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Google’s Call for Enforcement Action?

September 18th, 2020 No comments

We were surprised by Director General Guersent’s recent comments on the Google Search (Comparison Shopping) case, claiming to have seen “positive developments” in Google’s CSS Auction “remedy”.[1]

As we, and others, have demonstrated (for example, here, here, and here), Google’s CSS Auction is the polar opposite of the equal treatment remedy mandated by the EC’s June 2017 Prohibition Decision.  In fact, as we have also demonstrated (for example, here), Google’s CSS Auction is just a thinly-veiled continuation of the same abuse already identified by the Decision. Google’s CSS Auction recreates Google’s anti-competitive Shopping Units under another name and leaves Google’s anticompetitively-applied penalty algorithms in place and unaltered.

Crucially, since the February Appeal Hearing in Luxembourg, we can now add Google itself to the long list of parties that wholeheartedly agree with this damning assessment. At the Hearing, Google confirmed from the top-down what our December 2018 presentation had demonstrated from the bottom-up.

For a variety of reasons (which we will explain at a later date), it suited Google to point out that the options available to rival CSSs during the abuse were “identical to those currently available to rival comparison shopping services[2] today, through Google’s CSS Auction. For example, on Day 1 of the Hearing, Google claimed that since 2013 “[rival CSSs] in fact could place product ads in Shopping Units based on the same conditions that apply to product ads from Google’s CSS”.  But, as Google went on to explain, this ability for rival CSSs to place ads in Shopping Units came at an existential price. As Google put it: “[rival CSSs] had two options to place product ads in Shopping Units…The first option was for [rival CSSs] to place product ads that linked to pages on their own site that had buy functionality…The second option was for the [rival CSSs] to place product ads that link to the pages of their advertising partners.”  That is, to participate in Shopping Units, rival CSSs would have had to abandon their CSS functionality to become either a merchant (with “buy functionality”) or an advertising agency (placing “ads that link to the pages of their advertising partners”).

Crucially, by Google’s own admission, these two untenable options are exactly the same untenable options that Google’s CSS Auction now provides under the guise of a “remedy”.  Indeed, this explains the recent proliferation of so-called “fake CSSs”—advertising agencies that Google has approached and financially incentivised to pose as CSSs and thereby create the illusion of a functioning remedy.[3]

This belated confession by Google should put an end to the EC’s procrastination. It is well past time for the EC to enforce its Decision and issue non-compliance proceedings against Google’s anti-competitive and brazenly non-compliant CSS Auction. This enforcement action would now be supported by (a) the overwhelming evidence from complainants and market-participants, (b) the fundamental findings of the EC’s Prohibition Decision, and (c) Google’s own explicit admissions during the Appeal Hearing that its purported “remedy” offers rival CSSs nothing that wasn’t already available under Google’s previous abusive conduct. As Google put it: “this is what Google already allowed [rival CSSs] to do before the Decision.”[4]

Categories: Google Tags:

Google’s CSS Auction: Different Name, Same Illegal Conduct

November 1st, 2019 No comments

Our November 3rd 2009 Competition Complaint triggered the EC’s and US FTC’s antitrust investigations into Google’s search manipulation practices.  As we approach the 10-year anniversary of our Complaint, and with Commissioner Vestager set to embark on a welcome second consecutive term as Competition Commissioner, it seems like a good time to reflect on what has been achieved, and, more importantly, what remains to be achieved.

Having issued three landmark Prohibition Decisions against Google during her first term (totalling nearly $10 billion in fines), it is now critical that Commissioner Vestager uses her second term to enforce those Decisions—holding Google to effective and compliant remedies that restore the level playing field Google has spent the last decade quietly tilting in its favour.

