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European Commission market tests Google commitments in relation to online search and search advertising

Gabriele Accardo, Transatlantic Antitrust and IPR Developments Newsletter No. 1/2013 of the Stanford-Vienna Transatlantic Technology Law Forum.

See Gabriele Accardo's resume

On 25 April 2013 the European Commission published a press release [1] and a memo [2] seeking observations [3] from third parties on the commitments [4] offered by Google in order to address the Commission’s competition concerns that Google may be abusing its dominant position in the markets for web search, online search advertising and online search advertising intermediation in the European Economic Area (“EEA”), in breach of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”).

Based on its preliminary conclusions, the Commission considers that Google is dominant in web search and search advertising, and that in four areas it may be abusing its dominant position. As a result, Google has made proposals to try to address the Commission’s four competition concerns.

Specialized search. First, the Commission is concerned about the favorable treatment, within Google’s horizontal Web search results, of links to Google’s own specialized web search services as compared to links to competing specialized Web search services (i.e. services allowing users to search for specific categories of information such as restaurants, hotels or products). According to the Commission, this practice may unduly divert traffic away from Google’s competitors in specialized search towards Google’s own specialized search services, ultimately reducing the ability of consumers to find a potentially more relevant choice of specialized search services.

In order to address such concerns, Google proposes to clearly label its “promoted” links, so that users are made aware of their different “nature”, and even separate them from other web search results by clear graphical features (such as a frame). In addition, Google proposes to display links to three rival specialized search services close to its own services, in a place that is clearly visible to users.

Content usage. The second concern relates to the use by Google without consent of original content from third party web sites in its own specialized web search services, which may reduce competitors’ incentives to invest in the creation of original content for the benefit of Internet users. According to the Commission, if users know that Google’s specialized search services contain all the relevant information that is posted on the web, their incentive to visit other sites which contain only a part of that information will be significantly reduced, even if these were the sites from which that information originated.

Google will offer all websites the option to opt-out the use of all their content from Google’s specialized search services, without directly affecting their natural search ranking. Moreover, specialized search web sites that focus on product search or local search will be able to mark certain information so that it is not indexed or used by Google. Finally, newspaper publishers will be able to control on a web page by page basis the display of their content in Google News.

Exclusivity agreements for the provision of online search advertising. Thirdly, the Commission is also concerned about the agreements that oblige third party web sites (“publishers”) to obtain all or most of their online search advertisements from Google, insofar as, as a result of contractual or de facto exclusivity, publishers would be able to display no or only a limited amount of online search advertisements from Google’s competitors. In turn, Google’s competitors would face reduced incentives to innovate since Google’s conduct limits their access to customers.

In order to address such a concern, Google will no longer include in its agreements with publishers any written or unwritten obligations that would require them to source online search advertisements exclusively from Google.

Restrictions on the portability and management of online search advertising campaigns. The fourth competition concern relates to Google contractually restricting the possibility of transferring online search advertising campaigns away from Google’s AdWords and to simultaneously manage such campaigns on competing online search advertising platforms. According to the Commission, these restrictions create artificial switching costs that discourage advertisers using Google’s AdWords from running parallel online search advertising campaigns on competing platforms, thereby reducing consumer choice, while at the same time, stifle the development of innovative campaign management tools.

In order to address such a concern, Google will no longer impose obligations that would prevent advertisers from managing search advertising campaigns across competing advertising platforms.

The Commission clarified that the position of Google in the USA is different than in Europe, where it does not seem likely that another Web search service will replace Google as the European users’ web search service of choice. Web sites therefore rely more on traffic from Google in Europe than in the USA. Given the resulting commercial significance of Google for specialized search services, the way Google presents its web search results therefore has a much more significant impact on users and on the competitive process in Europe than in the USA. This explains why the Commission is seeking to ensure that Google’s prominent market position does not affect the possibility for other competitors to innovate in neighboring markets.

The commitments are now subject to a market test of one month (till 27 May 2013).

If, following the market test, the commitments form the basis for a satisfactory solution to the Commission’s competition concerns, the Commission may make them legally binding on Google by way of a decision for a period of 5 years. Such a decision will not conclude that there is an infringement of EU antitrust rules, but would legally bind Google to respect the commitments offered. In principle. If a company breaks such commitments, the Commission can impose a fine of up to 10% of its annual worldwide turnover.

Footnotes

[1IP 13-371 Brussels, 25 April 2013

[2Commission seeks feedback on commitments offered by Google to address competition concerns – questions and answers- Memo Brussels, 25 April 2013

[3Communication from the Commission published pursuant to Article 27(4) of Council Regulation (EC) No 1/2003 in Case AT.39740 — Google(2013/C 120/09), 26 April 2013

[4Case COMP/C-3/39.740 - Foundem and others, For Market Test, 3 April 2013

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