EC Decision On Google’s Proposed Commitments Expected In Coming Weeks

Saturday, November 16, 2013 - 12:15

On September 13, 2013, Joaquín Almunia, Vice President of the European Commission and the commissioner responsible for competition policy, announced that the EC will decide within the next few weeks whether to accept Google’s proposed commitments to settle the ongoing investigation into alleged abuses of dominance in online search and search advertising, or to proceed with its investigation towards a statement of objections and ultimately a possible infringement decision against Google.[1] The Commission’s investigation is considering a number of practices that were previously examined by the U.S. Federal Trade Commission (FTC), and it is interesting to note that Google has offered commitments covering two business practices for which commitments were not offered to the FTC.

The Commission’s investigation into Google’s online search and search advertising business has been running for more than three years, following an announcement by the EC in February 2010 that it had received complaints from three companies: Foundem, a UK price comparison site; ejustice.fr, a French legal search engine; and Ciao, a price comparison site owned at the time by Microsoft. One of the complainants (Foundem) has also brought a damages claim against Google in the United Kingdom, and that action is proceeding in parallel with the Commission investigation.[2]

In November 2010, the Commission opened a formal investigation under Article 102 TFEU into alleged abuses of dominance by Google, and in May 2012, the Commission announced that it was in discussions with Google about the possibility of commitments to remedy its concerns.  On April 25, 2013, the Commission announced that Google had proposed commitments, and since that time, the Commission has been considering the proposed commitments and inviting third-party comments on them.

Four main allegations have been considered by the Commission. In online search, the Commission examined concerns that (1) Google gives preferential treatment to its own “vertical” search services (specialised in showing results for particular content, such as price comparison sites) and (2) Google copies into its own search results content from competing vertical search services without consent. In search advertising, the Commission examined concerns that (3) Google imposes exclusivity obligations on third-party websites, preventing them from placing competing online search adverts and (4) Google imposes restrictions on advertisers conducting advertising campaigns on competing search advertising platforms.

The Commission’s preliminary view is that Google is dominant in online search in the EEA, where it has a market share of more than 90 percent and operates a number of vertical search services (such as Google Shopping, Google Places, and Google News).  It also has, in the Commission’s view, a very strong position in online search advertising, where advertisers can purchase search adverts through Google’s AdWords platform and web publishers can sell ad space through Google’s AdSense for Search platform.  The Commission further considers that the four competition concerns noted above may constitute an abuse of dominance contrary to Article 102 TFEU.  To remedy these concerns, Google has offered the commitments described below for a period of five years and three months for the entire EEA, as well as to have them subject to monitoring by an independent trustee.

1. Preferential Treatment For Google Vertical Search Services

In online search, the Commission originally examined allegations that Google lowers the search ranking of unpaid search results of competing vertical search services, lowers the “Quality Score” for sponsored links of competing vertical search services (which reduces both the ranking of the sponsored link and the likelihood that it would be displayed at all), and grants preferential placement to its own vertical search services.

Following its investigation, the Commission found that Google displays its own specialised search results in a more prominent position on the webpage and does not inform users that it is doing so.  Competing search results are therefore displayed further down the page or on subsequent pages, and may be visible only by clicking through to the competing search service.  As a result, users are likely to be diverted towards Google’s own results rather than to competing search services, even if competing search results are more relevant.  The Commission considers that this impairs the ability of consumers to find relevant results and may diminish the incentives of competitors to innovate.

Interestingly, the FTC closed its investigation into these practices in January 2013 without taking any action.[3] However, the Commission has argued that Google’s larger market share in the EEA (>90 percent), compared with its share in the United States (where competitors Bing and Yahoo! account for around 30 percent), means that its practices have a much greater impact on users and competition in Europe.

To address the Commission’s concerns, Google has offered to: (1) label promoted links to its own specialised search services so that users can distinguish between promoted links and natural search results; (2) separate promoted links using clear graphical features; and (3) display links to three competing specialised search services close to Google’s promoted links.

