Foundem Welcomes the Prohibition Decision in the Google Search Case

June 27th, 2017 No comments

Statement by Shivaun Raff, CEO and Co-Founder of Foundem, the lead Complainant in the European Commission’s Google Search case:

We welcome today’s announcement that the European Commission has adopted a Prohibition Decision in the Google Search case.

Although the record-breaking €2.42 billion fine is likely to dominate the headlines, the prohibition of Google’s immensely harmful search manipulation practices is far more important.  There can’t have been many Competition cases where the stakes for consumers, businesses, and innovation were any higher.

For well over a decade, Google’s search engine has played a decisive role in determining what most of us read, use and purchase online. Left unchecked, there are few limits to this gatekeeper power. Google can deploy its insidious search manipulation practices to commandeer the lion’s share of traffic and revenues in virtually any online sector of its choosing, quietly crushing competition, innovation, and consumer choice in the process.

Key Points

- The Google Search case is not about Google’s comparison shopping service; it is about Google’s core search results and the illegal practices Google uses to manipulate them.

- For the time being, the Commission has chosen to constrain the scope of its formal charges to Google’s application of these illegal practices as they affect the comparison shopping market—i.e., when Google uses these practices to divert traffic and revenues to its own comparison shopping service (currently called Google Shopping) and away from competing comparison shopping services.

- The Prohibition Decision upholds both halves of Foundem’s November 2009 competition complaint.  That is, it concludes that Google has been illegally “favouring” its own services in two ways: first, through Universal Search (which artificially promotes Google’s own specialised services) and second, through anti-competitive penalties (which artificially demote or exclude competing specialised services).

- As has been the case throughout the Commission’s investigation, the Prohibition Decision is not limited to desktop search.  It covers all of Google’s search results, regardless of whether they are accessed through a browser or an App, or from a desktop, laptop, tablet, or mobile phone.[1]

- The final remedy is likely to extend beyond comparison shopping to include travel search, local search, and other existing and future specialised services.[2]

Remedies

The Commission has made clear that it intends to pursue a remedy based on the Even-Handed, non-discrimination principle widely endorsed by Complainants and consumer groups.  This principle states that Google’s search engine must hold all services, including Google’s own, to exactly the same standards—using exactly the same crawling, indexing, ranking, display, and penalty algorithms.  One of the main advantages of a principle-based remedy is that it is resilient to future innovations and developments, as we highlighted in our November 2013 Analysis of Google’s Second Proposals:

“What the even-handed principle would look like in practice would be entirely up to Google.  Google would be left free to pursue any and all developments that improve the quality of its search results or enrich or enhance their display. The only difference would be that, under a non-discrimination remedy, the search results afforded these enhancements would be based on their relevance to the users’ query rather than Google’s financial interests.”

As things currently stand, Google has a range of implementation options available to it, falling into two broad categories: one option preserves Universal Search, while finding a way to incorporate competing services alongside Google’s own. The other abandons Universal Search altogether and entrusts the selection and ranking of appropriate specialised services to Google’s core crawling and ranking algorithms (minus anti-competitive penalties).  The second option is by far the more straightforward to implement, and could easily replicate all of the functionality and appearance of Universal Search, but in a way that is both pro-competitive and more desirable for users.

Given that the straightforward option relies on Google’s core algorithms (albeit minus the anti-competitive penalties) and on a meta tag schema that Google has already developed, it should be possible for Google to implement such a remedy in a matter of weeks.

For further details of the current state of play regarding remedies, see our March 2017 paper, Implementing and Monitoring a Non-Discrimination Remedy.

Rebutting Google’s Public Arguments

If Google has any legitimate arguments in defence of the search manipulation practices it has been quietly escalating for more than a decade, why has it not made them? As we demonstrate in our reply to Google’s public response to the SO and our reply to Google’s public response to the SSO, none of the arguments Google has made so far stand up to scrutiny.

The unpalatable truth at the centre of the Google Search case is that, if you are looking to buy something, Google has become increasingly particular about exactly how it wants to connect you to the merchants who sell it.  Google increasingly wants to connect you to merchants through paid advertisements or via its own comparison shopping service—either of which generates revenue for Google. But, crucially, Google increasingly does not want to connect you to merchants through relevance-based natural search results or via a competing comparison shopping service—neither of which generates revenue for Google.

