"Internet search engines in the focus of EU competition law – a closer look at the broader picture": today's GRUR-JIPLP seminar

"Internet search engines in the focus of EU competition law – a closer look at the broader picture" was the subject of today's joint GRUR-JIPLP seminar, held in the splendid surroundings of Munich's Max Planck Institute for Innovation and Competition, opposite the magnificent vista of the Hofgarten's sun-drenched autumn leaves.

Following welcomes by Professor Dr Josef Drexl, LL.M. (Berkeley), Dr Gert Würtenberger and Professor Jeremy Phillips, the seminar opened with a paper, "Abuse of dominance in digital markets: The case against Google" by Dr Thomas Höppner (Partner, Olswang Germany LL.P., Berlin). Thomas drew attention to the information asymmetry that existed between Google and its users, explaining the mechanism by which advertisers fed in their advertisements, other advertisers their keywords and users their queries.  This is the three-sided platform on which Google's  search engine business model is based.  Building on this, Google added further information portals which it filled with its own content, user-generated content and other third-part content.  This made the Google universe far more attractive both to users and to advertisers, rendering it unnecessary to visit other websites and harder for others to compete with Google.

This also meant that Google had a financial incentive to drive users to its own pages.  Google therefore made sure that its own sites (eg Google Maps) appeared at the head of users' research results even though that had not been looking for them. Google News used similar techniques for enabling content to be included under their own terms in its own 'boxes; Google Shopping was used in order to monopolise the inclusion of search results in its "Google Shopping" boxes, and the insertion of speculative Google Plus pages into search results along with lines like "Be the first to review ..." and "Is this your business ..." shows evidence of Google fishing for fresh business among users of its system.

Demotions are also an important part of the Google business plan. This happens when Google's algorithms are adjusted and websites find that their traffic falls 70-80% overnight. The adjustment of Google algorithms do not affect its own websites however.

Thomas then addressed the UK experience of the Google Panda algorithm, which caused a massive drop in non-Google shopping trade, a drop which was only partially redressed by Google's introduction of fees for listing others' online shopping products.  In April 2015 this was held to be an abuse of dominant position by the European Commission). Nb: complaints about this were first received in 2009; formal proceedings were instituted a year later but it was only on 15 April 2015 that the Commission issued its Statement of Objection.

The market tipped in favour of Google in 2001-2. Before then, Yahoo! never had more than 30-35% and Google, which invented auction-based bids in the search term market, has never had less than 80% of the market share since 2005.  Yahoo! is now closing down its advertising operations in favour of Google and it can only be a matter of time before Bing folds too.  Given that, the more people use Google the stronger it gets, and that it has such a strong position in terms of direct and network effects, it can't help getting stronger.  Switching to alternative sources is unattractive for advertisers since it is slow and can be costly.   Currently Google holds more than 33% of the data collected online. Next in line, Facebook, holds only around one fifth of that.

Does Google's dominance equal abuse? Google says "no", and this is effectively an essential facilities matter -- while Google never refuses to deal with anyone.  Really, said Thomas, it's a matter of monopoly leveraging, using a monopoly in one market in order to eliminate competition in another, an American invention.  Google has offered various Commitment Proposals, none of which have been warmly welcomed by the Commission, not least because they are so favourable to Google.

"EU vs. Google: Does the Commission have a case against Google?" was the subject of the paper by Professor Dr Torsten Körber (Chair of Civil Law, Antitrust Law, Insurance Law, Corporate Law and Regulation Law, University of Göttingen). Torsten, who has represented Google in competition-related issues, considered that the Commission's case against Google -- which was only brought regarding Google Shopping (formerly Froogle) was not a strong one. He explained how Froogle worked and showed how its organic-based service was replaced by a pay-for-inclusion sponsored results service more closely resembling that of Google AdWords.

Torsten then considered whether and, if so to what extent, there exists a general market for searches and what role is played by vertical shopping platforms and competitors such as Amazon and eBay, which do not merely advertise but also offer products for sale: are these part of the same market, he asked.  And what of sites such as Idealo (a German-language search platform).

A further consideration is how the size of the market is measured? Is it only by volume of search? This would be strange since the facility to do a search is not sold or paid for.  And what about multi-platform searches: how would they be treated? In a dynamic market with low or no switching costs, even a market share of over 90% can be regarded as non-dominant, as the European Commission concluded in its Microsoft investigation.  Google cannot stop innovating: if it did, it would instantly lose market share.

Google's services: an umbrella
for all search, but not needed
by competitors?
Does Google discriminate against consumers? This question cannot be answered without first looking at the concept of discrimination.  In the first place, the BGH has held that even a dominant company is not required to treat its competitors the same way as it treats its own services, and the CJEU does not appear to have contradicted it: equal treatment is a matter of regulatory law, not competition law except in the case of access to an essential facility.  Google is not an essential facility, since the relevant platform is not Google but the internet itself.  Google Product Search and Google Shopping are in any event entirely different services which cannot be compared. The latter is not part of the organic search market and is equated in commercial terms with Google AdWords, there is no question of artificial diversion of searches from other sites.  Basically Google is being accused of not sharing its business with its less successful competitors. Its competitors -- who can pay to be listed in Google searches -- are complaining that they are not being allowed to free-ride on Google and travel first class.

If the Commission were right, what would be the right solution?
  • Showing 300+ shopping boxes on the search page?
  • Presenting results of competitors in the Google Shopping box?
  • Presenting only "the most relevant service"?
  • Removing Google Shopping from all European web pages?

Each of these had its drawbacks, as Torsten explained.

The final speaker before coffee was JIPLP editorial board member Dr Christopher Stothers (Arnold & Porter (UK) LLP), on the title "Digital markets: The role of private enforcement of competition law , London". Opening with a screen shot of a Claim Form, Chris asked if anyone had ever seen a UK Claim Form before: it includes the line "Does, or will, your claim include any issues under the Human Rights Act?"  If it does, this suggests that you are clutching at straws and have a very weak case -- but it's also stated under the Practice Direction that the court must be notified of any competition law issues and whether the Commission is already contemplating the claim, in case it should be necessary to stay the national proceedings pending the outcome of the Commission's investigation.

UK, German and Dutch courts deal with the bulk of competition law litigation, in competition with one another. The British courts are happy to have a UK company at the heart of the case, so that they can bring non-UK businesses into the equation too. The rules on disclosure and the availability of injunctive relief made UK competition litigation attractive, particularly from the point of view of the claimant.  In an appropriate case, damages can be huge, and UK proceedings are reasonably transparent, subject to the necessary respect for confidentiality.

What happens in private competition litigation?  One case, started in 2012, is Indeferation (Foundem) v Google. Following a 2013 case management conference, Mr Justice Roth directed a limited degree of disclosure, basically tying to documents relating to the Commission investigation. No interim injunctive relief was sought.  Following a hearing and two further case management conferences, a hearing has been scheduled for July 2016.

Streetmap v Google raised some elements that fell outside of the Commission's investigation (ranking, bundling and map pricing). It goes to trial next week on bundling only.  I Plus V v Google, a French action launched in 2012, has been stayed pending the Commission's ruling.

1 comment: