Archive for September, 2012

For Google, All Roads Lead to Remedies

September 4th, 2012 No comments

In May this year, the European Commission issued Google with a public ultimatum. Keen for a "quick resolution" to the concerns it had identified during its eighteen-month antitrust investigation into Google’s business practices, Commissioner Almunia gave Google six weeks to propose "an outline of remedies", with a view to a negotiated settlement, or else face a formal “statement of objections and [the adoption of] a decision imposing fines and remedies.”

The main concern listed by the Commission was that of search manipulation: Google manipulating its search results to promote its own secondary services while demoting or excluding those of its competitors—a practice first described in Foundem’s Complaint to the Commission in November 2009.

By the end of July, Google had conceded enough ground to convince Commissioner Almunia to “proceed with technical meetings to explore the possibility of a settlement”. Note that the settlement procedure being offered to Google (under Article 9 of the EU Antitrust Regulations) can only be used in cases where the Commission’s investigation has already concluded (albeit provisionally) that an infringement has taken place.

We have now passed a crucial tipping point. From here, there are only two possible outcomes, and both involve binding remedies—either committed to voluntarily by Google through a settlement agreement or imposed on Google by an infringement decision. While the process can switch between these two paths at any time, both lead inexorably toward binding commitments designed to end Google’s anti-competitive practices. But, there is an important difference between the two paths: an infringement decision would offer greater assistance to those seeking compensation for past damage.

Google has been remarkably successful over the last several years. Its revenues have soared from $6 billion in 2005 to $37 billion in 2011. But, unbeknownst to its shareholders, Google’s increasingly anti-competitive practices have been quietly accruing billions of dollars of antitrust liabilities. It is impossible to know how many companies have been harmed or destroyed by these practices—it could be hundreds or even thousands—but whatever the number, the consequence of abuse on a grand scale is liabilities on a grand scale.

European businesses that have been harmed by Google’s anti-competitive practices would be able to rely on a formal infringement decision by the Commission when seeking compensation through their own courts. Without an infringement decision, many of these companies (lacking the substantial body of evidence that Foundem’s case brought to regulators) might hesitate or struggle to bring civil actions.

Google needs to reach a settlement with the Commission in order to avoid the tsunami of follow-on litigation that would surely follow an infringement decision. This unspoken need to avoid a guilty verdict at virtually any cost, together with the overwhelming evidence of Google’s anti-competitive practices currently locked behind closed doors, puts the Commission in a far stronger bargaining position than many commentators realise. Anyone suggesting that Google will get away with superficial remedies (a clear and conspicuous label here, a more transparent FAQ there) is almost certainly mistaken.

Today we are publishing a proposed framework of remedies. We suggest that these remedies are reasonable, practical to implement and enforce, and go a long way toward ending many of the abusive practices identified by the Commission’s investigation.

Whatever the final form of the remedies adopted by the Commission, they are likely to have a dramatic impact on Google’s power to stack the deck in its own favour. The success or failure of Google’s secondary services, in travel search, price comparison, social networking, and so on, will once more depend on its ability to innovate, rather than on its ability to hijack the traffic of its competitors.

With the right remedies, users themselves should not see much immediate difference—just a quiet return to the Google search results of old. The richness, variety, and relevance of users’ search results will improve, and the rate of innovation in areas long suppressed by Google’s anti-competitive practices will increase. The potential for appropriate remedies to restore competition and rekindle the growth of the digital economy cannot be overestimated.

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