Google’s Rebuttal Against EU May Be in Vain

Google last week responded to the European Commission’s statement of objections regarding its search practices by rejecting outright the Europeans’ argument that its innovations were anticompetitive.

The SO, published in April, doesn’t support the claim that the company’s displays of paid ads diverted traffic away from shopping services, Google said. Nor does it counter major advantages to consumers and advertisers. Further, the SO doesn’t provide a clear legal theory linking its claims with its proposed solution.

“We’ve taken seriously the concerns in the [SO] that our innovations are anticompetitive,” said Google General Counsel Kent Walker. “The response we filed shows why we believe those allegations are incorrect, and why we believe that Google increases choice for European consumers and offers valuable opportunities for businesses of all sizes.”

The Latest Google-EC Pas de Deux

The preliminary conclusion of the EC’s investigation, launched in November 2010, is that Google gives systematic favorable treatment to Google Shopping in its general search results pages, according to the SO. That practice may result in the redirection of traffic from rival comparison shopping services, preventing them from competing.

It infringes EU antitrust rules because it stifles competition and harms consumers. Google should treat rival comparison shopping services the way it treats Google Shopping, the SO states.

If an investigation confirms the EU’s concerns, Google will have to “change the way it does business in Europe,” EU Competition Commissioner Margrethe Vestager said.

To refute the SO’s claims, Google cited traffic analysis: Economic data spanning more than a decade, as well as an array of documents and statements from complainants, confirm that product search is robustly competitive.

Also, the SO fails to consider the impact of major shopping services such as Amazon and eBay, which are the biggest players in this space, Google said.

Innovations in the way it organizes and categorizes product information and presents it to users improve ad quality and make it easier for shoppers to find what they’re looking for, the company added.

Dominant Position

Google’s claim that consumers in the EU have choice is debatable, considering that Google overwhelmingly dominates the search market. In March, it had more than 90 percent of the search engine market in most countries.

“Google dominates, but creating a different perception is how highly paid attorneys make their money,” said Rob Enderle, principal at theEnderle Group.

The argument could be made that if Google weren’t so dominant, other shopping services might see more searches, he told the E-Commerce Times, but “don’t mistake what goes on in the court or government inquiries as reality.”

While it is easier for consumers to find what they’re looking for on Google under its new format, that locks them into the Google universe, and “that partially goes to the heart of the EU complaint,” Enderle remarked.

Fight to the Finish

“The issue is not really search; it’s advertising and who gets it,” said Mike Jude, a research manager at Frost & Sullivan.

The EU’s objective all along “has been to break up Google, forcing a divestiture of the search operations from the purely advertising interests,” he told the E-Commerce Times.

Google “is not going to do this willingly, and the EU is not going to back down,” he said. “The EU smells blood in the water.”

The pressure from Europe may have led Google to set up Alphabet as a holding company. Alphabet “can argue that it can segregate the businesses through operational controls and so no breakup is necessary,” Jude said.

If Google loses this battle, it will get hit with huge fines, and other countries may follow the EU’s lead, as happened with Microsoft, Enderle suggested.

“Google appears uniquely protected by the Obama administration, but that protection won’t last indefinitely,” he said. “Standard Oil, RCA and AT&T all ceased to be after run-ins with regulatory agencies, and that’s something Google should consider seriously.”