Our November 2017 and April 2018 online presentations demonstrated that Google’s CSS Auction, which Google introduced as a “Compliance Mechanism”, falls far short of the equal treatment standard mandated by the EC’s June 2017 Prohibition Decision.  Today, we are publishing a presentation that demonstrates that this auction is, in fact, a thinly-veiled continuation of exactly the same anti-competitive conduct already defined and prohibited by the Decision:

View Slideshow

Google could have interpreted the Commission’s June 2017 demand for equal treatment within its search result pages as a call for a return to the relevance-based search results Google built its reputation and monopoly on.  After all, that is what most of Google’s users wrongly assume they are still getting when they use Google.  But, instead, Google has thumbed its nose at both the Commission and its own users by misinterpreting the Commission’s call for equal access to relevance-based search results as a demand for unequal, and positively harmful, access to pay-for-placement advertisements.

And, this isn’t the first time Google has tried this ruse.  Google’s three previous auction-based “remedy” proposals were all resoundingly rejected under Commissioner Almunia, precisely because they were auction-based.[1]  As we explained in our earlier presentations, the primary difference between Google’s current auction-based offering and its three previous versions is that, in the current version, Google’s own service also “participates” in the auction.  But this participation is a facade: in stark contrast to rivals’ bids, which deprive rivals of nearly all of their profits (and, with it, their ability and incentive to innovate and grow), Google’s own “bids” cost Google nothing.  As we explained, that’s because Google’s bids aren’t real. They are, literally and figuratively, monopoly money—meaningless internal accounting, where every transaction recorded as a “cost” has an equal and corresponding “credit”.

Google’s CSS Auction presents users with pay-for-placement advertisements from the highest bidders, instead of the relevance-based search results they almost certainly came to Google for. Unsurprisingly, whenever relevance-based search results are replaced with ads—where the amount advertisers are willing to pay is often a decisive factor in determining which ads are shown—this inevitably leads to users paying higher prices for products and services than they would otherwise.[2]

As mentioned above, the presentation we are publishing today demonstrates that Google’s CSS Auction is not only the polar opposite of equal treatment, it is, in fact, a direct continuation of the same anti-competitive conduct already identified and prohibited by the EC’s June 2017 Decision.

As our presentation explains, in February 2013, Google introduced a fundamental change to the self-preferencing half of the anti-competitive search manipulation practices the EC and FTC were actively investigating.  This change (from prominently positioned links to Google’s CSS to prominently positioned pay-for-placement ads lifted directly from Google’s CSS) made no difference to the traffic Google was anti-competitively diverting away from competing services, but it did make a difference to how and where that traffic was diverted.

Google’s adoption of a pay-for-placement model represented a substantial departure from several of Google’s founding principles, including the “clear, large wall between the objective search results and the ads”,[3] and the promise that, “at Google, search results cannot be bought or paid for”.[4]  Indeed, this change prompted headlines such as “How Evil Are Google’s New Paid Shopping Search Results?”[5] and “Google product search results get a commercial bias”.[6]

Google didn’t just make this change during the EC’s investigation; it did so in the midst of what were supposed to be good faith settlement negotiations.  This is particularly troubling, because we now know that one of the ways Google persuaded the EC to explore the possibility of a settlement in the first place was by dangling a remedy proposal that guaranteed deep-links to rival services alongside Google’s own, with no mention or hint of any payment or auction. On the contrary, Google’s June 2012 written outline of this proposal made clear that it would select and place three rival services based solely on their algorithmically determined relevance to the user’s search query. For example, the following is an extract from Google’s June 2012 proposal[7] (which, to the best of our knowledge, has not previously been publicly discussed):

“Google proposes to display up to three, algorithmically selected links to rival “vertical” search sites within Google’s Product and Local Universal Results…These links will lead, to the extent possible, directly to result pages of the alternative vertical search site for the query that the user entered on Google…for each relevant query, Google will algorithmically select for display three qualifying sites based on their Web Search rank for that query…

Because rival sites will be selected algorithmically different sites can appear for different types of queries…and new sites may surface as they gain in relevance.”

It seems that Google’s February 2013 transition to a pay-for-placement model might have been the sole basis for the bait-and-switch Google then pulled; by the time Google’s official proposals were submitted in May 2013, the promised links to rival services had morphed from helpful, relevance-based search results, into positively harmful, pay-for-placement ads via an auction.

