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Google Faces EC Ultimatum

May 21st, 2012

We welcome today’s news that the European Commission has written to Google, outlining its preliminary conclusions that Google may have abused its dominant position and seeking a swift resolution to the issues it has identified. The Commission has effectively delivered an ultimatum to Google, offering the company “a matter of weeks” to propose its own remedies or else face a formal Statement of Objections and the hefty fine and imposed remedies that would almost inevitably follow.

Foundem’s Complaint, filed in November 2009 and updated in February 2010, was the first to document how Google systematically manipulates its ostensibly neutral search results to promote its own services while simultaneously demoting or excluding those of its competitors. We are pleased that the Commission has affirmed Foundem’s Complaint, listing search manipulation as its first concern.

Foundem’s goal has always been to ensure that Google exercises its extraordinary market power responsibly, by reinstating the level playing field that is required for innovation and competition to thrive. We have always emphasised the need for a swift end to Google’s anti-competitive practices, and we are pleased that the Commission is pursuing a path that could result in the particularly rapid deployment of binding remedies.

With the imposition of remedies now all but inevitable, it is crucial to devise pragmatic and robust measures that restore a healthy competitive Internet, without thwarting the ability of dominant players like Google to innovate. This will require thoughtful and nuanced consideration, and we look forward to participating in this important process.

Background

There is a growing chasm between the enduring public perception of Google as comprehensive and impartial and the reality that it has become increasingly neither. Before Google’s need for growth compelled it to look beyond horizontal search it really could focus on fulfilling its promise to provide the best possible search results for its users, even though that usually meant steering them to other people’s websites as quickly as possible. But, starting around 2005, Google began to develop a significant conflicting interest: to steer users, not to other people’s services, but to its own growing stable of competing services.

By manipulating its search results and ad listings in ways that systematically promote its own services while demoting or excluding those of its competitors, Google can exploit its gatekeeper advantage to commandeer a substantial proportion of the traffic and revenues of virtually any website or industry sector it chooses. This power to directly cut off a competitor’s access to customers is rare in competitive relationships, and it has created the far reaching and profoundly troubling conflict of interest that lies at the heart of Foundem’s Complaint.

Foundem has spearheaded the campaign to bring Google’s anti-competitive practices to light and subject them to public and regulatory scrutiny on both sides of the Atlantic. Our evidence to the Commission included search-ranking scattergrams demonstrating the breathtaking extent of Google’s preferential treatment of its own price comparison service over its rivals, as well as traffic charts demonstrating the resultant dramatic drops in visitor numbers to Google Product Search’s leading competitors. This study was the first of its kind and probably remains the most compelling illustration of the anti-competitive power of Google’s Universal Search mechanism. US Senator Lee focused extensively on a scattergram from one of Foundem’s more recent studies during last September’s Senate Antitrust hearing into Google.

Crucially, the businesses being harmed by the anti-competitive practices described in Foundem’s Complaint are not Google’s rival horizontal search engines such as Bing or Yahoo. They are the thousands of businesses that compete with Google’s other services—in price comparison, online video, digital mapping, news aggregation, local search, travel search, job search, property search, financial search, and so on.

In the traditional bricks-and-mortar world, Google’s anti-competitive practices would have been obvious to all. In the seemingly impenetrable world of Internet search, however, Google’s ability to get away with these practices has often depended on its ability to bamboozle, deflect, and obfuscate. Behind closed doors, Google’s confuse-and-conquer strategy has been unravelling for well over a year; Foundem’s video deconstructing Google’s recent testimony to the US Senate Antitrust Subcommittee provides the first public glimpse of the extent to which this strategy crumbles in the face of informed scrutiny.

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