The Google ultimatum: Europe has spoken, but what about Australia?

Google could face fines if it doesn’t address alleged anti-competitive practices. mark knol

The European Commission (EC) has given Google “a matter of weeks” to address concerns the American search giant has “abused a dominant market position”.

The announcement overnight (AEST) follows an 18-month antitrust investigation led by Joaquín Almunia, Vice President of the European Commission responsible for Competition Policy.

The investigation identified four concerns where Google’s business practices may be considered anti-competitive:

1) The distribution of general search results displayed by Google

When we search the web using Google, the results are skewed toward Google’s own search services. These search services are individual search engines that focus on specific topics, such as restaurants, news or products.

A user may be seeking a restaurant in a particular suburb and therefore enters a relevant search terms into Google. Google will return, as the highest-ranking result, information from its own search services for restaurants, as opposed to that of its competitors.

And, as well as promoting its own content, Google monetises such search requests. The clicks users make when visiting Google’s search services are paid for by the individual businesses that advertise on these services.

2) The way Google copies content from competing search services and uses it in its own offerings

According to the EC, Google “may be copying original material from the websites of its competitors, such as user reviews, and using that material on its own sites without their [those sites’] prior authorisation”.

So a user might be searching Google for a particular news interview that initially appeared on Bloomberg TV. The highest-ranking Google search result will be from YouTube (a Google product), not from Bloomberg, the creator of the content. Such content might be poached from rival companies, according to the EC.

3) The agreements between Google and companies which feature Google advertising on their websites

You’ve no doubt seen the Google AdWords advertisements used by many websites to generate revenue. Placing these advertisements on a website requires the website’s operator to sign an agreement with Google that prevents the use of advertising from other services.

Such agreements result in de facto exclusivity, requiring Google’s partner companies to obtain most, if not all, of their search advertisements from Google. These agreements shut out competing providers of search advertising.

4) The restrictions Google puts on the portability of AdWords advertising

The EC discovered Google places restrictions on the portability of AdWords advertising content, preventing a “seamless transfer” of ads to other, non-Google platforms. This does not allow companies to leverage their advertising efforts across a range of online platforms.

The EC’s actions should be applauded as they validate the complex and diverse concerns of more than a dozen complainants in the EU and US. These complainants, including TripAdvisor, Expedia and Microsoft, accused Google of manipulating search results, promoting its own advertising services and demoting rivals. It was complaints such as these complaints that prompted the EC investigation in late 2010.

The EC has asked Google to come up with “an outline of remedies which are capable of addressing [the EC’s] concerns” and any such proposal will be market-tested before the EC considers it legally binding.

It is unknown what remedies Google will come up with in the “matter of weeks” given to them by the EC. But what is needed is the implementation of pragmatic and robust measures that restore a healthy competitive internet and maintain the principles of search neutrality.

One thing’s for sure, Google won’t want to give up its global market dominance in search, if only to keep the stock market happy and maintain quarterly earnings.

Should Google fail to act on the EC’s requests, the company could face fines.

In response to the EC’s announcement, Google Spokesman Al Verney said overnight that the company’s representatives “disagree with the conclusions” of the EC.

Such a stance is common for Google and is consistent with its remarks at the conclusion of investigations from other global regulators, including the Federal Trade Commission (FTC).

(In the FTC case, Google representatives suggested it “would be a time-consuming and burdensome task” to search employee emails when the FTC found Google had hindered its investigation regarding the capture of Wi-Fi data from their Street View program.)

While the issues highlighted by the EC are directly relevant to Google’s European operations, there is certainly some crossover with the Australian market. Google has more than 90% of the search market in Australia and leverages its dominance in the same way here as it does in Europe.

The question for the Australian Competition and Consumer Commission is how it will look at the four issues identified by the EC to determine how problematic they are given Google’s share in Australia and the increasing migration of commerce and business to the internet.