Not only did this transition pave the way for several years of futile negotiations around variations on an auction-based mechanism that never had any prospect of delivering a viable remedy, it also presented the Commission with a challenge:  How to deal with this change in Google’s anti-competitive conduct—from the straightforward traffic-diversion of Product Universals and penalties, to the less straightforward, but even more harmful, traffic-and-revenue-diversion of Shopping Units and penalties?

As we explain in our presentation, the solution was to follow the money.  The finding at paragraph 630 of the Prohibition Decision allows Google’s transition from link-based traffic-diversion to ad-based revenue-and-traffic-diversion to be both identified and empirically quantified.  And, it is this same pivotal finding that allows us to demonstrate that Google’s so-called “Compliance Mechanism” is an empirically quantifiable continuation of exactly the same illegal conduct already identified by the Decision.

Finally, with U.S. regulators now launching fresh probes into Google’s anti-competitive practices, it is worth noting that Google made exactly the same transition from traffic-diverting Product Universals to traffic-and-revenue-diverting Shopping Units in the U.S. in October 2012.  As U.S. regulators look to address the immense escalation in consumer and competitive harm caused by this transition, they will need to follow the EC’s lead.  We hope that our presentation, which explains the crucial empirical relationship between the traffic diverted by Product Universals and the traffic/revenue diverted by Shopping Units, might be of some assistance in this regard.

 


[1] For example, see here, here, and here.       `

[3] Sergey Brin, April 2004 Interview with Playboy Magazine

[4] Ibid.

[5] Forbes, May 31 2012

[6] Venture Beat, May 31 2012

[7] Extracts from Google’s June 30 2012, Annex 1 – Discussion Paper Submitted by Google on The Preliminary Concerns Identified by the EC and Google’s Proposed Solution

Categories: Google Tags:

Open Letter to Commissioner Vestager from 14 European CSSs

November 22nd, 2018 No comments

The following open letter was sent to Commissioner Vestager today, signed by 14 European comparison shopping services (PDF):

 

Ms Margrethe Vestager
Commissioner for Competition
European Commission
Rue de la Loi
B – 1049 Brussels

22 November 2018

Dear Commissioner Vestager,

RE: AT.39740 – Google Search (Comparison Shopping)

We are writing to you as leading European comparison shopping services (CSSs) to express our collective view that Google’s “compliance mechanism” in the Google Search (Comparison Shopping) case does not comply with the European Commission’s June 2017 Prohibition Decision. It has now been more than a year since Google introduced its auction-based “remedy”, and the harm to competition, consumers and innovation caused by Google’s illegal conduct has continued unabated. We therefore respectfully urge you to commence non-compliance proceedings against Google.

As explained in this April 2018 presentation[1], an auction-based mechanism cannot comply with the equal treatment standard set out in the Prohibition Decision:

- While rivals are compelled to bid away the vast majority of their profits, Google Shopping’s bids cost it nothing—its bids are just meaningless internal accounting, paid from one Google pocket into another.

- Google’s commitment to a notional 20% “profit” margin imposes an artificial limit on Google Shopping’s otherwise unlimited ability to outbid its rivals—but this is equally meaningless. While this promise can create a narrow opening for competing CSSs to sometimes bid their way onto the page, it does nothing to address the inescapable and transformative inequality between bids that cost Google nothing and bids that cost competitors their incentive and ability to innovate and grow.

- In common with Google’s three previous auction-based proposals (which were all resoundingly rejected under Commissioner Almunia), the visibility of rivals’ links is also meaningless. As long as placement is determined by auction rather than relevance, it makes little material difference whether competitors occupy none, some, or even all of the available slots. In all cases, Google is the main beneficiary of any profits derived from these entries, and consumers are the main losers (see below).

If there has ever been any doubt that Google’s auction-based “remedy” is neither compliant nor effective, recent developments should have finally put this to rest.

The harsh reality is that a pay-for-placement auction is fundamentally incompatible with the concept of comparison shopping (or, indeed, any other form of vertical search).   As a result, few rivals have chosen to participate in Google’s CSS auction and, when they have, genuine CSSs that employ a consumer-friendly paid-inclusion model have struggled to outbid services like Google Shopping that, since 2013, employ a consumer-unfriendly pay-for-placement model.

