ICOMP: Initiative for a Competitive Online Marketplace

Yahoo! Japan announced on 27 July 2010 that it had “decided to change its search engine (the service for searching for information on the Internet) and ads platform (its search-triggered ads distribution system) to Google Inc”.

It also published the following diagram demonstrating what this means in practice:

The diagram makes clear what the words do not. The tie-up between Google and Yahoo! Japan will give Google a near-monopoly of both algorithmic search and of search advertising in Japan. All the red and blue boxes in the diagram will no longer be provided by Yahoo! Japan in competition to Google’s own offering, they will be provided by Google in a virtual absence of competition.

This seems remarkably similar to the Google/Yahoo! deal which provoked the opposition of the US Department of Justice in 2008. The terms seem similar, as do the combined market shares and the likely impact of the deal.

It is unclear at this stage what discussions have taken place with the Japanese antitrust authorities. Whatever the case, it is clearly important for advertisers and online publishers to make clear their views – and to do so rapidly.

David Wood
ICOMP Legal Counsel

It was announced today that Yahoo Japan will switch its search technology and paid search provider to Google. Yahoo! Japan and Google combined already provide virtually 100% of paid search ads in Japan. Furthermore, this deal would have knock-on effects in related sectors such as search and contextual advertising.

ICOMP has a strong stance on this issue and has just published a press release regarding the deal (available in English & Japanese). Reduced competition would harm online publishers and advertisers, and ultimately consumers, in a number of ways. A combined Google/Yahoo! Japan would win almost every bid to provide online advertising services or search syndication deals. It would deprive their competitors of the necessary scale to continue to compete in these markets. It would also increase the ability of Google and Yahoo Japan! to exercise their market power by increasing advertising prices whilst at the same time reducing the share of advertising revenue paid to online publishers. There should be very great concern that Google would achieve a near-monopoly position in Japan, given the many significant antitrust investigations taking place in countries where it has already acquired a near-monopoly position. For those reasons, the presumption must be that it should not be allowed to go ahead and that it should be blocked on antitrust grounds.

As Japan is the world’s second-largest market in advertising, anything that affects online advertising within the country will ultimately impact the global online marketplace – especially in this instance as Google has a dominant presence in many other parts of the world. In fact, on a recent trip to Japan, I had several conversations with key decision-makers about the issues surrounding the current online marketplace, and they expressed concern with the state of competition in their region. In addition, we have been receiving an increasing number of inquiries from the Asian market on competitive online marketplace issues. The rising level of interest has led to the launch of both Japanese and Chinese versions of the ICOMP website to provide easy access to ICOMP resources in those languages. There is clear demand across the globe for a healthy online environment with free and fair competition.

A number of antitrust authorities around the world have examined Google and its behaviour and a consensus is emerging that Google has an overwhelmingly dominant position on the markets for search and search advertising in the U.S., Europe and elsewhere. ICOMP urges the competition regulators in Japan as well as elsewhere in the world to ensure that their rules are fully enforced, and to play their part in achieving a truly competitive online marketplace.

David Wood
ICOMP Legal Counsel

Following the blog post earlier this week on the launch of the ICOMP White Paper on intellectual property, two videos featuring ‘vox pop’ interviews with the panellists, sharing their views on copyright issues, together with a longer video on the highlights of the event. Both of these can be watched below. Thanks to PRS for Music for allowing filming on the evening.

ICOMP Intellectual Property on the Internet: Vox Pops from Burson Marsteller on Vimeo.

ICOMP Intellectual Property on the Internet: The Search for Sustainable Business Practices from Burson Marsteller on Vimeo.

Best regards,
The ICOMP Secretariat

Following news of the paper’s publication alongside the ICOMP Council meeting earlier this month, Monday evening marked the launch of the latest ICOMP White Paper on intellectual property rights (IPR) entitled Intellectual Property On The Internet: The Search For Sustainable Business Practices.

The event, which took place at Copyright House consisted of a cross-industry panel discussion involving David Wood, Andrew Orlowski, Executive Editor of The Register, Author Nick Harkaway, Frances Lowe, Regulatory and Corporate Affairs Director at PRS for Music and Premier League spokesman Tim Vine, following a keynote by chairman of the PRS, Ellis Rich. The event was also well-atteneded by authors, academics, trade organisations and media owners.

Up for debate was the extent to which:
a) ’social contracts’ - agreements between an organisation and the individual to respect IP - were effective as part of industry best practice
b) fines or settlement out of court for IP infrigement risked being relagated to being a mere ‘operating cost’, where companies had the resources to make greater profit from the data gathered as a result, and
c) the role that metadata would play in preserving our analogue legacy in digital form, including orphan works.

