Google EU Antitrust Plan Leaves Competitors Uncertain, Unimpressed
Google is advancing an antitrust fix that rivals say isn't compliant, since the European Commission could decide to fine it up to 5 percent of Alphabet's average daily worldwide revenue for each day of noncompliance. The company announced last week that comparison shopping services now "have a new opportunity to use Shopping ads" to advertise in European Economic Area countries and Switzerland, and Google Shopping will "operate in the same manner, bidding alongside" other comparison sites on equal terms. Competitors told us they don't know exactly how Google intends to comply, and what they've seen so far leaves them less than enthusiastic. The company didn't comment.
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Rivals object to two proposals in Google's response to the EC antitrust prohibition decision. One is the decision to use an auction mechanism for competitors to bid for top slots in the results. Including Google's comparison shopping competitors in a new or existing pay-for-placement auction would create another 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," said Shivaun Raff, CEO of rival search service Foundem. She said there would be an "anti-competitive double-whammy" since rivals would be forced to pay Google for better placement. Switching from the model of free, relevance-based rankings to one where ranking is sold to the highest bidder "threatens to make the problem even worse," said the Open Markets Institute, a group working to "expose the stranglehold" of corporate monopolies after a related endeavor separated from New America amid controversy involving Google (see 1708300046). Auctioning placements would favor rich companies like Google over less well-capitalized businesses that might offer the public better services and more relevant results, it said.
The other concern is the offer to make Google Shopping an independent unit within the company and require it to compete with other comparison shopping services. It's unclear "whether they are doing the appropriate and relevant level of separation that would address the antitrust issues or some other form of corporate reorganisation that doesn't," said competition lawyer Timothy Cowen, counsel for ICOMP (Initiative for a Competitive Online Marketplace).
One appropriate mechanism would be functional separation, akin to BT's split-up of its network and services divisions, said Cowen, formerly BT competition law chief counsel. That could follow Google's current internal structure, unbundling "search" from "products, he said in a slide presentation. Engineering and quality control of Google search could operate to objectively produce responses relevant to users' requests, without accounting for commercial benefits for Google's products, he said. Functional separation would improve nondiscrimination -- which Google must ensure under the EC decision -- enabling monitoring and transparency and allowing third parties, users and Google to share in the benefits, the presentation said. "We don't know what Google is doing," Cowen told us. Enforcers in the U.S. and Europe should "take Google's proposal to its logical conclusion" and order it to completely break apart the two lines of business, the Open Markets Institute said.
ICOMP isn't put off by the auction proposal. There's no objection in principle to requiring rivals to pay the cost of access to Google's services in the same way that BT competitors must pay the telco for access to its network, Cowen said.
Google's proposals "don't pass the sniff test," Cowen said. The EC, however, said "it would be premature at this stage" for it to take any definite position on the company's plans. "As [Competition] Commissioner [Margrethe] Vestager said -- 'this issue will remain on our desks for some time,'" an EC spokesman said. The EC will monitor compliance closely and Google must submit reports on its actions every four months, he said.