It’s EU vs. Google for real: the time is now, the case is open

Press conference by Margrethe Vestager, Member of the EC, on the Statement of Objections to Google on comparison shopping service and the opening of a separate formal investigation on Android (EC Audiovisual Services, 15/04/2015)

Press conference by Margrethe Vestager, Member of the EC, on the Statement of Objections to Google on comparison shopping service and the opening of a separate formal investigation on Android (EC Audiovisual Services, 15/04/2015)

As anticipated by the European Sting in a latest Sting of the day last week on Google’s antitrust case in Europe, the European Commission did take finally formal actions and filed a complaint against the Northern American tech giant, alleging the company’s search results unfairly favoured its own shopping services over third-party sites.

The antitrust charge followed a five-year investigation by the EU against the company and marks the beginning of a formal legal process which might take Google “to face the legal consequences and change the way it does business in Europe”, as said EU’s Competition Commissioner Margrethe Vestager in an official statement released last Wednesday. In a few words, it could ultimately lead to billions of euros in fines to the Mountain View, California-based company, some €6 billion or roughly 10 percent of Google’s operating revenue.

Unfair advantage

Commissioner Vestager, who took over the post last November, declared in a statement: “In the case of Google I am concerned that the company has given an unfair advantage to its own comparison shopping service, in breach of EU antitrust rules. Google now has the opportunity to convince the Commission to the contrary”. That’s pretty clear. The American giant, for its part, replied almost immediately last week that it strongly disagrees with the charges, saying any allegations of harm to consumers or competitors was “wide of the mark”. Google is proclaiming it’s been following European law and proving to be a good, rather than evil, influence in the European mobile device market.

More businesses to be examined

Mrs. Vestager is currently examining other businesses in which Google faces similar complaints, like travel (Tripadvisor’s CEO is quite interested in this topic) and local services, and she added that Google Shopping case was a top priority when she took the post as Europe’s top competition watchdog last November. “It was my option that we should move forward here instead of waiting,” she had said.

No safe Android

The Commission has also formally opened a separate antitrust investigation on Google’s conduct regarding the mobile operating system Android. Commissioner Vestager reportedly said that the EU would work with various companies, including Google, to investigate the allegation. The investigation will focus on whether Google has entered into “anti-competitive agreements or abused a possible dominant position in the field of operating systems, applications and services for smart mobile devices”, as claimed by the European Commission through official channels.

Thus the Commission’s aim here is to determine whether Google is using its position to discourage the inclusion of rival applications into Android-based phones. Google has 10 weeks to respond to the charges.

Google’s big business in the EU

Google is more widely used in Europe than in the U.S., raising antitrust concerns for European regulators for half a decade at least. Google accounts approximately for 90 percent of the search engine traffic in the Old Continent, according to StatCounter data research firm. Digital research firm Statista, on the other hand, has shown how the situation in the USA is quite different, with Google handling “only” the 64.4 percent of the search engine traffic as of last January.

Google “skipped” the bullet in its own home pitch in early 2013 though, when the Federal Trade Commission (FTC) in the U.S. closed an antitrust investigation of Google in early 2013 but dropped charges shortly after. The Californian tech giant basically avoided the opening of an official case by making some concession and voluntarily loosening its advertising and patent licensing policies.

EU’s Anti-American mode on?

US critics now say the EU is being overselective in pointing the finger towards Google and other American companies, including Microsoft – the target of an investigation some ten years ago – Apple, Facebook and Amazon with the result of producing an unfair competition itself, which will unavoidably hit and shape the market.

The general feeling at the other side of the Atlantic is basically that some kind of “organised action” against American companies is being actioned by the EU watchdog. Commissioner Vestager, for her part, almost immediately said she wants to keep geopolitics off the table. “I will do my best to make sure that it is not politicized, the Google case, and that it’s not entangled in other issues,” she argued.

An impartial European watchdog?

US companies are often involved in antitrust and competition-related cases in the EU, and that’s so true. But that may be happening because of Silicon Valley’s dominant position in the IT sector, and also because of the size of those companies with enormous turnover and business units, evolving into dominant predators in a good mature market like the European one.

But what about European companies? How does the EU watchdog handle its own thing? Is the EU as strict with her own companies as she is with the foreign ones? A recent report published may help cast light on that direction and indeed provides a quite a clear-cut answer: No. The EU is way stricter against the European companies! It shows indeed that European companies were fined more often than their American counterparts.

Numbers tell the truth

The report edited by the Peterson Institute for International Economics for the European Commission, was published on 16 April  2015 and it was basically authored to support the speech of Commissioner Vestager in Washington DC on 17 April . The document reports that between 2010 and 2014 the European Commission adopted 30 cartel decisions involving 231 companies and imposed fines of a total €8.9 billion. Out of those companies, 190 were European and have received fines for a total € 4.8 billion – just over half of the whole cake. Only 17 companies among them were US-based companies, which received fines of a mere €652 million – about 7% of the total.

“Indifferent to nationalities”

“In all our cases, we are indifferent to the nationality of the companies involved”, underlined Ms. Vestager through the report. “Our responsibility is to make sure that any company with operations in the territory of the EU complies with our Treaty rules”, she added.

A matter of credibility

Google case brings once again the delicate matter of the liberty of action in the markets under the spotlight, and the importance of an independent watchdog. This last point should be the key point for the consumer, which has to be eager for a developed, free IT market, but also for impartiality.

In a few words, the consumer’s biggest hope should be that what is contained and proudly declared in the European Commission’s report proves to be eventually 100%t true: “The authority and credibility of competition enforcers anywhere in the world depend on their independence, on the quality of their work, and on impartial, consistent and balanced decisions”.

The case is open and we will be watching.

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