EC Widens Antitrust Probe of Google Activities

Google's advertising practices may breach EU antitrust law, the European Commission said Thursday. It said it sent the search engine two statements of objections (SOs), one that supplements its earlier finding that Google abuses its dominant position by favoring its comparison shopping services in search results (see 1504150002), and a new SO claiming Google also is preventing third-party websites from displaying search ads from its rivals. The new objections show the determination of Competition Commissioner Margrethe Vestager "to pursue the matter vigorously and to follow the investigation wherever it leads," said Europe Counsel Thomas Vinje of FairSearch, which is made up of Google rivals. Google didn't comment.

Google's flagship process is general interest search, which includes ads that respond to such inquiries, said Vestager at a news briefing. The more users who see the ads, the more money Google makes, she said. The ads are often on third-party websites such as those operated by telcos or newspapers, she said. The EC's preliminary finding is that Google is dominant in placing ads on such websites, Vestager said. Dominance isn't a problem under EU law unless a company abuses its position by restricting competition, she added.

The supplemental SO "outlines a broad range of additional evidence and data that reinforces the Commission's preliminary conclusion" that Google favors its own comparison shopping service in its search results, the EC said. It carried out further investigations after Google responded to the original SO, issued in April 2015, Vestager said. Further analysis turned up new evidence that showed, among other things, that in response to product-related queries, Google's comparison shopping product systematically appears prominently at the top of the search results regardless of whether it's the most relevant response, she said.

The EC also now has more evidence to show how important prominent display on Google's search result pages is to a website's traffic, Vestager said. Google disputes the claim, but the additional investigation showed "visibility and traffic are two sides of the same coin," and the EC now has the evidence to back that up, she said.

Vestager's team also examined in detail Google's claim its comparison shopping service faces competition from Amazon and eBay, Vestager said: "The facts unveiled by our investigation do not support this." Such merchant platforms are in a different market, and are consumers rather than competitors of comparison shopping sites, she said. Even if they were rivals, "Google's actions would still have harmed competition" because rivals knew that "however good their service, it would never be as visible as Google's," she said.

The second statement of objections concerns "AdSense for Search," the EC said. Large websites often offer a search box, and to find advertisers for the search results page, they often use an intermediary such as Google, said Vestager. The EC believes the company is the dominant provider of this kind of service, with market share in Europe of around 80 percent over the past 10 years, she said.

The SO "takes issue with Google's contracts with the largest third party websites," Vestager's written remarks said. For the past 10 years, the agreements have hindered third-party websites' ability to get search ads from rivals, she said. Some contracts had exclusivity clauses barring websites from getting ads from other providers, while more recent versions required the websites to take a minimum number of ads from Google and reserve the most prominent and profitable space on the page for Google ads, she said. The company also stopped the sites from placing rivals' ads next to or above its own, and forced them to obtain its agreement on how to display competitors' ads on its page on the limited place left for such ads, she said. Google recently decided to give third-party websites more freedom to display competitors' ads, and the EC will "keep a close eye on that" to see what impact the change will have on the market, said Vestager.

It's "very obvious" that companies complaining about Google's conduct are suffering, Vestager said. The search engine's behavior harms those companies, investors, employees and consumers, she said. Speed is of the essence in resolving the various antitrust cases, but sometimes high quality comes at the price of speed, she said. Google and its parent Alphabet have 10 weeks to respond to the SOs.

The new SOs show the EC "intends to proceed as fairly as possible in these landmark actions," said FairSearch's Vinje. He urged the EC to act expeditiously, saying Google's actions have hurt innovators and small-to-mid-sized companies in Europe, the U.S. and many other regions. FairSearch members include Expedia and TripAdvisor. The Initiative for a Competitive Online Marketplace tweeted, "Augmenting EC investigation will strengthen it. But should not slow it down, #Google has impeded #competition for over a decade." ICOMP describes its members as 70 companies, associations, consumer groups and individuals involved in the internet market, mostly in Europe.