Presumably, realising that it will never be possible to populate its new auction with enough genuine comparison shopping services to create even the veneer of a functioning remedy, Google has now set about populating it with fake ones instead[2]: Google has recently begun reaching out to Google Shopping Ad Agencies to encourage and incentivise them to pose as CSSs.

In exchange for a hefty rebate and official Google Certified CSS Partner status (a status granted despite offering no comparison shopping functionality of any kind), these Ad Agencies now bypass the Google Shopping auction and bid instead for placement in Google’s new, ostensibly-CSS-only auction.  In other words, where these Ad Agencies used to feed their merchants’ ad inventories into Google Shopping, they now feed these same ad inventories directly into Google’s CSS auction instead.  Crucially, Google is not doing this because it is confused about the many important differences between an Ad Agency and a comparison shopping service; it is doing it to circumvent the Commission’s Prohibition Decision, by simply recreating Google Shopping under a different name and then continuing to illegally favour it in exactly the same way as before.

The points outlined above should be more than sufficient grounds for the Commission to reject Google’s proposed “remedy” and commence non-compliance proceedings. But, the problems with Google’s auction-based mechanism go well beyond non-compliance: far from restoring a thriving comparison shopping market, Google’s CSS auction all but eradicates it.  Pay-for-placement advertisements are the antithesis of relevance-based search results, and, because users who click on them are taken directly to merchants rather than to the CSSs that feature them, there is no opportunity for CSSs or users to add or derive value from the process.

Indeed, Google’s new auction offers nothing of value to consumers.  On the contrary, instead of relevance-based search results, which—absent Google’s illegal conduct—would naturally contain an appropriate blend of merchants, CSSs, manufacturer sites and so on, users are presented with a selection of advertisements for specific products from specific merchants.  These are not the best products, the best merchants, or the best prices; they are whatever specific products and merchants are likely to earn Google the most profit from a click. Not only do Google’s users inevitably end up paying higher prices for products than they need to, they are often left completely unaware that comparison shopping services even exist—a problem exacerbated by Google’s failure to address the anti-competitive demotion/penalty half of its illegal conduct.

We respectfully urge the Commission to enforce its Prohibition Decision by rejecting Google’s non-compliant “compliance mechanism” and demanding an effective remedy that adheres to the principle of equal treatment set out in the Decision.

Yours sincerely,

Frédéric Lambert,
Founder and CEO, Acheter-moins-cher.com

Philipp Schrader,
CEO, Comparado (Preis.de)

Shivaun Raff and Adam Raff,
CEOs and Co-Founders, Foundem

Dr. Albrecht von Sonntag and Dr. Philipp-Christopher Peitsch,
CEOs, Idealo

Paulo Pimenta,
CEO, KuantoKusta

Michael Röcker,
CEO, LionsHome

Nicklas Storåkers,
CEO, PriceRunner

Peter Greberg,
CEO, Prisjakt / PriceSpy

Doug Scott and Alex Major,
Founder and CEO, RedBrain.com

Bernd Vermaaten,
CEO, Solute (Billiger.de)

Nicolas Le Borgne
CEO, StyleLounge

Ben Kerkhof,
CEO, Vergelijk (Compare Group)

Dr. Johannes Kotte and Robert Maier,
CEOs, Visual Meta (Ladenzeile / ShopAlike)

James Cunningham,
CEO and Co-founder, Yroo

 

Categories: Google Tags:

Decoding Google’s Behind-the-Scenes “Remedy” Manoeuvres

July 11th, 2018 No comments

Today, we are publishing our recent submission to the European Commission, which outlines some of Google’s latest behind-the-scenes “remedy” manoeuvres in the Google Search (Comparison Shopping) case and analyses their chilling implications.

Categories: Google Tags:

Debunking Google’s Blatantly Non-Compliant Remedy

April 18th, 2018 No comments

Today, we published our latest (and hopefully final!) interactive take-down of Google’s hopelessly ineffective and blatantly non-compliant “remedy” proposal.

