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EC Antitrust Regulators Target Google's Search and Android Practices

April 15, 2015. The European Commission (EC) Union announced in a release that it sent a document titled "Statement of Objections" (SOO) to Google regarding its "comparison shopping service", and a second item that announces that it has instituted a "separate antitrust investigation into Google's conduct as regards the mobile operating system Android".

The EC released only news releases. It did not release the text of either the SOO or its notice to Google of its Android investigation. Google did not release either document either.

The two matters are separate investigations. Both are in the nature of antitrust regulation.

The EC has a long history of regulating and fining successful technology companies that are incorporated and based in the United States, for business activities that take place largely outside of the countries within the EC's jurisdiction, and for which U.S. regulators have already concluded a parallel proceeding.

These redundant EC proceedings have generated billions of dollars in fines for the EC, and much lucrative work for European lawyers, lobbyists, economists, and consultants.

Margarethe VestagerEC Competition Commissioner Margrethe Vestager (at left) stated in a release that "Google has had market shares of more than 90% in general internet search in most EU Member States for many years" and that "Google artificially favours its own comparison shopping service and that this constitutes an abuse."

The EC also announced that Vestager will travel to the U.S. on April 15 through 20 to, among other things, meet with FTC Chairman Edith Ramirez. The FTC declined to take action against Google in early 2013.

Google's Amit Singhal stated in a release that "we respectfully but strongly disagree with the need to issue a Statement of Objections and look forward to making our case" regarding search.

He argued that "While Google may be the most used search engine, people can now find and access information in numerous different ways -- and allegations of harm, for consumers and competitors, have proved to be wide of the mark."

Google also issued a second release in which it defended its Android related business practices.

FTC Investigation Regarding Search Practices. On January 3, 2013, the U.S. Federal Trade Commission (FTC) announced in a statement that it will take no action against Google with respect to search bias or other search related practices. (At the same time, the FTC filed and simultaneously settled an administrative complaint against Google regarding its abuse of standards essential patents (SEPs) for which it was bound by FRAND commitments.) See, story titled "FTC Concludes Its Investigation of Google" TLJ Daily E-Mail Alert No. 2,504, January 7, 2013.)

The FTC wrote back in 2013 that it decided "to close the portion of its investigation relating to allegations that Google unfairly preferences its own content on the Google search results page and selectively demotes its competitors' content from those results".

It noted that complaining entities alleged that Google "unfairly promoted its own vertical properties through changes in its search results page" and "manipulated its search algorithms in order to demote vertical websites that competed against Google's own vertical properties."

The FTC concluded that "the evidence presented at this time does not support the allegation that Google’s display of its own vertical content at or near the top of its search results page was a product design change undertaken without a legitimate business justification. Rather, we conclude that Google’s display of its own content could plausibly be viewed as an improvement in the overall quality of Google’s search product. Similarly, we have not found sufficient evidence that Google manipulates its search algorithms to unfairly disadvantage vertical websites that compete with Google-owned vertical properties. Although at points in time various vertical websites have experienced demotions, we find that this was a consequence of algorithm changes that also could plausibly be viewed as an improvement in the overall quality of Google’s search results.

Just under four months before the FTC made its announcement regarding its Google investigation, staff of the FTC's Bureau of Competition (BOC) submitted to the full Commission a massive report.

This August 8, 2012 report is 116 pages. However, the FTC did not release this report, or even disclose its conclusions, back in January of 2013. This report was first disclosed to the public by the Wall Street Journal (WSJ) only last month.

The WSJ published a story on March 19, 2015, by Brody Mullins, Rolfe Winkler, and Brent Kendall titled "Inside the U.S. Antitrust Probe of Google".

The FTC/BOC staff concluded that there were violations of antitrust law pertaining to scraping (threatening to remove web sites from Google search results if they did not allow Google to use their content in specialized search results, such as maps), advertising data (making it more costly for advertisers that also used competing search engines), and exclusive deals (restricting other web sites its search results from working with competing search engines), but not to search bias.

See also, related story in this issue titled "Conclusions of the FTC's Staff Report Regarding Google".

EC Investigation Regarding Search Practices. The EC issued another release regarding search practices. It states the EC's "preliminary view that the company is abusing a dominant position, in breach of EU antitrust rules, by systematically favouring its own comparison shopping product in its general search results pages in the European Economic Area (EEA)."

This release states several "preliminary conclusions".

First, "Google systematically positions and prominently displays its comparison shopping service in its general search results pages, irrespective of its merits."

Second, "Google does not apply to its own comparison shopping service the system of penalties, which it applies to other comparison shopping services on the basis of defined parameters, and which can lead to the lowering of the rank in which they appear in Google's general search results pages."

Third, "Froogle, Google's first comparison shopping service, did not benefit from any favourable treatment, and performed poorly."

Fourth, "As a result of Google's systematic favouring of its subsequent comparison shopping services ``Google Product Search´´ and ``Google Shopping´´, both experienced higher rates of growth, to the detriment of rival comparison shopping services."

Finally, "Google's conduct has a negative impact on consumers and innovation. It means that users do not necessarily see the most relevant comparison shopping results in response to their queries, and that incentives to innovate from rivals are lowered as they know that however good their product, they will not benefit from the same prominence as Google's product."

EC Investigation Regarding Android. The EC stated in another release regarding the Android investigation that it has "opened formal proceedings against Google to investigate in-depth if the company's conduct in relation to its Android mobile operating system as well as applications and services for smartphones and tablets has breached EU antitrust rules. The Commission will assess if, by entering into anticompetitive agreements and/or by abusing a possible dominant position, Google has illegally hindered the development and market access of rival mobile operating systems, mobile communication applications and services in the European Economic Area (EEA)."

The EC also disclosed that this investigation will "focus on the following three allegations".

First, "whether Google has illegally hindered the development and market access of rival mobile applications or services by requiring or incentivising smartphone and tablet manufacturers to exclusively pre-install Google’s own applications or services".

Second, "whether Google has prevented smartphone and tablet manufacturers who wish to install Google's applications and services on some of their Android devices from developing and marketing modified and potentially competing versions of Android (so-called “Android forks”) on other devices, thereby illegally hindering the development and market access of rival mobile operating systems and mobile applications or services".

Third, "whether Google has illegally hindered the development and market access of rival applications and services by tying or bundling certain Google applications and services distributed on Android devices with other Google applications, services and/or application programming interfaces of Google."

See also, related story in this issue titled "Reaction to the EC's Google Announcement".

(Published in TLJ Daily E-Mail Alert No. 2,720, April 13, 2015.)