November 2013
[1]. According to its press release, the Commission has found, on a preliminary basis, four areas of concern:
a. The favourable treatment, within Google’s web search results, of links to Google’s own specialised web search services as compared to links to competing specialised web search services (i.e. services allowing users to search for specific categories of information such as restaurants, hotels or products);
b. The use by Google without consent of original content from third party web sites in its own specialised web search services; c. Agreements that oblige third party web sites (“publishers”) to
obtain all or most of their online search advertisements from Google; and
d. Contractual restrictions on the transferability of online search advertising campaigns to rival search advertising platforms and the management of such campaigns across Google's Adwords and rival search advertising platforms.
[2]. The commitments offered by Google are not designed, intended or related to addressing the competitive concerns as set out by the Commission in its press release (European Commission - IP/13/371 25/04/2013). In relation to the first set of commitments, ICOMP already pointed out their inadequacy to solve the competition concerns, bring a serious and well characterised infringement (discrimination and exclusivity by a dominant firm) to an end, or to restore effective competition. Nothing in the new set of commitments has changed that position.
[3]. The commitments basically consist of a logical evolution of the commercial strategy of Google, which Google seeks to get endorsed by the European Commission for a period of five years. “Logical” because the commitments as they stand basically represent a method for Google to increase the advertising revenues it generates by enlarging the space allocated to paid advertising to the detriment of the space devoted to organic search results in Google’s search results pages. The commitments do not represent anything else that an additional step in Google’s strategy to transition organic traffic into paid traffic so as to improve monetisation of its search engine and increase its advertising revenues, and have nothing to do with the competition concerns identified by the Commission in its preliminary assessment. The reduction in free traffic that Google’s commitments will produce will significantly affect the viability of competing web sites, whose profitability is substantially dependent on free traffic arising from
organic results in search. The RFI is not addressing this crucial issue at all.
[4]. To the extent that the Commission’s second market test of the
commitments focuses on (i) whether the second commitments represent an improvement in relation to the first commitments and (ii) the possibility for Google to circumvent its own commitments in future, the Commission has focused its market test or RFI wrongly, because any of these two criteria are irrelevant to assess the adequacy of the commitments to resolve the competition concerns identified. The primary objective of a competition procedure is requiring that an infringement be brought to an end; and the Commission is also empowered to accept commitments to that end.
[5]. It is evident that whether a second set of commitments represents an improvement in relation to a first set bears no relation to bringing an infringement to an end. Assessing whether the commitments would contain some loopholes so that they could be circumvented would be at most a necessary condition, but never a sufficient condition to accept commitments. Nothing in the legislation allows the Commission to accept commitments only on the basis that they represent a significant improvement.
[6]. It is submitted that the Commission’s RFY is unfocused and the
replies to the specific questions are not of a nature to place the Commission in a position to determine with the requisite certainty the full impact of the commitments and their ability to restore effective competition.
[7]. These assertions are substantiated below.
Commitments on Search.
[8]. With regard to Search and vertical site discrimination, the commitments are not designed to address nor even related to the competition problem raised by the abuse of Google’s dominant position in Europe. As the Commission itself has established, the abuse finds its roots in the possibility for Google to manipulate rankings in search and thereby divert traffic to its own vertical sites to the detriment of its competitors and users/consumers.
[9]. Nothing in the commitments addresses the issue of manipulation of the search results; Google itself accepts that that manipulation is possible in so far as it commits not to retaliate against individual companies using the opt out mechanism for crawled content or using the robot exclusion protocol described in point 20 of the commitments. Save for that, there is not a word in relation to manipulation of search results in the commitments.
[10]. On the contrary, if the Commission would accept the commitments, it would be endorsing the current practice by which Google preferences its own vertical sites and anti-competitively demotes competing vertical sites, which is at the origin of several complaints lodged with the Commission.
[11]. The fact that Google will introduce three Paid Rival Links maintains the discrimination to those three Paid Rival Links in relation to Google and discriminates those three links in relation to all other competitors. Discrimination as an abuse is not a matter of degree, it is an absolute concept, and to reduce the amount or quantum of discrimination is of no meaning whatsoever. It suffices that just one company is discriminated for an abuse to exist. In other words, if a firm in a dominant position is discriminating, that infringement can only be brought to an end by removing the discrimination, but not by modulating in whatever way the amount of discrimination. Google’s commitments only modulate the discrimination, they do not remove it; they just include an intermediate layer of three companies that would be purportedly “less” discriminated than the remaining competitors.