A series of vox-pop interviews, featuring the panellists that explored the measures recommended to protect intellectual property online, the damaging impact of ‘institutional’ IP mis-use by larger players in the online marketplace, together with highlights of the event will be available on video soon.
We conducted a series of ‘vox pop’ interviews in which we asked about their views regarding protecting intellectual property online. They were also questioned regarding the role of market dominance in IP mis-use.

Germany’s Data Protection Authority has launched legal proceedings against Facebook amid an alleged breach of data privacy laws.

Spearheaded by Johannes Caspar, head of Hamburg’s Data Protection Authority, the legal allegations focus on Facebook’s use of personal data of people who do not have a Facebook account or profile.

The social network company recently responded to a storm of criticism regarding its use of user data when it changed its user-configurable privacy settings in April this year. One of the new privacy settings allows users to block access to their e-mail contacts. However, this slight privacy change was not considered enough, particularly in Germany, a country that has strict privacy laws.

The e-mail contacts often relate to people who do not use Facebook, yet are stored by the social networking site. Johannes Caspar argues that they are now being used by Facebook for marketing-related purposes, breaching Germany’s data protection laws.

Caspar’s legal suit against the U.S. firm follows a number of complaints from German internet users filed with the national Data Protection Authority.

“It is a system that is designed around making it possible for Facebook to expand, for its own benefit”, said Caspar. “Given that several million people in Germany alone are members, this is a very unsettling notion”.

“We consider the saving of data from third parties, in this context, to be against data privacy laws”, he stated.

Facebook has been given a deadline of August 11 to formally respond to the legal complaint. The legal allegations could result in the company having to pay tens of thousands of Euros under privacy laws.

This latest privacy related complaint is one of several which have been launched against the California-based company. Earlier this year, Canada’s privacy commissioner launched an investigation into Facebook’s privacy policies following complaints.

by Marc Pinter-Krainer
OneNewsPage.com

“My services are currently examining some allegations of anti-competitive conduct in relation to search….I am looking at the allegations very, very carefully.”

With these words the Commissioner for Competition, Vice President Almunia, concluded his remarks yesterday at a speech in London that had been widely trailed in advance as a significant signal of the Commission’s intentions in relation to Google.
There was much to ponder in the speech. While acknowledging the complexity of online markets, the Commissioner stressed that “the principles of competition must be maintained in the digital economy with the same intensity that they are imposed in the brick and mortar world”. He focused in particular on the search and search advertising markets. While noting that these markets are constantly evolving he expressed concern at the existence of very high market shares in some areas, attributing to Google a usage share of 95% in Europe.

It is usual for such speeches to be very carefully worded, to avoid any impression that issues are being pre-judged. Therefore the Commissioner was careful to underline that market definition can be a difficult exercise and that market share on its own does not always signify market power. But probably of most interest to those concerned about healthy competition in search, was the fact that he went beyond mere discussion of market structure and addressed questions of behaviour.

Echoing complaints that have been filed against Google, he raised the problem of search results being “manipulated” by the search engine and questioned whether the risks could in part be addressed by transparency. However he also suggested doubts as to whether even transparency would be enough to counter the harm to competition caused by such manipulation.

ICOMP welcomes this public contribution to the debate over Google’s market power and behaviour. In speaking out now the Commissioner has clearly issued an invitation to all market participants to come forward, and quickly, if they have evidence to contribute to his investigation. All the signs are that the Commission will want to move ahead soon.

But while that investigation continues, Google is not standing still. In addition to its attempts to gain preferential access for its search engines to millions of books through the Google Book Settlement it has recently announced its intentions to spend $700 million on the acquisition of ITA. That transaction, if permitted to continue, would give Google control over an essential input for travel search services. Like so many of Google’s acquisitions, this deal will probably escape merger scrutiny by the European Commission but it may nevertheless trigger the merger thresholds in a number of EU Member States. ICOMP would urge the competition regulators in the EU member states as well as elsewhere in the world to ensure that their rules are fully enforced, and to play their part in achieving a truly competitive online marketplace.

David Wood
ICOMP Legal Counsel

ICOMP launched its second white paper in Paris yesterday in conjunction with the annual ICOMP meeting. The paper, entitled Intellectual Property on the Internet: the Search for Sustainable Business Practices explores how policymakers and industry can work together to preserve incentives for creativity and commerce online.

The complete paper is viewable here: Intellectual Property on the Internet: The Search For Sustainable Business Practices.

Following the launch of the white paper, an event to mark the publication will be held at Copyright House in London on Monday, 12th July 2010. The session will aim to address the seven questions outlined in the concluding section of the white paper. These questions aim to advance the debate in ways that prompt stakeholders to engage in further dialogue about how best to promote a vibrant online ecosystem that respects IP rights while encouraging investment in innovation and the emergence of legitimate, sustainable online business models. Similar events are due to be announced in Spain and Germany later on in the year.

