Could Google be Googled by a European Commission Googlie
While we have all been fixated by the daily mayhem oozing out from the Leveson Inquiry another potentially more important inquiry has been moving at its usual, seemingly glacial, speed towards an outcome.
Last week marked the first anniversary of the European Commission’s investigation into the alleged anti-competitive practices of Google.
It may seem a long time for an investigation but all the signs are that a great deal has been going on under the surface and that the world’s biggest search engine organisation could be hit with a ferocious 400 page Statement of Objections early in the New Year. According to the FT this week Google “is being blamed for multiple and multifaceted abuses.”
We won’t know the full state of the charge sheet against Google until the document is published but lawyers representing complaining companies believe the mood of investigators is tough. Most of the top telecommunications, publishing and advertising groups in Europe have been in to see the Competition Commissioner Joaquín Almunia and encouraged to submit evidence of what they see as abuse of market dominance.
As one lawyer noted it would be very bad management of expectations if Almunia marched the communications companies up the hill only to march them down again. Recently Google’s chairman Eric Schmidt, who naturally rejects the allegations of rivals and likes to say that competition “is only a click away,” flew to Brussels for talks with Almunia.
The European Commissioner denied that the meeting was about negotiations of any kind.
A report for ICOMP, the industry body which campaigns for competition and transparency on the web, notes that Google’s market share in online search and search advertising has grown to 83.6 per cent worldwide and is over 90 per cent in some parts of Europe. Since 2001 Google has acquired no less than 103 companies, 30 of them in the 12 months to August 2011.
Then in case anyone doubted Google’s continuing ambitions the giant group agreed to spend $12.5 billion (£8 billion) to buy Motorola Mobility, a deal which would enormously strengthen its presence in mobile search and advertising – another vertical slice of the communications industry. Google will obviously need Commission approval for the Motorola deal too.
The complaints against Google include allegations that its activities in everything from mapping, publishing and search make it near impossible for competitors to get a hold in the market.
Then there is the controversy surrounding the “arbitrary imposition of search penalties” by Google – dumping a company so far down the search order for unexplained breaches of Google rules that its future is endangered. The British online company One News Page one morning found its number of hits had fallen off a cliff when Google unexpectedly moved it down the search word rankings. One News Page was unable to learn what rules it was supposed to have breached or to find any effective way of appealing. As suddenly as the penalty was imposed, months later it was lifted equally without warning or explanation.
Market dominance itself is not illegal; it is abuse of that market dominance that can lead to serious action from the European Commission, including the imposition of fines totalling up to 10 per cent of annual revenue. A year of relative “silence” results from the Competition Commission’s working methods. A case is built from the ground up and then in the final weeks before publication – the stage we have reached now – it is tested robustly in the Commission by lawyers and economists.
After publication of the Statement of Objections things can then move quite quickly. Google will typically have two months to respond and by the late spring rival European publishers and online operators should have a fair idea whether there will be effective redress for what they see as abuses of competition.
The Commission’s past record in competition cases suggests they prefer “structural” remedies that prevent the complained of the behaviour happening again. It is less keen on “behavioural” remedies that require continuing regulation and endless disputes.
If Google should be found guilty of abusing its market dominance then a swinging fine is likely to reflect previous behaviour. Yet even if the fine were to be 10 per cent of revenue, or around $3 billion, this would be shrugged off by one of the world’s richest Corporations.
ICOMP, which represents 70 European companies, has a long shopping list of remedies. It says it wants Google’s search results to be neutral and not be influenced by “exclusionary or retaliatory motives.” Google’s rivals want the company to be prevented from walling off its premium content from competitors including rival platforms and “imposing agreements on third parties requiring them to support or distribute Google’s services exclusively.”
Nobody yet knows exactly what the European Commission will decide but it is increasingly likely that significant steps will be taken and that Google will probably be surprised by the result.
Googled, Ken Auletta’s best-selling portrait of the search engine company, portrays graphically the wondrous achievements of a company dominated by endless ranks of talented engineers doing work that they earnestly believe is in the interests of all humanity. Most of us enjoy the benefits of their creativity every day. The book, however, also shows the darker, almost mildly autistic side of Google – that it is a corporation with very poor insight into the effects of its actions on others and “the others” certainly include competitors.
Eric Schmidt was made chairman of Google precisely to make the company’s case to the world – the human face of Google – and so far he has done a very good job. But the sheer weight of the achievement of Google’s engineers, the impact of the cash flow that has resulted and the aggressive acquisition policy could mean 2012 could be a year of non-stop tap dancing for Schmidt.
As for the very different work of Leveson, mercilessly hanging out all the dirty washing of the press day-by day the worry is that he too could come up with some very serious conclusions.