European Commissioner Rebuffs German CEO’s Criticisms Of Google Search Engine Settlement

A View from Constantine Cannon’s London Office

By Michael Petrides

The European Commission’s Competition Commissioner, Joaquin Almunia, is strongly defending the EC from charges that its proposed settlement with Google concerning search engine practices would permit Google to expand its dominant market position.

Commissioner Alumina’s defense of the proposed settlement joins a debate with Matthias Döpfner, CEO of German publishing giant Axel Springer.

This blog commented in February on Google’s proposed commitments to settle its long-running antitrust case with the EC over its search engine practices. In the meantime, and before the commitments have been “market tested,” Döpfner has launched a scathing attack against the antitrust regulator.

In an open letter to Google CEO Eric Schmidt dated April 16, 2014, Döpfner criticises the EC’s proposed settlement, which would be based on Google’s proposed commitments concerning the display of competing specialized search services. Döpfner argues that the Internet giant will continue to be able to display its own specialized search services higher up the results page, even when those have fewer visitors than the comparable services of a competitor. At the same time, the proposed remedy would offer Google an additional earnings opportunity, by enabling it to sell space in an advertising window at the beginning of the page to those same companies against which it discriminates.

In a reply to Mr Döpfner published on Tuesday, Commissioner Almunia rebuffed these criticisms. He argues that the proposed package will restructure Google’s search engine in three major ways. First, users will now be informed as to which specialized search links are promoted by Google and not generated by the normal search algorithm. Second, Google’s specialized search services would be clearly separated from standard specialized search results. Third, whenever presenting its own specialized search services, Google would have to present competing specialized search services in a comparable visual format to make them clearly and equally visible to the user.

According to Commissioner Almunia, this revamped results page would in turn give users the real option of making an informed choice between different alternatives and thus protect their incentives to innovate in specialized search. As to the “additional revenue” argument put forward by the German CEO, Commissioner Almunia pointed out that competing specialized search providers would not have to pay to be featured if merchants did not have to pay for being displayed either (e.g., restaurants in Google Local). These competitors will be chosen according to their ranking in the normal search results.

On the other hand, in cases where Google does require merchants to pay to be featured in its specialized search services (e.g., Google Shopping), competitors would have to pay through a dedicated bidding mechanism. The justification for this policy is that Google would normally have generated income by charging merchants for that space. Since, under the commitments, it would have to make available some of that revenue-generating space to competitors, Google would in practice not generate any “additional income,” but rather substitute the income foregone from the merchants with that generated by the featured competitors.

The Commissioner’s reply goes further and points out that Article 102 of the Treaty on the Functioning of the European Union forbids the misuse – but not the simple existence – of a dominant market position. As a result, the Commission has no power to require a company to accede in to any demand from its competitors simply because it is dominant. Furthermore, the Commission is mandated to prevent the misuse of dominant positions in order to protect consumers, not to promote the interests of competitors.

Commissioner Almunia stresses that his enforcement powers are not unlimited. If he were to require Google to present its own specialized search services in the same way as those of competitors, this would mean that Google services would sometimes not even appear on its own results page. This would represent, in the Commissioner’s words, “a restriction by an antitrust authority that has never been seen before”.

– Edited by Gary J. Malone