Google has taken a step close to a rather juicy legal fight with the European Commission, after it issued a robust rebuttal to claims that it used its market dominance to stifle competition. Europe’s arguments are, it says, ‘wrong as a matter of fact, law and economics’. Pistols (well, immensely well-paid lawyers) at dawn, eh?
In April, European competition commissioner Margrethe Vestager formally accused Google in a Statement of Objections of ‘diverting’ traffic away from price comparison websites in favour of its own shopping adverts. The commission has the power to issue fines of up to 10% of Google’s global revenues (roughly $7bn or £4.5bn), though by the sounds of it any such move would be fiercely contested.
‘Our response provides evidence and data to show why the SO’s [Statement of Objection’s] concerns are unfounded,’ Google senior vice president and general counsel Kent Walker said in a blog post. ‘We use traffic analysis to rebut claims that our ad displays and specialized organic results harmed competition by preventing shopping aggregators from reaching consumers.’
The EU’s argument is built on two assertions: that Google has monopolistic power as the ‘window to the web’ and that it’s used that power to muscle in on the price comparison business.
You can always use Bing
Google has always denied it’s a monopoly, despite having 90% of the search market in Europe. ‘We aren’t a ferry. We aren’t a railroad,’ said Google boss Eric Schmidt last year. ‘No one is stuck using Google.’ Competition, the firm insists, is only ever one click away.
More to the point, the evidence doesn’t suggest it actually is a monopoly in product search, according to Walker. Google traffic to aggregators has increased 227% in the last decade (though surely overall web traffic has increased more than that since 2005) and many consumers go direct to ‘trusted merchants who have established an online presence', he said.
Then there’s Amazon and eBay. Walker points out that these sites are in fact the largest players in product search, which kind of dents the argument that Google has monopolistic powers.
Protecting the middle men?
Google maintains that its shopping ads, typically displayed on the right and top of the search page, are in fact beneficial for consumers. ‘That’s not "favouring" -- that’s giving our customers and advertisers what they find most useful,’ Walker said.
If Google does as the European Commission wishes and shows adverts sourced and ranked by price comparison sites in its own advertising space, it is effectively being asked to subsidise its direct competitors, which it isn't obliged to do unless it is in fact a monopoly.
After all, price comparison websites are aggregators like Google, helping consumers find what they want from a mass of third party sites. Why should searching for products be any different to searching for information? And how is it good for consumers to go through two middle men rather than one?
The European Commission is unlikely to be swayed by Google’s arguments, which have been expressed many times before. It might find some of Google’s traffic data (and who would have better data than Google?) a bit harder to swallow, but a legal showdown remains the likeliest option.