Please contact us to register your interest for these events.

ICOMP Secretariat

For months now, competition watchers (lawyers, journalists, politicians and the online business world), have been waiting to see which of the various competition investigations of Google would take the step to an actual finding. After all, when you are that big and are the subject of multiple investigations, it is only a matter of time.

The answer came on 30th June 2010 when the French competition authorities adopted an extremely detailed and well-crafted interim decision roundly condemning Google’s behaviour vis-à-vis one of its French customers. It found that Google’s behaviour had been opaque, discriminatory and abusive, and had amounted to an unlawful breach of EU competition rules. Google was ordered to correct its behaviour within short deadlines. The victim was Navx, a French Internet company offering GPS services.

The decision is a preliminary one which means that the a formal decision will follow, probably towards the end of this year. In the meantime and subject to an appeal, Google has been subject to orders requiring it to publish a transparent account of its AdWords policies within four months. This means it will have to publish technical documentation explaining the AdWords processes that may lead to an advertiser’s account being suspended. Similar documentation must be disclosed to explain Google’s treatment of GPS database companies like Navx (in addition to the requirement that Navx’s account be reactivated within five days).

By way of background, Navx sells databases for use on GPS navigation devices. For example, Navx will sell databases that will show a user of a TomTom or Garmin device the fuel prices at different gas stations and the location of speed cameras on the road, all of which is legal in France. Google terminated Navx’s ability to advertise on Google’s AdWords advertising platform, claiming that Navx violated Google’s “content policy” which apparently prohibits sites which offer services intended to avoid traffic controls. However, Google allowed other companies, including market leaders for GPS services in Frances, to offer their services, thereby engaging in unlawful discrimination against Navx.

The decision needs to be studied with great care as it seems to be intended to have a much wider impact than just the Navx case. One can expect other national competition authorities in Europe to be strongly influenced by its findings.

It is obvious that the lack of transparency was not only unfair, it deprived Navx and others of the means to choose which advertising partner to work with. Further, the discrimination deprived Navx of the ability to advertise on the dominant search platform (bearing in mind that nine in every ten online searches in France use Google). In turn, this lack of transparency - and still more the discrimination - deprived consumers of choice in terms of the GPS services they use. More transparency equals more choice equals more competition.

At this point it is worth briefly noting that the conduct considered in the Navx case appears to be part of a broader pattern of opaque business practices by Google, as further described in ICOMP’s transparency paper.

Moreover, it is obviously harmful for the company in question to be effectively excluded from the market. It is also harmful for the economy in general and likely to have a significantly harmful effect on competition.

The final decision when it comes will almost certainly also deal with the financial penalties to be imposed on Google for its illegal behaviours and also to set out a framework which NAVX can use should it wish to seek damages and reparations before a civil court.

David Wood
ICOMP Legal Counsel

ICOMP Council Member, OneNewsPage.com, has published an article discussing the Federal Communications Commission’s (FCC) move to consult industry players and the public on how the internet should be governed going forward. This is in light of the recent issue FCC faced when its powers were challenged by the internet giant Comcast regarding peer-to-peer file sharing restrictions.

Marc Pinter-Krainer discusses the situation and FCC’s proposal of possible routes to take going forward.

The article can be read in full here.

ICOMP Secretariat

This year ICOMP will be participating at the annual CEPIC congress.

The goal of CEPIC, the Coordination of European Picture Agencies Stock, Press and Heritage, is to be the centre of the picture industry. CEPIC represents over 1,000 picture sources in Europe with members from most different European countries. The aim of CEPIC is to be a united voice for the press, stock & heritage organisations of Europe in all matters pertaining to the photographic industry.

The CEPIC Congress, held 9th to 13th of June 2010, is the largest event of its kind in the world, presenting the entire spectrum of the Image Industry each year in a different European city. After a very successful CEPIC Dresden last year, with over 600 delegates in spite of the recession – we are looking forward to this year’s CEPIC Congress being even more successful.

ICOMP’s participation in the CEPIC congress will primarily be on Friday, 11th June 2010 – the day will start at 2pm with Lord Alan Watson, Chairman of ICOMP providing a consultation on the future of Intellectual Property online. In addition to this, David Wood, ICOMP Legal Counsel, will be participating in a panel discussion entitled Initiatives for Growth in the Online Environment, moderated by internet entrepreneur Franck Perrier.

Other events of note taking place during the CEPIC congress include a panel discussion entitled the Mass Digitisation of Cultural Heritage, on 10th June as well as Threats and Opportunities for Content Owners in the Online Space, a presentation given by Ben Edelman on 12th June.

Klaus Plaumann
Vice President CEPIC