This time around we take a more empirical approach, and directly address what we now believe to be the primary source of confusion: Google’s reassuring-sounding but effectively meaningless commitment to run Google Shopping at a notional “profit”.

Stripping away this confusion reveals that Google’s latest auction-based proposal is essentially the same as its previous, resoundingly rejected, auction-based proposals.

Categories: Google Tags:

An Open Letter to Commissioner Vestager

February 28th, 2018 No comments

The following open letter was sent to Commissioner Vestager today, signed by 19 companies and associations from across the comparison shopping, travel search, local search, digital mapping, and publishing sectors (PDF):

 

Ms Margrethe Vestager
Commissioner for Competition
European Commission
Rue de la Loi
B – 1049 Brussels
 
28 February 2018
 

Dear Commissioner Vestager,

RE: AT.39740 – Google Search (Comparison Shopping)

We are writing to express our common views on the European Commission’s ongoing monitoring of Google’s compliance with the Google Search Prohibition Decision.  Google’s current remedy proposal has been in operation for more than four months, and the harm to competition, consumers and innovation caused by the infringement established by the Decision has continued unabated.

In our view, Google’s current remedy proposal is no better than Google’s Commitment proposals under Commissioner Almunia, and in some ways may be worse.

Google’s remedy proposal is, on its face, non-compliant with the Prohibition Decision for at least three reasons:

- first, without full ownership unbundling (structural separation), Google Shopping’s participation in the auction is essentially meaningless;

- second, without explicit measures to prevent it, any fully- or over-subscribed auction inevitably leads to competing services being charged a fee that has the equivalent object or effect as the infringement established by the Decision; and

- third, the aggregation of rich product ads (derived from product feeds or their equivalent) in itself constitutes a comparison shopping service which Google is favouring in its general search results. Note that this remains true with or without the participation of Google Shopping.

And of course, the resultant wholesale replacement of relevance-based search results with pay-for-placement ads has terrible consequences for consumers.

Moreover, Google’s current remedy proposal does nothing to address the demotion half of Google’s illegal Conduct—the penalty algorithms, such as Panda, that are prone to demoting competing services.

It would be highly damaging to competition and consumers should the Commission attempt to resolve its ongoing investigations into Google’s similar anti-competitive conduct in other verticals with a Commitments Decision that is based on the same or similar ineffective “remedy”.

We respectfully urge the Commission to reject Google’s current remedy proposal and to hold Google to an effective remedy that complies with the principles of equal treatment set out in the Prohibition Decision.

We continue to be ready to provide the Commission with detailed feedback on any proposed remedy, including on Google’s first post-implementation report. We believe that our respective expertise might be critical to assess whether a remedy effectively puts an end to Google’s abuse of dominance.

Yours sincerely,

Frédéric Lambert,
Founder and General Manager, Acheter-moins-cher.com

Helmut Verdenhalven,
Head of Media Policy, BDZV (Federation of German Newspaper Publishers)

Sylvie Fodor,
Executive Director, CEPIC (Centre of the Picture Industry)

Philipp Schrader,
CEO, Comparado

Christoph Klenner,
Secretary General, ETTSA (European Technology & Travel Services Association)

Dr. h.c. Hans Biermann,
Chief Executive Officer, Euro-Cities

Thomas Vinje,
Legal Counsel and Spokesman, FairSearch

Shivaun Raff,
CEO and Co-founder, Foundem

Michael Weber,
Owner, Hot-Map.com

Tim Cowen,
Legal Counsel, ICOMP (Initiative for a Competitive Online Marketplace)

Dr. Albrecht von Sonntag and Dr. Philipp-Christopher Peitsch,
CEOs, Idealo

Eric Leandri,
President, OIP (Open Internet Project)

Kate Sutton,
Director, Streetmap.eu Ltd

Dr. Wolfgang Sander-Beuermann,
CEO, SUMA-EV

Bastien Duclaux,
CEO and Co-founder, Twenga

Prof. Dr. Christoph Fiedler,
Executive Director for European and Media Policy, VDZ (Association of German Magazine Publishers)

Ben Kerkhof,
CEO, Vergelijk (Compare Group)

Robert Maier,
Founder and CEO, Visual Meta

James Cunningham,
CEO and Co-founder, Yroo
 
 

 

Categories: Google Tags:

Why a Pay-For-Placement Auction Isn’t Equal Treatment – Part 2

November 7th, 2017 No comments

Following on from our September 2017 initial thoughts on Google’s proposed auction-based “remedy”, our latest presentation explains why the proposed functional separation of Google Shopping is essentially meaningless within the context of a pay-for-placement auction.

