The Commission’s failure to secure
acceptable commitments from Google in its search engine investigation has
further prompted concerns as to the effectiveness of the existing legal tools
to curb abuse of dominance in digital markets. The Commission’s issue of
a Statement of Objections to Google on 15 April 2015, however, suggests a new
impetus in the investigation.
The Commission’s investigation into
alleged abuse of dominance by Google in relation to its search engine practices
dates back to February 2010, when the Commission announced that it had received
complaints about Google, including allegations revolving around grants of
preferential placement in search results to its own vertical search services.
The Commission announced that it had
initiated Article 102 proceedings against Google on 30 November 2010.
Since then the investigation has been very much in the public eye but on
successive occasions where a resolution has seemed imminent, this has not
materialised.
The Commission consulted on two rounds
of commitments from Google and on 5 February 2014, the Commission announced
that it had obtained an enhanced proposal that it was minded to accept.
In particular, Google offered a remedy that where it promotes its own services,
at least three rivals will be displayed in a “comparable” way, such as by using
the same sized photos. Interestingly, when similar concerns were raised
in the US these resulted in more modest concessions being offered to the FTC
than those offered by Google in the EU.
In June 2014 Commissioner Almunia said
that the investigation was “hopefully coming to an end with the adoption of a
decision before the end of my mandate”. However, in September 2014 this
appeared unlikely and Google was asked to offer improvements after feedback
from the market test. Revised objections were raised by third parties
including the price comparison site Foundem. These question, for example,
why Google should be able to give greater visibility to paid links.
It is not unusual for the Commission to
consult on more than one set of draft commitments. It has not yet
accepted commitments in a case involving four rounds. Moreover, where the
market test reveals that the commitments on offer are insufficient the
Commission should be wary of accepting a revised offer without putting it back
to the market, unless it was very obvious that the new package addressed the
Commission’s concerns. Given the obvious trade-off between an early resolution
and an uncertain legal challenge, it is understandable why the process can be
iterative.
On 15 April 2015, however, the
investigation took a rather different turn and the Commission sent Google a
Statement of Objections. The Commission alleges that by favouring its own
comparison shopping pages in its general search results this hinders the
ability of its rivals to compete. The Commission alleges that as a result
of artificially shifting traffic to its own sites, users do not necessarily see
the most relevant results in response to their search queries.
On the same day as issuing its Statement
of Objections in the search engine case the Commission announced a formal
investigation into Google’s Android operating system. The Commission has
concerns that Google may be unlawfully restricting competitor operating systems
and applications. Commissioner
Vestager states that: "In recent years, smartphones and tablets have
changed the way that consumers access the internet and the way that many
companies do business. Mobile internet usage is growing rapidly and there is no
reason to think that this will change in the coming years. I want consumers to
benefit from the broadest range of mobile services and innovation in the
sector". While the investigation is separate from the search
engine case and has been under the Commission’s watch for some months, it
confirms sustained momentum in the Commission’s policy focus.
A test of the substantive theory of harm
Much of the debate about the Google case
has focused on remedies. Those issues cannot be divorced from the
underlying substantive issues. Novel and controversial theories of harm
have been raised.
When the Commission set out its
preliminary assessment, of most concern was the prominent display, within
Google's web search results, of links to Google's specialised web search
services (e.g. Google Shopping) relative to links to competing specialised web
search services (including services allowing users to search for restaurants,
hotels or products).
At first sight it might appear that the
preference shown by a dominant company to its own services could be a classic
abuse of dominance. However, on closer inspection this conclusion does
not automatically follow. It may be asked why Google cannot show what it
considers to be its own directly responsive results, since that is precisely
what a search engine does and is a core value proposition. Search engines
will compete on the basis of their own offering by showing exactly what they
consider to be responsive to a user query. An issue for competition,
then, is what Google should or should not be permitted to do in terms of
differentiating itself. Putting it another way: should third parties be
entitled to an equal position in Google’s search results? Even if that is
accepted, how is that to be achieved in a way that allows consumers to make an
informed choice and without destroying Google’s incentives to innovate?
These are the issues at the heart of the Google case.
Where next in the investigation?
The new commissioner Danish politician
Margrethe Vestager may provide the impetus for a change in direction.
Those who expect such a route to be speedier and more definitive may, however,
be disappointed. Should the Commission proceed to a formal finding of
infringement, it cannot expect to be immune from challenge given the vigour
with which all sides have pursued their case so far.
Google now has to prepare its defence to
the Statement of Objections in advance of an oral hearing. One possible
outcome is that the Commission finds an abuse of dominance and imposes a
penalty on Google. However, Vestager’s comments that this is “not the
end” seem to suggest that outcome is not inevitable and that there is still the
possibility of a consensual remedy.
A key difference between the commitments
route and an infringement decision under Article 7 of Regulation 1/2003 is that
the Commission will almost certainly impose a penalty in the latter case.
If the Commission issues an infringement decision Google could be fined up to
10 per cent of its worldwide turnover (i.e. up to US$ 6 billion). The
actual level of the fine imposed will be based on a number of factors including
the ‘gravity’ or seriousness of the infringement. The Commission will
typically take as a starting point the relevant sales in the market concerned
by the infringement. The highest fine imposed for a breach of EU
competition law was on Intel in 2008 and amounted to just over a billion
euro. This was still some way short of 10 per cent of Intel’s 27,972 million
euro (US$ 38 834 million) worldwide turnover in 2007.
The Commission’s focus on Google (and
Microsoft before it) has prompted the often recurring question as to whether US
companies are receiving rather more scrutiny than their European rivals.
However, only a day after issuing the Statement of Objections on her first
visit to the USA, Commissioner Vestager has made clear her views that Google is
a “good company” and that it makes no difference from the EU competition law
perspective whether a company is American or European.
The announcement of a Statement of
Objections has been hailed as a win for many complainants, including rival
search engines. However, in law as well as in life there can be an
element of ‘be careful what you wish for’. The commitments offered so far
have not appeased complainants but an infringement decision may not give them
complete satisfaction either. This is because a prohibition decision is
just that: it will say what is not permitted but it is not so susceptible to
prescribing changes to market conduct.
Reference:
Commission press release IP/15/4780 ,
MEMO/15/4781 and STATEMENT/15/4785
Speech by Margrethe Vestager
"Competition policy in the EU: Outlook and recent developments in
antitrust", Peterson Institute for International Economics Washington DC,
16 April 2015
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