EU opens a third antitrust file against Google

Google Logo 2016The European Commission announced last Thursday that is taking “further steps” in investigation against Google, officially accusing the company of having restricted consumer choice by blocking rivals in online search advertising. Although it sounds like there’s absolutely nothing new about this new complaint against Google, the latest antitrust charge filed by the Commission, which is the third since early 2015, it may surely open a new chapter in the long standing “EU vs. Google” story.

Two charges

With an official statement, the European Commission has announced no less than two charge sheets, known as “statements of objections”, and has sent it to Google. Formally, with the first Statement of Objections, the Commission has reinforced its preliminary conclusion that Google has abused its dominant position by “systematically favouring its comparison shopping service in its search result pages”. The move is explained in detail in the official EC statement published on that same day.

Comparison shopping

The European Commission issued its first Statement of Objections against Google on the subject of comparison shopping in April 2015, and now confirms it also carried out further investigations since then. Last Thursday’s Statement of Objections indeed represents a reinforcement of the Commission’s preliminary conclusions and outlines “a broad range of additional evidence and data”, as declared by the Commission. “Google has come up with many innovative products that have made a difference to our lives”, Commissioner Margrethe Vestager, in charge of competition policy, said. “But that doesn’t give Google the right to deny other companies the chance to compete and innovate”, she added.

According to the Commission, the additional evidence relates to the way Google “favours its own comparison shopping service over those of competitors, the impact of a website’s prominence of display in Google’s search results on its traffic, and the evolution of traffic to Google’s comparison shopping service compared to its competitors”, to use the exact words of the Commission’s spokesperson. “The Commission is concerned that users do not necessarily see the most relevant results in response to queries”, the statement says. “Today, we have further strengthened our case that Google has unduly favoured its own comparison shopping service in its general search result pages. It means consumers may not see the most relevant results to their search queries”, Commissioner Vestager also stressed.

The AdSense problem

The second accusation is about Google’s “AdSense for Search” platform, through which Google acts as an intermediary for websites such as retailers, telecom operators and newspapers. The Commission officially raises concerns that the Mountain View, California-based firm has breached the EU antitrust rules by putting restrictions on the ability of certain third party websites to display search advertisements from its competitors. According to the European Commission Google has “prevented existing and potential competitors, including other search providers and online advertising platforms, from entering and growing in this commercially important area”.

This latest accusation refers to what the Commission sees as Google’s “original sin” of having abused its 80 % market share “dominant position” in the European Economic Area (EEA), specifically in the placement of search advertising on third party websites. A large proportion of Google’s revenues from search advertising intermediation indeed stems from its agreements with a limited number of large third parties, and the Commission has concerns that in those agreements Google might have breached the bloc’s antitrust laws by requesting conditions of exclusivity and the right to authorise competing ads.

A reply to Google

This new round of antitrust charges represents a massive reply to all the proofs of innocence that Google has showcased through the year, a big. An example of that lies on its its first accusation, the one regarding comparison shopping, where the Commission has completely rejected Google’s claim that the EU watchdog had failed to take into account competition from online retailers Amazon and eBay. Google’s argument indeed was that comparison shopping services should not be considered in isolation, but together with the services provided by merchant platforms. Last week, the Commission openly said it will continue to consider that comparison shopping services and merchant platforms belong to separate markets.

“The latest round of charges underscores the European Commission’s commitment to the case and signals that serious penalties against Google are likely”, Mr. Albert Foer, a senior fellow at the American Antitrust Institute, told Reuters last week. “My sense is that we are talking about something more substantial than a slap on the wrist, and also that’s why this has been going on for so long”, he said.

Alphabet under the lens

Moreover, this new round of charges carries a big element of novelty: the Commission decided to initiate proceedings also against Alphabet, Google’s parent company, which “was created after the Commission had initiated proceedings against Google”, as said in the statement by the Commission. “Both Statements of Objections summarised above are addressed to Google and Alphabet”, the statement also said, adding that also the April 2015 Statement of Objections has been notified to Alphabet.

This is the first time Alphabet itself gets dragged onto the field, which is another proof of how the EU-Google question is definitely far from a conclusion. Google’s AdWords and AdSense programmes have been on the Commission’s radar since 2010, under Vestager’s predecessor, Mr. Joaquin Almunia. Google for more than two years tried to negotiate a settlement with the EU, and almost got it, before Mr. Almunia left his cabinet. Ms. Vestager recently said that bringing the thorny matter to a final stage is her top priority, although there’s still no visible resolution ahead.

Growing concerns

Google now could face fines up to 10 % of its global turnover for each case, if found guilty of breaking the region’s antitrust rules. Still such threat doesn’t seem too much of a risk to Google’s business, which was flying around $75 billion in revenue in 2015. However, many sources close to the company are reportedly saying that the concern around the matter is rapidly growing inside the US tech giant’s offices.

“We believe our innovations and product improvements have increased choice for E.U. consumers and promote competition”, a Google’s spokesperson commented on Twitter last week, which is the company’s only reply to date. Google also said that it would provide a “detailed” response to Europe’s latest charges in due course.

Google and Alphabet have 8 weeks to respond to the first Statement of Objections and 10 weeks to provide a response to the second.

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