It is perhaps not surprising that Google has tended to gloss over this important point.  Convincing users that it is in their best interests to forego relevance-based natural search results in favour of pay-for-placement advertisements and artificially promoted links to Google’s own services is a tough sell.

Google introduced its search manipulation practices gradually over time, in a series of virtually imperceptible individual steps (see section 2 of our Response to Google’s November 2016 Statement). As a result, there is now a growing chasm between the enduring public perception of Google’s search engine as comprehensive and unbiased and the reality that, for commercial search terms at least, it is increasingly neither.  As Google co-founders Larry Page and Sergey Brin pointed out in 1998, “since it is very difficult even for experts to evaluate search engines, search engine bias is particularly insidious.”

It is also worth noting that, in the two-sided market in which Google operates, Google’s well-worn line about competition being “only a click away” does nothing to mitigate its special responsibilities as an overwhelmingly dominant search engine, but it does underline the unusual extent to which Google’s dominant market position depends on maintaining a trustworthy, even benevolent, public image (see section 7 of our Response to Google’s November 2016 Statement).

Many of Google’s recent public statements have been based on the false premise that the Commission’s antitrust charges are about ads rather than search results and on the false notion that these two things are interchangeable.  While ads and search results might look similar, the underlying financial implications for Google, consumers, and businesses are very different.

Given how much of Google’s recent public pushback has hinged on the pay-for-placement model Google now employs within its Universal Search inserts, it is noteworthy that Google only introduced this fundamental change more than two years into the Commission’s formal investigation.[3]  And, prior to introducing pay-for-placement, Google had spent more than a decade railing against the many obvious shortcomings of this model for users (see section 5 of our Response to Google’s November 2016 Statement).

Before Google began anti-competitively demoting rival comparison shopping services, these services were an increasingly popular way of shopping online (see sections 4.8 to 4.13 of our Response to Google’s November 2016 Statement).  And it’s easy to see why: with just one click on a Google natural search result, users would be taken to their selected comparison shopping service and presented with a comprehensive survey of prices and availability for their chosen product from all or most of the leading online retailers (usually including Amazon and its various Marketplace Merchants).  And, with just one more click, users would be delivered directly to the appropriate page on the website of their chosen merchant, from where they could then complete a purchase.  In other words, prior to the introduction of Google’s anti-competitive search manipulation practices, consumers were rarely more than two clicks away from buying their chosen product based on a comprehensive survey of the market. By contrast, following the introduction of Google’s anti-competitive practices, consumers are now either several clicks away from a cursory survey of the market (which they must conduct manually themselves) or just one click away from probably paying more than they need to via one of Google’s prominently positioned, pay-for-placement, Google-Shopping-derived advertisements (see section 3 of our Response to Google’s November 2016 Statement).

The crucial role search engines play in directing users to websites means that most Internet-based businesses rely on search engines for a substantial proportion of their traffic and revenues. Google’s overwhelming dominance of horizontal search means that, for most websites, this amounts to an uncomfortable but unavoidable reliance on Google. And, of course, Google’s own specialised services are no less dependent on this Google search traffic than anyone else’s.  Moreover, given that Google’s users visit Google for its natural search results and not for its paid advertisements, there is and always has been a symbiotic relationship between the websites that depend on Google for free natural search traffic and the tens of billions of dollars of Google’s annual advertising revenues that depend on these websites—because, without them, Google would have no natural search results to hang its ads on.

Google’s repeated protestations about the flourishing fortunes of Amazon and eBay remain the red herrings they have always been. Put simply, Google does not (yet) have an online retail, auction, or merchant-platform service that competes with Amazon or eBay. Therefore, Google does not (yet) have any incentive to anti-competitively penalise Amazon or eBay in its natural search results, and it does not (yet) have any directly competing service of its own to anti-competitively insert at the top of all potentially relevant search results.  For an analysis and rebuttal of Google’s “Search for Harm” and Amazon-based “shopping” arguments, see our interactive reply to Google’s public response to the SO and section 4 of our reply to Google’s public response to the SSO.