We also explore the various options that will be open to Google if, or more accurately when, the Commission informs Google that its current “remedy” proposal is not compliant with the required equal-treatment standard.

Click on the screenshot below to open the interactive presentation.

View Slideshow

Categories: Google Tags:

Why Google’s Proposed Auction-Based “Remedy” Isn’t a Remedy

September 28th, 2017 No comments

Our initial thoughts on why Google’s proposed auction-based “remedy” does not comply with the European Commission’s required equal-treatment remedy.

Categories: Google Tags:

Google’s Proposed “Remedy”: The Return of the Undead Auction

September 18th, 2017 No comments

Contrary to some reports, the Commission’s June 2017 Prohibition Decision in the Google Search case did not leave it to Google to propose a remedy.  Instead, the Commission laid out a detailed set of requirements[1] for a remedy based on the principle of non-discriminatory, equal treatment for all services: Google’s own and those of its competitors.  The particular implementation of this principle-based remedy was, however, left up to Google.

Towards the end of last month, Google presented the European Commission with an outline of how it is proposing to comply with the Commission’s stated remedy requirements.  And we understand that, since then, Google has started to meet privately with various comparison shopping services throughout Europe (presumably under NDA) to brief them on its auction-based proposal.

That’s right.  Auction-based.  Like Google’s three previous remedy proposals under Commissioner Almunia—all of which were resoundingly rejected precisely because they were auction-based (see our deconstructions of Google’s first, second, and third commitment proposals to see why).

In our March 2017 Remedy Paper, we set out the various options available to Google for implementing a solution that would be both effective and compliant with the Commission’s stated requirements for an equal-treatment remedy.  It is no coincidence that none of these options involved a paid auction.  We will reserve final judgement until we have seen the details of Google’s proposal, but it is difficult to imagine how Google could devise an auction mechanism that would not inflict significant additional consumer harm, both by further restricting competition and by aiding and abetting Google in its long-term goal to substitute unprofitable, relevance-based natural search results with highly-profitable, pay-for-placement[2] advertisements.  It is also difficult to imagine how Google could devise an auction that Google’s own comparison shopping service could meaningfully participate in (without full-blown structural separation), or that would not result in Google’s competitors being compelled to bid away the majority of their profits to Google.  In other words, it is difficult to imagine how Google could devise an auction-based remedy that does not fall far short of the Commission’s stipulated requirements for an equal treatment remedy.

Unless Google is volunteering to break up its general- and specialised-search businesses, the inclusion of Google’s comparison shopping competitors into a new or existing pay-for-placement auction would simply create an additional anti-competitive barrier—one that would formalise the transformation of free, relevance-based traffic into paid, pay-for-placement traffic for all services but Google’s own.  This would only serve to escalate the inability of these services to compete against Google’s services in the face of Google’s immensely powerful search manipulation practices, particularly as, in an anti-competitive double-whammy, the company these competitors would be forced to hand their profits to would also be Google.

It is also difficult to imagine how Google hopes to persuade its users to accept what would be such a clearly retrograde step in the evolution of Google’s search service.  We suggest that the primary reason that users have so far tolerated Google’s incremental shifts away from relevance-based search results towards pay-for-placement advertisements is not because they like or approve of these changes, but because they have so far been largely unaware of them (see our December 2016 Paper[3] for some of the history, context, and consumer harm resulting from Google’s progressive blurring of the lines between relevance-based search results and pay-for-placement advertisements). Of course, the same is true of Google’s illegal search manipulation practices; in our experience, Google’s users are still largely unaware of these immensely harmful anti-competitive practices.

