Is Google Right About Its ‘Value To Businesses’ Of All Sizes?

In April, after a five-year-long investigation, the European Commission announced it had sent a Statement of Objections to Google alleging it has abused its dominant position in the markets for genera...
Is Google Right About Its ‘Value To Businesses’ Of All Sizes?
Written by Chris Crum
  • In April, after a five-year-long investigation, the European Commission announced it had sent a Statement of Objections to Google alleging it has abused its dominant position in the markets for general internet search services by favoring its own comparison shopping product in general search pages.

    Do you think Google should be penalized? Let us know in the comments.

    It said this infringes on EU antitrust rules because “it stifles competition and harms consumers”.

    “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,” said Margrethe Vestager, the EU Commissioner in charge of competition policy. “Google now has the opportunity to convince the Commission to the contrary. However, if the investigation confirmed our concerns, Google would have to face the legal consequences and change the way it does business in Europe.”

    So Google has been working on convincing the Commission, and has now responded with a blog post and a formal filing. hey also released this video:

    Essentially, Google isn’t backing away from this fight, even though it faces stiff fines.

    SVP & General Counsel Kent Walker says in the blog post that the allegations in the statement of objections are “incorrect,” and that Google increases choice for European consumers and “offers valuable opportunities for businesses of all sizes.” He writes:

    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. 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.
    Our response provides evidence and data to show why the SO’s concerns are unfounded. We use traffic analysis to rebut claims that our ad displays and specialized organic results harmed competition by preventing shopping aggregators from reaching consumers. Economic data spanning more than a decade, an array of documents, and statements from complainants all confirm that product search is robustly competitive. And we show why the SO is incorrect in failing to consider the impact of major shopping services like Amazon and eBay, who are the largest players in this space.
    The universe of shopping services has seen an enormous increase in traffic from Google, diverse new players, new investments, and expanding consumer choice. Google delivered more than 20 billion free clicks to aggregators over the last decade in the countries covered by the SO, with free traffic increasing by 227% (and total traffic increasing even more).
    Moreover, the ways people search for, compare, and buy products are rapidly evolving. Users on desktop and mobile devices often want to go straight to trusted merchants who have established an online presence. These kinds of developments reflect a dynamic and competitive industry, where companies are continuing to evolve their business models and online and offline markets are converging.

    He goes on to say things we’ve mostly heard before about Google’s commitment to quality and how it’s not anticompetitive. He maintains that if Google were to do what the SO seeks, it would harm quality (which would not be good for consumers).

    He concludes saying that the SO’s conclusions are “wrong as a matter of fact, law, and economics” and that the company looks forward to discussing its response and supporting evidence with the Commission further.

    If the Commission isn’t buying what Google’s selling (and there’s a good chance they’re not), it can and probably will impose massive fines on the company. Here’s what the EC says about fines:

    A firm that has engaged in anti-competitive behaviour and so infringed competition law may be subject to fines imposed by the Commission under Regulation 1/2003. The Commission’s fining policy is aimed at punishment and deterrence. The fines reflect the gravity and duration of the infringement. They are calculated under the framework of a set of Guidelines last revised in 2006.
    The starting point for the fine is the percentage of the company’s annual sales of the product concerned in the infringement (up to 30%). This is then multiplied by the number of years and months the infringement lasted. The fine can be increased (e.g. repeat offender) or decreased (e.g. limited involvement). The maximum level of fine is capped at 10% of the overall annual turnover of the company. See separate factsheet on fines.

    If fines are imposed, Google can still appeal.

    Is Google right about the value it creates for businesses and maintaining quality? Let us know what you think.

    Image via Google

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