2. Use Of Competing Third-Party Content In Google Vertical Search Services

Also in online search, the Commission found that Google’s own specialised search services display content from the websites of competing specialised search providers, and that Google would agree not to display this content only if the competing search provider opted out of Google’s services (including Google’s general web search).  As opting out would not be commercially feasible for the competing provider in most instances, Google would be able to benefit from the content prepared by competing search providers.  The Commission expressed concerns that this may reduce competitors’ incentives to invest in developing content and users’ incentives to visit the search sites on which the material originated because it was already available on Google.

To address these concerns, Google has offered to: (1) offer all websites the ability to opt out from the use of their content without unduly affecting the ranking of the website in Google’s general web search results; (2) offer all specialised search websites that are focused on product searches or local searches the ability to code information so that it is not indexed or used by Google; and (3) enable online newspapers to control the extent to which their content is displayed in Google News, on a page-by-page basis.  Google also offered websites an opt-out option in its commitment letter in December 2012 to settle the FTC investigation.[4]

3. Exclusivity Obligations For Placing Search Adverts

The Commission found that Google has a very strong position in search advertising intermediation (i.e., the provision of search advertising to web publishers), and that Google requires its web publisher customers that sell ad space through AdSense for Search to obtain all or most of their search adverts from Google rather than from competing search advertising providers.  The Commission expressed concerns that this reduces web publishers’ choices and that, by limiting competitors’ access to web publisher customers, the exclusivity obligations may also reduce competitors’ incentives to innovate.

To address these concerns, Google has offered not to include exclusivity obligations in its AdSense for Search contracts with web publishers.  This issue does not appear to have been a concern in the FTC investigation.

4. Restrictions On Transferability Of Search Advertising On Competing Platforms

Also in search advertising, the Commission found that Google imposed contractual restrictions on advertisers using AdWords that prevented them from collecting or transmitting advertising campaign data between Google and non-Google ad campaigns.  This makes it difficult for advertisers to run parallel ad campaigns on Google and non-Google platforms, or to transfer ad campaigns from Google to another platform.  The Commission expressed concerns that this reduces customer choice and impairs the development of innovative campaign tools.

To address these concerns, Google has offered not to impose on advertisers any obligations that would prevent them from managing search advertising campaigns across competing advertising platforms. Google also offered not to impose such restrictions in its commitment letter in December 2012 to settle the FTC investigation.

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The Commission has been considering these proposed commitments since April 2013.  The recent speech by Vice President Almunia suggests that the Commission will soon decide whether to accept the commitments or to continue with its investigation and issue a statement of objections and ultimately a possible infringement decision.  Vice President Almunia has further indicated that, if market feedback on the revised commitments is positive, he expects to adopt a formal decision in spring 2014.[5]


[1] See SPEECH/13/697 Joaquín Almunia “EU competition policy and innovation” IBA 17th annual competition conference, Florence, 13 September 2013.

[2] See Infederation Ltd v Google Inc & Ors [2013] EWHC 2295 (Ch), judgment of July 26, 2013.

[3] See Statement of the Federal Trade Commission Regarding Google’s Search Practices In the Matter of Google Inc., FTC File Number 111-0163, January 3, 2013, available on the FTC’s website at http://www.ftc.gov/os/2013/01/130103googlesearchstmtofcomm.pdf.

[4] See Letter from the Federal Trade Commission Regarding Google Inc., FTC File No. 111-0163, January 3, 2013, available on the FTC’s website at http://www.ftc.gov/os/closings/comm/130103googlesearchletter.pdf.  See Commitment Letter from Google Regarding Google Inc., File No. 111-0163, available on the FTC’s website at http://www.ftc.gov/os/2013/01/130103googleletterchairmanleibowitz.pdf.

[5] See SPEECH/13/768 Joaquín Almunia “The Google antitrust case: what is at stake?” European Parliament hearing, Brussels, October 1, 2013.

 

Neil Rigby is an Associate in the Antitrust/Competition practice in Weil Gotshal’s London office, where he advises on all aspects of EU and UK competition law, including merger control, cartel investigations, restricted practices, market dominance, and sector inquiries. He has significant experience in antitrust litigation before the English High Court (Chancery Division and Commercial Court) and the UK Competition Appeal Tribunal.

 

Please email the author at neil.rigby@weil.com with questions about this article.