In the months following the Commission’s April 2015 Statement of Objections, Google began to develop a new line of argument—one based on the pretence that the Commission’s formal anti-trust charges are about ads rather than search results and on the false notion that these two things are interchangeable.  It now appears that Google is doubling down on this strategy.  Indeed, through Google’s own writings and those of its extensive network of influencers[4], Google has tried to create the false impression that an ad-based remedy is the only option—even going so far as to wrongly suggest that the Commission is specifically demanding such an ad-based remedy.  For example, on 4 September 2017, Google’s outside counsel for the EC’s investigation, Maurits Dolmans, presented the Commission’s emphatically non-prescriptive, search-result-based remedy as though it was explicitly and exclusively about ads (emphasis added)[5]:

“[The Commission] say Google should treat its rivals the same way it treats its own ad business.  They want…the rivals’ ads to show up in Google’s own product ads, and then the rival would get paid.  In other words, some kind of non-discrimination rule.”

Below, we have made the adjustments that would be necessary to render Mr Dolmans’ statement an accurate representation of the Commission’s requirements[6] (changes highlighted in bold):

[The Commission] say Google should treat rival comparison shopping services the same way it treats its own comparison shopping service.  They want…the rivals’ comparison shopping services to show up in Google’s search result pages in exactly the same way as Google’s own comparison shopping service, and subject to exactly the same processes and methods determining the positioning and display, including the same relevance standards, ranking algorithms, penalty mechanisms and their respective conditions, parameters and signals.  In other words, some kind of non-discrimination rule.

In addition to the many manifest shortcomings of any ad/auction-based remedy, it is important to bear in mind that Google only introduced the pay-for-placement business model underpinning all of its ad-based assumptions and arguments in February 2013—at least 7 years after the introduction of Google’s anti-competitive practices, 3 years after the start of the EC’s investigation, and 11 months after the commencement of “settlement” negotiations with Commissioner Almunia.

An important part of Google’s remedy strategy seems to be to divert attention away from the obvious, straightforward, and infinitely more effective alternative.  Rather than preserving Google’s illegal anti-competitive practices and devising a way of unnaturally “shoe-horning” competitors’ listings into them, the more obvious solution is to simply end them.  Google could cease and desist its anti-competitive Universal Search and penalty practices[7] and instead entrust the selection and ranking of all appropriate specialised services to Google’s core crawling, indexing, and ranking algorithms (albeit while borrowing some of the visual and other enhancements currently reserved for Google’s own products)[8].  As we have explained previously[9], this option would be relatively straightforward to implement and monitor, and it would immediately act to reinstate the comprehensive, relevance-based search results on which Google forged its formidable reputation and market position (and which many of Google’s users still assume they are getting when they use Google).

The incentives behind Google’s apparent attempts to secure an ineffective and non-compliant auction-based remedy are clear: any remedy that restores Google’s search results to a level-playing field for commercially-oriented search terms would inevitably result in a significant short- to medium-term decline in Google’s revenues and growth.  Comparison shopping is a lucrative business model, and competing on the merits is considerably more difficult than relying on anti-competitive search manipulation practices that quietly commandeer the lion’s share of traffic and revenues.

While we have yet to see details of Google’s proposal, it seems unlikely that Google could have devised an auction-based remedy that does not fall far short of the equal treatment standard stipulated by the Prohibition Decision.  It is therefore unlikely that the Commission would consider any such auction-based remedy to be compliant.

We are concerned, however, that in sectors such as comparison shopping—where Google’s anti-competitive practices are so entrenched and extreme that Google’s competitors have now been running on fumes for several years—there might be an understandable temptation to seize on any proposal that seems to offer a rapid lifeline to survival, rather than holding out for a truly effective remedy.  Presumably, the reason Google is privately briefing various comparison shopping services is because it badly needs a number of them to sign-up to the deal before Google’s end-of-September implementation deadline.  Perhaps Google is hoping that, if enough services can be persuaded to participate, this will help to create the impression of a viable solution.  As an added temptation for participants and a bonus for Google, if the number of initial participants is small enough, participating services might enjoy a brief period of artificially inflated profits, resulting from what would be an abnormally under-subscribed auction.