The Length of the Investigation

We are often asked whether we would have submitted our European Competition Complaint if we had known how long the process would take or the herculean effort that would be needed to rebut Google’s seemingly endless obfuscatory arguments. In the end, getting to this point required numerous formal submissions, White Papers, panel discussions, Op-Eds, and open letters, as well as countless meetings with regulators, politicians, and journalists across four continents.

The definitive answer to this question might have to wait until the conclusion of our related civil claim in the UK High Court, but we have always known that the process we began and have devoted so much of the last several years to is immensely important.  If effective remedies can be devised and enforced, which we believe they can, then it is no stretch to say that the outcome of this case could safeguard the future of competition, innovation, and consumer choice on the Internet.

About Foundem

Foundem is a UK-based vertical search company and the lead Complainant in the European Commission’s Google Search case.

It was Foundem’s November 2009 Competition Complaint[4] that triggered the Commission’s Google Search investigation, and, since then, we have continued to spearhead the global effort to shed light on Google’s anti-competitive search practices and reveal the truth behind the misleading arguments Google has used to defend them.[5]

Although Foundem was the first to raise these issues with the European Commission (and with the U.S. FTC), we have always known that our case was just the tip of a global iceberg. Indeed, over time, more and more companies have come forward, from Europe, the U.S., and elsewhere.  Moreover, while there are now an unprecedented number of formal Complainants, there are many more companies that, through fear of retaliation, have only engaged with the Commission informally and/or in confidence.

Foundem provides a compelling example of the innovation-suppressing cost of Google’s anti-competitive search manipulation practices.  Our case is not only about a legitimate business being anti-competitively denied access to a level playing field; it is also about an innovative, and potentially revolutionary, technology being denied the opportunity to fulfil its potential.

Our patented, programmable, vertical search technology allowed us to provide best-of-breed vertical search services to virtually any vertical with a fraction of the costs and resources of our competitors. By seamlessly ingesting feeds, crawling websites, and querying APIs and databases, Foundem could deliver unique results that were often more comprehensive and accurate than those of its competitors.  Coupled with our innovative product-classification technology, this also allowed Foundem to deliver comparison shopping functionality to niche domains that lay beyond the reach of conventional services.

Google’s illegal search manipulation practices have caused substantial harm to Foundem’s business. And, in June 2012, we launched a civil claim for damages in the UK High Court.  Under European Law, the conclusions of Prohibition Decisions are binding on national courts.  Due to the substantial overlap between the Commission’s (then) anticipated Prohibition Decision and the Foundem Complaint, evidence, and arguments on which so much of it is based, our civil claim was stayed by mutual consent in December 2015.  This stay will be lifted now that the Commission has adopted a Decision.

A Timeline of the Google Search Case

For further information about the background, context, and key turning points of the Google Search investigation, please see our Timeline of Significant Events.

 


[1] For example, see the “Defined Terms” section of Google’s January 2014 Commitment Proposals.

[2] For example, see Commissioner Vestager’s 15 April 2015 Statement.

[3] Google introduced a pay-for-placement model within its comparison shopping service and associated Universal Search inserts in the U.S. and Europe in October 2012 and February 2013, respectively.  In a pay-for-placement model, the amount a merchant is willing to pay is a determining factor in where its offers are placed. This contrasts with the industry-standard pay-for-inclusion model, where merchants typically pay only to have their offers included in the service’s listings—their placement being determined solely by the user’s search and sort criteria (typically defaulting to cheapest offer first).

[4] Foundem updated and augmented this Complaint in February 2010

[5] For some examples, see our deconstructions of Google’s first, second, and third commitment proposals, our rebuttals of Google’s public responses to the Commission’s SO and SSO, and our proposal and advocacy of the non-discrimination remedy now being sought by the Commission.

Categories: Google Tags:

Implementing and Monitoring a Non-Discrimination Remedy

March 31st, 2017 No comments

As thoughts turn to remedies in the European Commission’s Google Search Case, today we are publishing our latest thoughts on the topic.

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Lifting the Veil on Google’s 3 November Blog Post

December 12th, 2016 No comments

Today we are publishing our Response to Google’s 3 November 2016 Blog Post. In it, we describe the unusual and often counterintuitive business model underpinning Google’s anti-competitive search manipulation practices, and we provide a point by point deconstruction of Google’s misleading arguments.

