EU vs Google: is there a case against Google?

It looked as though maybe Google had dealt with the antitrust problem last year when it agreed to promote rival ads to avoid EU fines. But, just the other week a new press release from the European Commission laid out a Statement of Objections which focuses on Google favoring its own Google Shopping comparison product in general search results.

There was also news that a formal investigation into Google’s conduct on Android has been opened, but we’ll get to that later. Let’s see what merits, if any, the EU has in its charge against Google.

Is Google gaming search results?

Of course it is, but it’s pretty difficult to see exactly where the line is when it’s Google’s job to decide on the results. As Amir Efrati points out, at The Information, the idea that Google is not providing the “the most relevant results” doesn’t make a great deal of sense. Google is deciding what’s relevant in the first place, there is no objective standard.

The internal memo response from Google, published at Re/code makes for interesting reading and lays out Google’s defense, starting with the idea that “The competition is just one click away – and it’s growing.”

There’s definitely a problem with the idea that a company is reliant on Google Search for traffic when there are search alternatives, social networks, and a growing dependence on mobile apps.

On the other hand, there’s a clear issue for competitors when Google is in charge of search, providing the lion’s share of traffic to specific businesses, such as shopping comparisons websites, and also competing with them. Is it favoring its own product in the results, as the Commission alleges? It seems very likely. Does that hinder the competition and stifle innovation? It’s a little harder to say.

The FTC found worse and nearly sued Google a few years back, as reported by The Wall Street Journal. Those allegations focused on Google scraping content from Yelp, Trip Advisor, and Amazon, sticking it into the search results, and then threatening to remove those companies from the results when they complained. Although, Google has argued successfully before that it’s not a publisher – search results can’t really work without headlines and snippets of content.

The antitrust laws

The idea that competition is good, is at the heart of capitalism, and it makes sense to safeguard consumers from price fixing agreements. We don’t want a monopoly or an oligopoly blocking competition and innovation, while fleecing us in the process. But, it’s not easy to get your head around the antitrust laws because a monopoly is not illegal, it’s achieving or maintaining one by “anti-competitive” means that makes it an offense.

That means you can engage in anti-competitive practices without penalty, unless you get too successful. So, Google can be penalized for things now, that its less successful competitors (in monopoly terms) are still doing.

What this could mean for Android

There’s an awful lot of gray in the search argument, but if you take a look at the scope of the European Commission’s formal investigation into Android, it’s easy to see trouble ahead. The structure of Google’s Android is a lot closer to Microsoft’s Windows strategy in the 90’s, which led it into serious antitrust problems.

These are the three main areas the investigation will focus on:

• whether Google has illegally hindered the development and market access of rival mobile applications or services by requiring or incentivising smartphone and tablet manufacturers to exclusively pre-install Google’s own applications or services;
• whether Google has prevented smartphone and tablet manufacturers who wish to install Google’s applications and services on some of their Android devices from developing and marketing modified and potentially competing versions of Android (so-called “Android forks”) on other devices, thereby illegally hindering the development and market access of rival mobile operating systems and mobile applications or services;
• whether Google has illegally hindered the development and market access of rival applications and services by tying or bundling certain Google applications and services distributed on Android devices with other Google applications, services and/or application programming interfaces of Google.

It seems perfectly possible Google will be found guilty here. When Google insists that specific things are pre-installed, or that you can’t use Google apps and services on Android forks, it’s opening itself up to antitrust issues. But, they don’t really have much to do with consumer interests, do they?

Business or consumers

Google has argued in the past that the controls it enforces on Android are about ensuring the user experience is good. It’s up to you if you believe that or not, but having used a number of different forks and tried Android without Google services, it seems like a valid point to me.

The thing about these examples the European Commission is throwing up is that they clearly relate to competition with other businesses and don’t demonstrably harm consumers.

Does Google Search or Android really have a monopoly? They’re dominant, but there are still plenty of competitors that appear to be perfectly healthy. What if it’s a monopoly based on merit? Few people are going to argue that the alternatives to Google Search are better, but if you do feel that way, just go ahead and use something else. There’s nothing stopping you, is there?

You can argue that, if a competitor developers a better service, then we’ll all just jump ship. But, there is another side to the argument which is also worth considering. If Google uses its better service in one sphere, say search, to drive you into using its inferior service in another sphere, say Google Shopping or Google+, then is it getting an unfair advantage from that monopoly? Maybe it is, and maybe it doesn’t benefit the consumer.

In any case, the chances are good that Google will come to some kind of agreement. The EC can technically fine Google 10% of its 2014 revenues, which would come to $6.6 billion, but that seems very unlikely. Google is admitting no wrong-doing so far, and insists it hasn’t been anti-competitive. We’ll keep you posted on this one as it develops.