It is also possible that Google might seek to tempt the Commission into tacitly accepting an auction-based “compromise” of a remedy by volunteering to apply it more broadly—perhaps across all of the other verticals the Commission is still actively investigating, such as travel and local search.  Of course, it would be easy for Google to make such an offer if it was confident that the remedy would be ineffective, or even, as in this case, a substantial source of additional revenue for Google.

From what we know so far about Google’s auction-based proposal, it is hardly surprising that Google has not yet applied for interim measures[10].  It would be difficult for Google to argue that a “remedy” likely to net it substantial additional revenue would cause it grave and irreparable harm.

 


[2] In a pay-for-placement model, merchants bid for placement and the amount a merchant is willing to pay is a determining factor in where its offers are placed.  In such models, product listings are not sorted by price, but instead prioritise offers from merchants willing to pay Google the most money for a click.

[4] See our 14 September 2017 blog post on this topic

[5] See Mr Dolmans’ full remarks here

[6] See pages 3-5 of the Commission’s June 2017 Invitation to Tender

[7] Note: not all penalties are anti-competitive.  All search engines require sophisticated penalty algorithms that seek to demote low-quality spam sites that masquerade as highly relevant to popular keywords.

[8] See section 3 of our March 2017 Remedy Paper.

[9] For example, here, here and most recently here

[10] i.e., an application to suspend enforcement of its “remedy” pending the outcome of Google’s appeal.

Categories: Google Tags:

Google’s Influence Over Its Network of Influencers

September 14th, 2017 No comments

With the looming public debate around Google’s recently filed appeal in the Google Search (Comparison Shoppping) case and, more importantly, around its soon to be disclosed remedy proposals, an understanding of the basic facts of the case may never have been so important.

With this in mind, here are our thoughts on the most recent revelations about Google’s network of academic influencers and surrogates:

We accept that many of the academics and other professionals within Google’s extensive network of influencers sincerely believe that their pro-Google opinions are their own and are not influenced by their (or their institution’s) financial ties to Google.  However, it is noteworthy how often these opinions are underpinned by an eerily consistent misrepresentation of the basic facts of the Google case that belies, at the very least, a failure to treat Google’s representations of the case with the healthy scepticism one would normally reserve for a defendant.

The criticisms of the EC’s Google Search verdict by Google-funded academics and think tanks have tended to rely on and mirror many of the same fundamental misrepresentations and omissions that Google’s own criticisms of the verdict rely on. For example:

- They tend to focus exclusively on Google’s anti-competitive promotion of its own services (through Universal Search), while ignoring Google’s anti-competitive demotions and exclusions of competing services (through anti-competitive penalties). This is an important omission because any defence of one practice inevitably undermines the defence of the other.

- They neglect to point out that pay-for-placement advertisements are not a substitute for the relevance-based search results they are anti-competitively replacing. This is not a minor omission: paid advertisements are not what users visit Google for, and, when they are used to promote the merchants willing to pay Google the most money for a click rather than those offering users the lowest prices, the resultant user harm is obvious.

- They ignore the inconvenient yet immutable fact that Google only introduced these pay-for-placement advertisements (which underpin all of Google’s misleading ad-based arguments) in February 2013—at least 7 years after the introduction of Google’s anti-competitive practices, 3 years after the start of the EC’s investigation, and 11 months after the commencement of “settlement” negotiations with Commissioner Almunia. (See our December 2016 Paper for some of the history, context, and consumer harm resulting from Google’s progressive blurring of the lines between search results and pay-for-placement ads).

The perception-shaping power of Google’s sophisticated and disciplined PR machine is far-reaching. For example, many commentators now routinely refer to the EC’s Google Search case as the “Google Shopping” case. But, as Google well knows, the EC’s case isn’t about “shopping”, or even about “comparison shopping”. It is and always has been about Google’s anti-competitive manipulations of its core search results.  What is true is that, for the time being at least, the Commission has chosen to constrain the scope of its formal charges and verdict to Google’s application of these illegal search-manipulation practices as they affect the comparison shopping market—i.e., where 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.

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