At first glance, Google’s latest blog post appears to be a straightforward rehash of Google’s previous public arguments in the European Commission’s Google Search case.  But this appearance is deceptive. The reality is that Google knows it has already lost the battle over those arguments. Google’s blog post is actually a tentative segue into a new line of argument—based on the pretence that the Commission’s formal anti-trust charges are about advertisements rather than search results and on the false notion that these two things are interchangeable.

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Foundem’s Statement on Today’s SSO to Google

July 14th, 2016 No comments

Today’s Supplementary Statement of Objections to Google, reinforcing the Commission’s preliminary conclusion that Google has abused its dominant position by systematically favouring its comparison shopping service in its search result pages, is another decisive step towards restoring the level playing field required for competition and innovation to thrive.

While we understand and respect the Commission’s thorough, step-by-step approach, Google’s unprecedented power and proven track record of exploiting every delay to further extend and entrench its immensely harmful anti-competitive practices creates a particularly strong imperative to act swiftly in this case.

While the Commission is clearly heading towards a robust Prohibition Decision, we are concerned that if it does not act conclusively in the near future there may be little competition left to protect.

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The Microsoft-Google Truce

May 9th, 2016 No comments

Many have been puzzled by Microsoft’s recent agreement with Google to cease all legal and regulatory hostilities at a time when it seems that Google has more to gain from this unlikely entente than Microsoft. While details of the agreement have not been disclosed, it appears to prohibit either company from instigating, participating in, or even commenting on the legal or regulatory disputes of the other.

Microsoft’s 28 April Blog post[1] might provide a clue to Microsoft’s motivation. It reveals that a recent Windows 10 update closed the loopholes that had allowed its Cortana digital assistant to use non-Microsoft browsers and search engines. But doesn’t this bear an eerie resemblance to the anti-competitive practices at the core of both Microsoft’s and Google’s antitrust woes with European and US regulators?

Windows 10 represents a dramatic shift in Microsoft’s business model. It is Microsoft’s first multi-platform operating system, its first to be given away as a free upgrade, and its first to require users to allow Microsoft to push updates without further consent. Given that Microsoft expects Windows 10 to be installed on more than a billion active devices within the next two years[2], surely any move that ties its integrated Cortana assistant to its own search engine and browser risks inviting accusations of anti-competitive leveraging from Bing and Edge’s rivals? You know, rivals such as Google, and…well…Google.

So what has Google had to say about the recent Windows 10 update? When asked by the Wall Street Journal, “Google declined to comment”[3]. The penny drops?

Given that Microsoft’s withdrawal from the various investigations into Google’s anti-competitive conduct is unlikely to have any material impact on their outcome, particularly at this late stage, is it possible that Microsoft has more to gain from this pact than we, or even Google, first realised?


[1] https://blogs.windows.com/windowsexperience/2016/04/28/delivering-personalized-search-experiences-in-windows-10-through-cortana/

[2] http://www.zdnet.com/article/microsoft-windows-10-will-be-on-1-billion-devices-in-two-to-three-years/

[3] http://www.wsj.com/articles/the-digital-assistant-cortana-has-a-one-track-mind-microsoft-1461968974

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An Analysis of Google’s Public Response to the EC’s Formal Charges

June 10th, 2015 No comments

It’s taken us a while to get around to it, but here is our analysis and rebuttal of Google’s public response to the European Commission’s Statement of Objections.

Click on the Screenshot below to open the interactive presentation.

View Slideshow

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The European Commission Issues a Statement of Objections to Google

April 15th, 2015 No comments

Foundem Statement:

We welcome today’s announcement by Commissioner Vestager that she has issued a statement of objections to Google, which is a decisive step towards restoring the level playing field required for competition and innovation to thrive.

Foundem’s November 2009 Competition Complaint to the European Commission was the first to document Google’s insidious search manipulation practices and to highlight their devastating impact on competition, innovation, and consumer choice.

