April 25, 2013

Google's Solutions to Mollify European Antitrust Concerns Made Public


I wrote previously about Google’s attempts to get the European Commission (EC) off its back concerning antitrust issues that surrounded its perceived abuse of search to unfairly favor its own services over those of competitors. Until now, the concessions it was willing to make were a secret. Well, they are public, and competitors have been given a month to provide comments about whether they feel Google should be allowed to get off the hook based on its proposals to the EC.    

The deadline to "test" Google's commitments was set by Brussels' competition chief Joaquin Almunia. The complaints have been about Google’s unfair promotion of itself, and also about its use of information from competitors’ and embedding that data in Google’s own services.  

"We hope to achieve a settled outcome and address each of the four concerns raised by the commission," said a spokesman for Almunia.

Google's Commitments:

So what is Google willing to do? Over a five-year period Google has proposed precisely what all of the rumors leading up to the public release speculated they would to. In summary these include:

  • Label promoted links to its own specialized search services so that users can distinguish them from natural web search results
  • Clearly separate these promoted links from other web search results by clear graphical features (such as a frame)
  • Display links to three rival specialized search services close to its own services, in a place that is clearly visible to users
  • Offer all websites the option to opt out from the use of all their content by Google's specialized search services, while ensuring that such opt-outs do not unduly affect the ranking of those websites in Google's general web search results
  • Offer all specialized search websites that focus on product search or local search the option to mark certain categories of information in such a way that the information is not indexed or used by Google
  • Provide newspaper publishers with a mechanism allowing them to control, on a per-web-page basis, the display of their content in Google News
  • No longer include in its agreements with publishers any written or unwritten obligations that would require them to source online search advertisements exclusively from Google
  • No longer impose obligations that would prevent advertisers from managing search advertising campaigns across competing advertising platforms

The commission added that an independent monitoring trustee would closely watch Google to ensure that it sticks to these commitments.

The commission had to be careful here, based on its own preliminary findings showing that Google was dominant in web search and search advertising. In fact, they stated that, "The commission has also reached the preliminary conclusion that in four areas Google may be abusing its dominant position in the European Economic Area (EEA). Such abuses would be in breach of Article 102 of the Treaty on the Functioning of the European Union," the EC said.

While Google declined to comment on the release of the commitments, it did say, "We continue to work cooperatively with the European Commission."

Competitors, on the other hand, were not shy about their disappointment. Their interpretation of the EC statements is that the commission seems favorably inclined to accept Google’s offer and use the commitments as way to avoid a drawn out fight.

Reuters quoted UK-based price-comparison provider Foundem’s CEO Shivaun Raff, an original complainant in the EC investigation, as saying, “Instead of promising to end its abusive practices, Google’s proposal seems to offer a half-hearted attempt to dilute their anti-competitive effects, by labeling Google’s own services and throwing in some token links to competitors’ services alongside them… Without robust guidelines that guarantee the placement, depth, prominence, and relevance of these links, and guarantee that the selection of competitors will be free from anti-competitive penalties and discrimination, neither measure will make a dent in Google’s ability to hijack the traffic and revenues of its rivals."

The New York Times published some choice words from Thomas Vinje, chief lawyer for FairSearch Europe, a group of Google’s competitors that includes Microsoft, Nokia and Oracle. “Google has taken a year to develop the proposal released today,” he said. “We think it’s only fair that outside experts have more than a month to help the commission market test the long-lasting effects of Google’s proposal on consumers and innovation.”

Monique Goyens, the director general of the European Consumers’ Organization, said leaving it up to Google to decide which three specialized services to promote in the menu “leaves too much discretion” to Google. Ms. Goyens said she was hoping “to iron out an improved end-result” in that area and in other areas of the settlement.

It should be noted that any settlement can be appealed. However, whether competitors have the stomach or the time to “fine-tune” the commitments is problematic at best.

While the EC is clearly agitated enough to have pursued Google for a few years on this subject, observers may be correct in their assessment that the regulators have extracted as much as they think is reasonable and would like to move on. In fact, waiting in the wings is the recent FairSearch complaint, urging the commission to start a new investigation regarding Google’s use of the dominant Android OS to disadvantage those in that market.

All may be fair in love and war, and while this drama still has time to take a few twists and turns, Google investors are probably breathing a bit easier at the moment, since the odds are now better that Google will be able to avoid a multi-billion dollar fine. Admittedly, even a large fine (as much as 10 percent of its 2012 European earnings) would represent a minor bump in the road given the Google war chest. For the moment, however, the hysteria that the commission might look for more draconian commitments has abated, despite its initial findings. Competitors may make a very strong case this month, and in private legal actions as well, but the suspicion is that five years of keeping watch on the above commitments maybe sufficient. We will obviously be checking back soon, now that the competitors are on the clock.




Edited by Blaise McNamee




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