[12]. In our view, Google’s commitments make commercial sense and fit
in Google’s commercial strategy to transition organic traffic into paid traffic. Google would have implemented the “alleged” remedy in any case and independently of the Commission’s investigation. This is so because the remedy is likely to increase Google’s revenues by (i) reducing the space devoted to organic results and (ii) increasing the visibility of three additional Paid Rival Links in the search results page. In its RFY the Commission is not addressing this crucial issue, and the Commission should also seek clarifications with Google on this point: how will the commitments affect Google’s advertising revenues?
[13]. As stated above, the three additional Paid Rival Links will enjoy a prima facie increased visibility, albeit to a much lesser extent than Google’s own specialised search sites. But if the preferencing of these three sites over all other competitors (excepting Google’s sites) proves interesting in that it increases to some extent click through rates, the auction mechanism, for which Google seeks endorsement by the Commission through its commitments, will prove very profitable for Google.
[14]. By introducing this intermediate layer of visibility of three Paid Rival Links, Google is creating an artificial scarcity of Paid Rival Links. Since Google is dominant, the auction will systematically be oversubscribed, as there are no alternative auctioneers to Google. Thus, it can be expected that if the commitments on search would effectively work and increase click through rates, bidders will bid
away most of their anticipated profits. Thus, the three most effective competitors that can generate revenues enough to win the bid, would be transferring to Google most of their profits. Even if the auction mechanism may be efficient, it would have an anticompetitive result to the extent that the most efficient competitors to Google would see their financial resources to expand their business reduced, possibly removed.
[15]. This would create an additional competition concern on its own. However, more details are needed about the auction mechanism that Google intends to use to be able to assess its potential results. Obviously, the detailed design of an auction mechanism may provide very different results. It is submitted that in its RFY the Commission does not address this issue properly, and consequently cannot possibly gather the necessary information to assess the impact of the auction mechanism.
[16]. Finally, the Paid Rival Links remedy is also committed in relation to mobile devices. The same criticisms stand in respect of mobile devices. But it is also important to recall that Google’s use of Android is posing very serious competitive concerns, which should be addressed on their own. In fact Google is using Android and its dominant position in Internet search to preinstall several of Google’s applications and services in the mobile devices, to the exclusion of all competitors. In its strategy to monopolise the fast expanding mobile internet traffic Google is engaging in a number of anticompetitive practices identified by ICOMP members, including offering Android for free, enforcing Google’s Android compatibility programme to exclude rival applications, 1 imposing on clients of Adwords the acquisition of mobile publicity, and a number of other practices that ICOMP has already pointed out to the Commission. The present commitments are not addressing any of these issues and should not prevent the Commission from fully investigating Google’s anticompetitive practices in the mobile advertising market.
Commitments on Display and use of content.
[17]. Google proposes to create a mechanism to provide website owners with the option to opt out of display on Covered Web Pages of content crawled by Google’s search user agents. It is difficult to see how this addresses the competitive issue arising between Google and competing web pages or domains that pay copy right to content owners. This is a clear distortion of competition and places competing web sites at a competitive disadvantage. To the extent that free riding practices remove incentives to invest by rivals, the
1
Some of these practices have been the object of formal complaint to competition authorities such as Skyhook in the US and FairSearch’s complaint to the Commission.
commitment as it stands maintains fully the anticompetitive effects of Google’s practices.
[18]. Curiously enough, the actual implementation of this remedy is left to the discretion of website owners, who will balance in their own interest whether the traffic provided to their web pages by Google compensates them for the loss of copy right revenues or not.
Commitments on AFS.
[19]. ICOMP has already indicated to the Commission in its reply to the first market test that the commitments only cover partially the vast network of exclusive agreements Google has entered into with OEMs, software providers and web browsers. ICOMP also pointed out the significant competitive advantage Google enjoys over its competitors from the vast amount of information it has gathered from internet users. The new set of commitments still does not address these major issues.
[20]. The Commission’s RFY does not include any questions to assess
these commitments, suggesting that the Commission has already accepted them. However, a dominant firm cannot impose exclusivity on its customers, not only because it directly harms those customers, but also because it forecloses access to the market to existing competitors or new entrants.
[21]. Formal exclusivity clauses are committed to be withdrawn from contracts, but Google retains the ability to reserve to itself a minimum portion of customer’s demand (at least three Google search ads when the customer requires five ads, two out of a total of three or four and one out of a total of one or two). This implies that Google retains de facto exclusivity over a significant portion of each customer requirements, thus maintaining foreclosure of a very significant portion of demand. Once again, the commitment is not designed to bring an infringement to en end, but rather to modulate the intensity of the infringement, which is defined as obtaining all or most of a customer demand. Allowing Google to retain on an exclusive basis most of customers demand cannot be described as putting an infringement to an end.
Commitments on portability of campaigns data.
[22]. ICOMP refers to its previous submission, since nothing has changed.