Google is not just a monopoly; it is probably the most powerful monopoly in history. As the gatekeeper to the Internet, Google plays a decisive role in determining what the vast majority of us read, use, and purchase online. Today’s announcement isn’t about the potential size of any eventual fine; it is about ending Google’s ability to manipulate its unprecedented power to its own financial ends and to the detriment of consumers and innovation.

As the company that first brought Google’s anti-competitive search manipulation practices to the attention of regulators on both sides of the Atlantic, Foundem is uniquely placed to shed light on the vital background and context of the ensuing Google investigations. To this end, we are today publishing a Timeline of some of the significant events that brought Google to this point.

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Open Letter to Commissioner Almunia and College of Commissioners

July 23rd, 2014 No comments

 

Dear Commissioner Almunia,

CC: Commissioners of the College and the President of the Commission

In a recent interview with the Global Competition Review, you mentioned that you were “very interested in reading” Complainants’ responses to the Commission’s recent Letters in the Google case. Please find a copy of our 11 July Response attached.

We very much hope that you will find the time to read it, because it unambiguously demonstrates that all of the Commission’s key arguments for adopting Google’s proposals are erroneous. More importantly, it shows that these arguments directly contradict the fundamental conclusions of the Commission’s own Preliminary Assessment: having correctly concluded in March 2013 that Paid Search traffic “cannot be a substitute” for the free, natural search traffic Google is illegally diverting, the Commission is now proposing to do precisely that.

Our Response also reveals that many of the spurious arguments the Commission has been making in defence of Google’s proposals (including many of those in your 11 June 2014 letter to your fellow Commissioners) have been adopted from Google arguments and submissions that the Commission seems to have made no attempt to validate. As we demonstrate, had the Commission sought such validation, the fatal flaws in these arguments would have been revealed some time ago. For example, contrary to the Commission’s claims, the proposed Paid Rival Links will consume the majority of rivals’ profits; will not be selected according to "relevance", "merit", or "quality"; will not be less expensive than existing advertisements; will not ensure that innovative new entrants can participate on non-disadvantageous terms; and most certainly will generate billions of dollars of additional revenue for Google that will come at the direct expense of the European businesses and consumers the Commission is duty bound to protect.

For you to continue to claim that auction-based Paid Rival Links are a substitute for the free, natural search traffic Google is anti-competitively diverting, you would now need not only to argue against the overwhelming evidence and analyses from Complainants, market participants, and consumer groups, you would also need to argue against your own DG—directly contradicting the fundamental conclusions of its Preliminary Assessment. Clearly, this is not a sustainable position—particularly in a case with such far-reaching and potentially catastrophic consequences.

In February, you announced your determination to accept Google’s proposals, despite overwhelming and unprecedented opposition to them from all of the parties they are ostensibly intended to help. Whatever sequence of events led you to accept Google’s misleading arguments without displaying any of the healthy scepticism that would normally be applied to “evidence” from a defendant in a competition case, we trust that the attached comprehensive rebuttal of these arguments will persuade you to think again and change course. If not, the future of the European digital economy may well depend on the acumen and resolve of your fellow Commissioners.

Yours sincerely,

Adam and Shivaun Raff

Co-Founders, www.foundem.co.uk and www.SearchNeutrality.org

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Letter to Commissioner Almunia and the College of Commissioners

March 12th, 2014 No comments

The following letter was sent to Commissioner Almunia, President Barroso, and the College of Commissioners on 11 March 2014:

 

Dear Commissioner Almunia,

CC: Commissioners of the College and the President of the Commission

As the company whose November 2009 Competition Complaint first brought Google’s search manipulation practices to the Commission’s attention, we were troubled by some of your statements recorded in the minutes of the 2075th meeting of the Commission (held on 12 February 2014 and published on the 25 February)[1].

In response to questions about how Google’s proposed transition from natural, relevance-based search results to a pay-for-placement, auction-based system could hope to restore a level playing field or ensure access to innovative new entrants, the minutes record the following:

"As regards the importance of ensuring that SMEs could enter specialised online search markets, Mr ALMUNIA cited a number of technical parameters of the auction system which would ensure that this type of company would have access on non-disadvantageous terms and that the same arrangements, with or without fees, would be applied to both Google’s services and those of its competitors.” (Emphasis added)

If these official minutes provide an accurate account of the exchange, then we must respectfully point out that your answer to this crucial question was misleading on both counts.

