ICOMP: Initiative for a Competitive Online Marketplace

Last Friday, 13 November, the parties to the US Google Book Search litigation filed a revised settlement proposal. The original proposal had drawn vociferous objections from the French, German, and US governments, as well as from authors, publishers, libraries, academics, and consumer groups across Europe and the world.

Although ICOMP is still studying all 173 pages of the revised proposal, it clearly does not fix the serious problems that plagued the original settlement and that led to widespread European condemnation. Although some European works will technically now fall outside the scope of the settlement, Google appears intent to continue copying and engaging in “snippet” display of copyrighted European works through its existing arrangements with American libraries. In short, the behaviour that sparked years of anger and frustration amongst European publishers and authors goes on. To say the least, the revised settlement is a massive disappointment.

No one seriously doubts the value of expanding online access to books and making books more easily searchable online. But Google’s newest settlement proposal, like the earlier version, is a disaster. It would give Google a monopoly over millions of the world’s books. It would also further entrench Google’s dominance in search, including in Europe, and stifle innovation and harm consumers in a vitally important sector of the Internet ecosystem. It should be - and for the good of the Internet must be - rejected.

Bad for Competition and Innovation

ICOMP, like many others, objected to the original settlement proposal because it would have granted Google de facto exclusive rights for the digital distribution of millions of orphan works as well as many other books. It also would have given Google a virtual monopoly over the ability to search books online, further strengthening its widespread existing monopoly in online search and search advertising. As the US Department of Justice noted, the settlement would “create a dangerous probability that only Google would have the ability to market . . . a comprehensive digital book subscription.”

The revised settlement proposal does nothing to fix these problems. New provisions giving retailers the ability to “resell” access to Google’s scanned copies of books to consumers will do nothing to diminish Google’s monopoly grip on digitized books and search. This proposal is like a monopoly internet service provider saying it will allow the Internet to be accessed multiple PCs. That might allow competition in PCs, but would do absolutely nothing to enable competition in ISP provision. The revised settlement proposal essentially guarantees that no other commercial entity in the world, either in Europe or elsewhere, will be able either to access directly or to replicate the massive books database that the settlement proposal places under Google’s sole control. It also means that consumers wishing to search for books online will have no choice - it will be Google or nothing. Google has long sought to build a moat around its monopoly in search. This settlement threatens to make Google’s search monopoly an impenetrable fortress.

The revised provisions on orphan works are similarly a failure. They merely provide for the appointment of a board member on the Book Rights Registry to serve as a “guardian” of the interests of orphan works owners and state that identified authors and publishers will no longer profit from the exploitation of orphan works. But Google gets to keep a significant share of any profits from orphans works and to maintain its monopoly grip on online access to orphan works.

If Google were serious about allowing meaningful competition, the settlement would allow any company to access copies of orphan works scanned pursuant to the settlement on the same terms as Google. This would have been a simple fix to make and would have alleviated many of the most serious competition concerns. As the settlement stands, no competition authority in the world is likely to see it as allowing meaningful competition in the supply of online access to orphan works.

Equally disturbing is that this settlement, by making Google the monopoly gatekeeper to online access to books for US readers, will give Google inordinate influence over Europe’s own efforts to develop online digital libraries. It will give Google overwhelming influence over how much consumers and libraries pay for access, and how much authors and publishers earn. It is clear that Google’s pricing in the US will also have a strong influence on the pricing of any similar digital library project that emerges in Europe.

Without competition, Google will face no pressure to innovate, to improve its services, or lower its prices. Online access to millions of books will remain locked up in the database of a single American company, and only Google will have the key. The world’s literary heritage is simply too important to abandon to such a fate.

Bad for the Internet

In sum, the revised settlement proposal would confer on Google and Google alone what amounts to a blanket authorisation to copy and exploit millions of books. The proposed settlement would effectively foreclose competition in one of the most important markets of the future - providing innovative, high-quality access to books, especially out-of-print and orphan works. If approved, the settlement will inflict serious harm on the Internet ecosystem, harm that could easily be avoided while still realising the important goal of expanding online access to books. And although the settlement ostensibly is confined to the United States, it is absolutely clear that its anti-competitive effects will be felt in Europe and elsewhere around the world.

Underlying these concerns is the fact that the entire process in reaching this settlement has been fatally flawed. Many rights holders criticised the woefully inadequate notice of the original settlement. And despite a chorus of pleas from European governments, rights holders, libraries, and others that the parties open up the process to affected stakeholders, the parties negotiated in total secrecy and now offer this proposal on take-it-or-leave-it terms.

As the German government noted in its objections to the original settlement, “the proposed Settlement is a privately-negotiated document that is shrouded in secrecy, formulated behind closed doors by three interested parties, the [US] Authors Guild, the Association of American Publishers, and Google, Inc., resulting in a commercially driven document that is contrary to established international treaties and laws.” Nothing about the revised settlement changes these fundamental facts.

Private commercial litigation and secret negotiations are not the way to decide the future of books, particularly where they destroy competition and undermine innovation. For the good of the Internet, this settlement proposal should be rejected.

David Wood
ICOMP legal expert