Oh, well, you are wrong, Google responds to the European Commission

Many months post the European Commission filed formal antitrust actions against Google, the American tech-giant issued its response to the Commission last week. Google, which has always denied the European Union’s antitrust charges, this time decided to formalise its response and speak wide open.

In short, the high interests and the enormous weight the case has in antitrust files in Europe, have been stamped by Google in a 150 pages document, and then condensed into a post that appeared on Google’s European blog last Thursday.

Google attacks

“We’ve taken seriously the concerns in the European Commission’s Statement of Objections (SO) that our innovations are anti-competitive”, declared Kent Walker, Senior Vice President and General Counsel at Google, to open the company’s statement on their official blog. “The response we filed today shows why we believe those allegations are incorrect, and why we believe that Google increases choice for European consumers and offers valuable opportunities for businesses of all sizes”, he added.

Mr. Walker basically resumed the case where it was left a few months ago, when the European Commission formally opened the Google’s case, alleging the company’s search results unfairly favoured its own shopping services over third-party sites. “The SO says that Google’s displays of paid ads from merchants (and, previously, of specialized groups of organic search results) “diverted” traffic away from shopping services”, said Walker. “But the SO doesn’t back up that claim, doesn’t counter the significant benefits to consumers and advertisers, and doesn’t provide a clear legal theory to connect its claims with its proposed remedy”.

Five-year investigation

It is evident how Google now wants to formally attack the accusations by the European Commission, without leaving any space for doubts or misunderstanding. But the question here is whether it is now too late to convince the European watchdog. The antitrust charge followed a five-year investigation by the EU against the company and came to the formal EU conclusion that Google harms both its rivals and consumers with unfair competition.

EU concerns

Google now says that all accusations by the European Commission are situated far from reality, and that its shopping service not only gives fair space to all competitors, but indeed benefits customers and businesses without unlawfully distorting the market. Back in April, EU’s Competition Commissioner Margrethe Vestager  felt “concerned that the company has given an unfair advantage to its own comparison shopping service, in breach of EU antitrust rules”. She also said that “Google now has the opportunity to convince the Commission to the contrary”.

“We don’t think this format is anti-competitive”, now Mr. Walker responds to Commissioner Vestager’s concerns. “On the contrary, showing ads based on structured data provided by merchants demonstrably improves ad quality and makes it easier for consumers to find what they’re looking for. We show these ad groups where we’ve always shown ads […] and we use specialised algorithms to maximize their relevance for users. Data from users and advertisers confirms they like these formats. That’s not ‘favoring’ – that’s giving our customers and advertisers what they find most useful”.

A brief analysis

Even if we assumed that all that Mr. Walker says is true, an important observation is due here. Google says its online-shopping service has indeed advantaged competitors, rather than damaging them. Mr. Walker, for instance, underlined how web traffic to other price-comparison sites has been increased by 227% over the past decade, and how Google delivered more than 20 billion free clicks to aggregators over the last decade in the countries covered by the SO. However, he never mentioned how Google’s own traffic has increased in the same time frame, or how the data collection has improved. It is only through the data a dominant firm collects, and the more users it gets, that it can improve its service, and to extend its lead over rivals. This, we believe, is a crucial point.

High-priced risks

Commissioner Vestager’s spokesperson Ricardo Cardoso confirmed she had received Google’s reply. Mr. Walker concluded the statement on Google’s blog saying that they “look forward to discussing our response and supporting evidence with the Commission”. “We will carefully consider Google’s response before taking any decision on how to proceed and do not want to prejudge the final outcome of the investigation”, EU’s Cardoso replied.

Now it is high time to see what impact Google’s clear-cut reply will have. If found guilty of violating EU law, the Mountain View, California-based company, could face fines of up to €6 billion, roughly 10 percent of the company’s operating revenue. That’s certainly no peanuts at all.

The European Sting will keep following this important case.