First, as anyone who has studied Google’s proposals could readily confirm, Google’s services are not subject to “the same arrangements” as those of its competitors. As you must be aware, under Google’s proposals, only Google’s rivals would pay for placement in Google’s Universal Search box. Google would pay nothing; it would continue to insert links to its own services (together with monetised links derived from those services) in prime positions and entirely free of charge in all cases. In other words, Google would remain the sole beneficiary of the traffic it anti-competitively hijacks (diverts) from rivals, and would now also become the main beneficiary of any traffic it sends to them. If the Commission were to adopt these proposals, Google would gain sole possession of the free, natural search traffic that has hitherto fuelled the Internet revolution, and the Commission will have unwittingly granted Google a five year mandate to increase substantially the anti-competitive advantage Google already affords its own, often inferior, vertical search services.

Second, the proposed auction system does not contain any technical parameters that ensure “non-disadvantageous terms” for innovative SMEs[2]; in fact, the minimum traffic threshold alone would almost entirely exclude new entrants.

As the overwhelming consensus from the two previous market tests made clear, the adoption of Google’s proposals would cause additional grave and irreparable harm to hundreds of European businesses and millions of European consumers.

Google’s proposals offer nothing to end the search manipulation practices it was tasked with remedying, and nothing to restore competition to the vertical search domains that these anti-competitive practices have already devastated, such as product price comparison. But, remarkably, Google’s proposed transition from free, relevance-based listings to pay-for-placement listings for all services except Google’s own introduces an entirely new form of abuse that will, if adopted, directly destroy competition in many verticals that have not yet been devastated, such as travel search, financial search, property search, and job search. As used to be the case with product price comparison, these are currently innovative and highly profitable industries, employing many thousands of people and contributing many millions in tax revenues across Europe. That most of these businesses are currently unaware of the damage that is about to be inflicted on them is not surprising; who could have anticipated that the Commission might allow a dominant company to settle a competition case by substantially increasing the anti-competitive abuse it had been instructed to remedy?

If Google’s proposals were adopted, consumers would not only be harmed by the ensuing lack of competition and consumer choice, they would also be directly and immediately harmed by the transition from relevance-based ranking to auction-based pay-for-placement. In what might be the mother of all unintended consequences, this transition would all but eradicate the considerable value that vertical search services provide to consumers; services that direct users to merchants with the best prices or products cannot compete in an auction against rivals that direct users to merchants that pay them the most. Not surprisingly, studies have already shown that the recent transition of Google’s own product price comparison service from relevance-based-placement to pay-for-placement has led directly to European consumers paying significantly higher prices for products purchased through this service[3].

It is difficult to imagine a Competition case where the stakes for consumers, businesses, and innovation could be any higher. As the gateway to the Internet, Google plays a decisive role in determining what the vast majority of us read, use, and purchase online. The importance of ending Google’s ability to manipulate this unprecedented power to its own anti-competitive ends cannot be overstated. It is no exaggeration to say that the hopes of a digital-led economic recovery may depend on the outcome of this case.

We are struggling to understand why you seem so determined to ignore the overwhelming empirical evidence and consensus of opinion from complainants, market participants, and consumer organisations. We urge you to reject Google’s proposals and pursue a Prohibition Decision that will end, rather than escalate, the abusive practices the Commission has identified.

Yours sincerely,

Shivaun Raff

CEO and Co-Founder, www.foundem.co.uk and www.SearchNeutrality.org (a Foundem initiative)


[1] http://ec.europa.eu/transparency/regdoc/rep/10061/2014/EN/10061-2014-2075-EN-F1-1.Pdf

[2] For details, see our Response to the Commission’s RFI regarding Google’s second set of proposals: http://www.foundem.co.uk/Foundem_Comments_Google_Revised_Proposals.pdf.

[3] http://www.ft.com/cms/s/2/a004c830-552d-11e3-a321-00144feabdc0.html#axzz2vP0HIhfG

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Foundem’s Comments on Google’s Revised Proposals

November 22nd, 2013 No comments

Today, we are publishing Foundem’s Comments on Google’s Revised Proposals (PDF).

 

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