Microsoft Complains to EC Antitrust Regulators About Google
March 30, 2011. Microsoft announced the filing of "a formal complaint with the European Commission as part of the Commission's ongoing investigation into whether Google has violated European competition law". The complaint pertains to search.
Microsoft did not release its filings with the European Commission (EC). Nor did the EC.
However, Brad Smith, SVP and General Counsel of Microsoft, stated in a release that "were concerned by a broadening pattern of conduct aimed at stopping anyone else from creating a competitive alternative".
Smith (at right) wrote that "Having spent more than a decade wearing the shoe on the other foot with the European Commission, the filing of a formal antitrust complaint is not something we take lightly. This is the first time Microsoft Corporation has ever taken this step."
He also stated that "Over the past year, a growing number of advertisers, publishers, and consumers have expressed to us their concerns about the search market in Europe. They've urged us to share our knowledge of the search market with competition officials."
Allegations of Anticompetitive Conduct. Brad Smith asserted that "Google has engaged in a broadening pattern of walling off access to content and data that competitors need to provide search results to consumers and to attract advertisers."
For example, Smith wrote, "in 2006 Google acquired YouTube -- and since then it has put in place a growing number of technical measures to restrict competing search engines from properly accessing it for their search results."
As another example, Smith wrote that "in 2010 and again more recently, Google blocked Microsoft's new Windows Phones from operating properly with YouTube. Google has enabled its own Android phones to access YouTube so that users can search for video categories, find favorites, see ratings, and so forth in the rich user interfaces offered by those phones. It's done the same thing for the iPhones offered by Apple, which doesn’t offer a competing search service. Unfortunately, Google has refused to allow Microsoft's new Windows Phones to access this YouTube metadata in the same way that Android phones and iPhones do."
Smith also complained about Google's efforts to block advertisers' "access to their own data". He also complained that "Google contractually blocks leading Web sites in Europe from distributing competing search boxes". And, he complained that "Google discriminates against would-be competitors by making it more costly for them to attain prominent placement for their advertisements".
Allegations Regarding Orphan Works. Smith also stated that "Google is seeking to block access to content owned by book publishers. This was underscored in federal court in New York last week".
On March 22, 2011, the U.S. District Court (SDNY) issued its opinion [48 pages in PDF] in Authors Guild v. Google, denying, without prejudice, the motion for approval of the proposed class action settlement. See, story titled "District Court Rejects Google Books Class Action Settlement" in TLJ Daily E-Mail Alert No. 2,206, March 22, 2011.
Smith asserted that "Under Google's plan only its search engine would be able to return search results from" certain "orphan books". See, story titled "Orphan Works and the Court's Rejection of the Google Book Deal" in TLJ Daily E-Mail Alert No. 2,207, March 23, 2011.
Smith quoted from page 37 of the District Court's opinion: "Google's ability to deny competitors the ability to search orphan books would further entrench Google’s market power in the online search market."
It should also be noted that the Department of Justice's (DOJ) Antitrust Division filed a pleading on September 18, 2009, and an amended pleading on February 4, 2010, with the District Court in which it raised antitrust concerns.
The DOJ wrote in its first pleading that the proposed class action settlement would grant "Google de facto exclusive rights for the digital distribution of orphan works". Moreover, "Google's competitors are unlikely to be able to obtain comparable rights independently." This then "appears to create a dangerous probability that only Google would have the ability to market to libraries and other institutions a comprehensive digital-book subscription. The seller of an incomplete database -- i.e., one that does not include the millions of orphan works -- cannot compete effectively with the seller of a comprehensive product."
The DOJ wrote in its second filing regarding the amended settlement agreement (ASA) that "Google's exclusive access to millions and millions of books may well benefit Google's existing online search business. Google already holds a relatively dominant market share in that market. That dominance may be further entrenched by its exclusive access to content through the ASA. Content that can be discovered by only one search engine offers that search engine at least some protection from competition. This outcome has not been achieved by a technological advance in search or by operation of normal market forces; rather, it is the direct product of scanning millions of books without the copyright holders' consent and then using Rule 23 to achieve results not otherwise obtainable in the market." (Footnotes omitted. Rule 23 of the Federal Rules of Civil Procedure pertains to class actions.)
See also, story titled "DOJ Files Pleading in Google Books Case" in TLJ Daily E-Mail Alert No. 1,985, September 21, 2009, and story titled "DOJ Criticizes Amended Google Books Settlement" in TLJ Daily E-Mail Alert No. 2,043, February 12, 2010.
Why Europe? Microsoft has just complained to the EC. Both Microsoft and Google are U.S. companies.
In recent years U.S. companies have been taking their antitrust grievances with other U.S. companies to the EC, and have, in matters pertaining to Microsoft and Intel, obtained results not obtained from U.S. antitrust regulators.
One reason that U.S. companies take complaints to Europe may be that the EC's competition related actions sometimes lack the basis in rigorous economic analysis, and a finding of harm to consumers, that usually but not always characterize actions by the U.S. DOJ or Federal Trade Commission (FTC).
For more on the EC role in regulating US companies, see story titled "Kroes Discusses EC's Global Regulation Goals" in TLJ Daily E-Mail Alert No. 1,722, February 25, 2008, and "Commentary" subsection of story titled "EC Demands More Money From Microsoft" in TLJ Daily E-Mail Alert No. 1,723, February 26, 2008.
However, Microsoft's Smith endeavored to portray this complaint as a European matter.
He wrote that "By the European Commission's own reckoning, Google has about 95 percent of the search market in Europe. This contrasts with the United States, where Microsoft serves about a quarter of Americans' search needs either directly through Bing or through our partnership with Yahoo!."
He also stated that "As troubling as the situation is in United States, it is worse in Europe. That is why our filing today focuses on a pattern of actions that Google has taken to entrench its dominance in the markets for online search and search advertising to the detriment of European consumers."
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