internet and technology, argues that this settlement is not fair given Google’s dominant position in the European search market: “[T]he EC essentially did the bare minimum possible in the circumstances to avoid being perceived as just rolling over.”

The problem with this settlement, Professor Jenkins argues, is that Google’s ‘concession’ to display links from three competitors serves to create a Google-dominated search market: “The settlement cynically allows Google to profit from its own anti-competitive wrongdoing, since the marketplace will result in the bidding up of the price for the coveted spots.”

A further problem with this settlement is that competitors who cannot afford to pay the premium for one of the three spots have no avenue for recourse because the trustee responsible for monitoring Google’s compliance with the settlement does not have the authority to scrutinize its ranking of websites. Professor Jenkins argues that this is particularly problematic because Google could ensure that the competitors who do not make the cut for one of the three spots would be “deliberately relegated to the 5th or 6th pages” of the search results and have no mechanism for redress.

For his part, Joaquin Almunia has defended the proposed settlement, stating the following on February 21st:

I have also heard people say that the Commission has entered a gentlemen’s agreement with Google which would lead to a way of dropping the charges or closing the file. Not at all. I believe that, contrary to some opinions, the process is quite transparent and takes into account the interests of all.

Google’s Regulatory Battles at Home and Abroad

Google’s place atop the search engine industry has led to high profile regulatory scrutiny before. It is only relatively recently, however, that this scrutiny has focused on Google’s Internet advertising business model.

For example, just last year the FTC completed a two-year investigation into Google’s business practices. The settlement featured several commitments for business practice changes. However, the FTC determined that Google was motivated not by a desire to stifle competition, but rather to innovate. Thus, there was no finding of anti-competitive bias in Google’s search results by the FTC, and the settlement was widely considered a victory for Google. Professor Jenkins attributes the FTC decision to the more favourable political and regulatory environment in the United States than in Europe:

U.S. anti-trust law allows more freedom than does EU law for companies to maintain a monopolistic position if they create a superior product for consumers, and Google has very close ties to the Obama Administration, facilitating successful rent-seeking in [the] U.S., whereas it lacks such relationships in the EU.

Canada, for its part, has focused more on privacy-related Google issues, such as Google Street View. However, in recent months both the Competition Bureau and the federal privacy commissioner have either begun or completed investigations relating to Google’s business model as the result of complaints by competitors or users of Google’s services.

The federal privacy commissioner recently completed an investigation stemming from a Google user’s complaint that his Internet usage was being tracked. In this case, the user had searched for medical devices for sleep apnea, and then began receiving advertisements on other websites for similar devices. The privacy commissioner determined that this breached Canadian privacy law, as the advertisements involved sensitive information that required explicit consent from the user. For its part, Google agreed to several changes in an attempt to ensure compliance by its advertising programs with company policies and the law.

The Competition Bureau’s investigation is still in its early stages, and dovetails strongly with the investigations undertaken in both Europe and the United States. In December 2013, the Federal Court of Canada issued an order requiring Google to disclose information regarding its business activities. At this point, there is no indication that the investigation will be coming to a close in the near future.

Professor Jenkins argues that the proposed settlement with the Commission may “exert a chilling effect” on further regulatory efforts or, at the very least, serve as a precedent that Google can cite in its global regulatory battles.

Settlement Approval Still Looms

Overall, it appears that despite Google’s modest concessions to the European Commission, the latest regulatory salvo against the undisputed search engine leader may not have an appreciable impact on its anti-competitive behaviour. In fact, the institutionalization of premium search result spots that this settlement proposes may actually exacerbate Google’s march toward a market monopoly. Professor Jenkins highlights this concern: “[T]he effect of the EU settlement will be to assist Google in remaining the dominant player, relegating all of the others into minor segments of the market.”

Time will only tell whether the proposed settlement will be approved by the Commission. Indeed, reports have surfaced suggesting that one-third of the members of the Commission oppose the deal. If the Commission does choose to approve the settlement, the eighteen complainants must be contacted by the Commission with an explanation as to how their concerns have been addressed by the settlement. This could lead to further concessions on Google’s part prior to the completion of the settlement, as the complainants will have a final opportunity to have their voices heard.