Google Agrees To Search Engine Makeover To Settle European Antitrust Case

A View from Constantine Cannon’s London Office

By Michael Petrides

The announcement by the European Commission on February 5, 2014, that it has received a set of “improved commitments” from Google in their stand-off over the Internet giant’s search engine practices signals not only the beginning of the end of a four-year antitrust battle, but also a new chapter in online search and search advertising.

Under the settlement, which is awaiting final approval by the European Commission, Google would give its rivals more prominence in specialized search results, including those for shopping, travel and local business reviews.  The settlement would result in Google’s search engine in Europe looking substantially different look from the way it appears in the United States.  

The European Commission’s case against Google dates back to November 2010, when the Commission launched an investigation after having received a total of 18 formal complaints against Google.  The probe focused on whether a series of Google business practices in online searches effectively amounted to an abuse of the company’s dominant position in the markets for web search, online search advertising and online search advertising intermediation in the European Economic Area (EEA) – in violation of Article 102 of the Treaty on the Functioning of the European Union.

After nearly three years, the Commission published its objections in March 2013, raising four competition concerns, namely:

(1)   That Google’s prominent display of its own “specialised search services” – such as Google Shopping (specialising in the search for products), Google Places (local business search) and Google News (news search) – within its web search results constitutes favorable treatment that unduly diverts traffic away from other specialised search engines.  Such favorable treatment could reduce the ability of consumers to find a potentially more relevant choice of specialised search services given that Google is a seminal source of traffic for competing specialised search services.

(2)   That Google’s use in its own specialised search services of original content taken from the websites of other specialised search services without their consent (e.g., user reviews) – with no possibility of opting out – may reduce competitors’ incentives to invest in creating original content for the benefit of internet users.  This practice could significantly reduce users’ incentives to visit other sites that contain part of the information available on Google’s specialised services.

(3)   That the exclusivity provisions in Google’s agreements with web publishers, including any third party website such as newspapers, requiring them to obtain all or most of their online search advertisements that is posted on their websites from Google (dubbed as “search advertising intermediation”) reduces the choice of online search ads offered on those sites and competitors’ incentives to innovate.

(4)   That Google’s contractual restrictions of the possibility to transfer (“port”) online search advertising campaigns away from Google AdWords to competing ad platforms, and the restriction of the possibility to simultaneously manage such campaigns on competing online ad platforms, create artificial switching costs.  Such restrictions could discourage advertisers using AdWords from running parallel online search advertising campaigns on competing platforms – thereby reducing consumer choice.

Seeking to appease the Commission, Google proposed a first set of commitments in April 2013 to address the four competition concerns. According to Vice President Joaquín Almunia, Commissioner responsible for Competition, the Commission’s market testing of the commitment package came back “very negative,” which required Google to improve the package.  Google submitted an updated package in October 2013, which market testing showed needed further improvements.

Hoping that the third time’s the charm, Google returned with its latest commitment package, on which the Commission is now seeking the views of the complainants.  This extensive package addresses the four competition concerns – to the satisfaction of Commission competition regulators – in the following ways:

(1)   On the thorny issue regarding the way Google displays specialised search services, Google proposes a three-fold remedy for all its current and future services and for all search entry points (irrespective of how the search query is made, e.g. type), according to which

a.       Users will be informed by a label that Google’s own specialised search services are being promoted,

b.      These specialised search services will be graphically separated from other search results, in order to distinguish them from normal web search results, and

c.       For relevant specialised search services, Google will display prominent links to three rival specialised search services in a format that is visually comparable to that of links to its own specialised services (e.g. inclusion of images). Rivals will have control of how they want to present their offerings [see screenshots below].

                                                              i.      If Google does not charge for the inclusion of its specialised search services in the search results, rivals will not be charged to participate in the rival links either. These three rivals will be chosen from a pool of eligible specialised search competitors using Google’s normal web search algorithm.

                                                            ii.      On the other hand, if Google does charge for the inclusion of its specialised search services, the three rivals will be chosen from a pool of eligible specialised search competitors through a dedicated auction mechanism.

(2)   On Google’s usage of content from competing specialised search services within its own specialised search services, Google will allow third parties to opt out from the use of their content in Google’s search services. Google will undertake that any such opt out will not unduly impact on its competitor’s ranking in its general search results or their ranking in the AdWords platform. The opt out will be open to all websites, with a specific opt out with “finer granularity” for news publishers – for the control of the use of their content in Google News.

(3)   Google will no longer include any written or unwritten obligations that would require web publishers to source online search ads exclusively from Google.

(4)   Google will no longer impose obligations that would prevent advertisers from porting or managing search advertising campaigns across competing ad platforms to Google’s AdWords.

The Commission has indicated that it considers the latest commitment package as capable of addressing its antitrust concerns.  Before giving final approval of the settlement, the Commission is seeking the views of complainants.  Under the settlement, a monitoring trustee would also be appointed to ensure the correct implementation of the commitments in the EEA over a period of five years.

Interestingly, a decision to make the commitments legally binding does not constitute a formal decision on whether Google has infringed EU antitrust rules.  However, any non-compliance on Google’s part with the commitments would constitute a separate breach of the commitments decision that is subject to fines under Article 23(2) of the Antitrust Regulation.

The top image shows how a Google search for gas grills currently appears – with promoted products – while the bottom image shows how competitors’ promoted products would appear under the settlement.  ©  European Commission.

— Edited by Gary J. Malone