Just days after the European Commission announced that it had opened a formal investigation into whether Google’s business practices amount to an abuse of its dominant position in breach of EU competition rules, the French Competition Authority has published a detailed Study into the application of the competition rules to online advertising.
The French Study is significant, not just because it comes at an opportune time in terms of contributing to the Commission’s investigation; it is also significant in that it is the fourth antitrust investigation which reaches clear conclusions as to how to assess dominance in online advertising markets. The previous investigations have concerned both of the US’s antitrust agencies, the Department of Justice and the Federal Trade Commission, as well as the European Commission itself.
The correct approach for assessing dominance is a crucial issue for competition authorities. Once a business is in a dominant position on a given market, the assumption under EU law is that competition is already so damaged that the dominant business must be held to a special obligation not to harm it any further. This special obligation can be extremely burdensome since almost all commercial activities need to be reviewed before implementation to ensure that breaches of EU competition law do not take place.
The penalties can be dramatic: in recent cases, the European Commission has fined companies up to and over €1 billion for abuse of a dominant position.
In the Study, the French Competition Authority expressly concludes that online search advertising is the relevant market on which to assess dominance. Within online search advertising, a distinction can be made between search and display advertising. The Study rejects Google’s assertions that it faces competition from Facebook.
These are key findings of fact. Although many of the same findings have been made by other competition authorities in the past, Google has dismissed those findings as mistaken or worse and has continued to argue that the market is much wider, comprising all advertising and that Google has only a small share of that wider market. Those arguments look increasingly weak with each successive finding to the contrary.
Once the market is defined as online search advertising, the dominant position of Google becomes manifest: the French Study found that Google has a market share of over 90% of online search advertising in France, a figure matched or exceeded in many other European countries. Shares of that order are always found to raise a presumption of dominance, and are often described as super-dominance.
What happens next?
Unlike the European Commission investigation, the purpose of the French Study was not to identify individual examples of abusive behaviour. However, it identified a number of general practices which had been broadly criticised including, unfair and unlawful commercial practices, arbitrary and obscure changes in practices, as well as parasitical and predatory pricing. The French Study also chose fourteen specific examples of Google practices which it considered to raise concerns. Unlike the much broader scope of the European Commission’s investigation (which includes an examination of manipulation of search results), the French Competition Authority focused just on online advertising. The matters raising concern include:
* Exclusivity clauses in Adsense contracts.
* Barriers to indexation of YouTube (Google’s subsidiary) by competing search engines.
* Obstacles to simultaneous use by advertisers of several advertising platforms.
* [Practices of] Distortion of the ranking or “quality score” attributed to advertisers within the AdWords bidding system.
* Unfair competition by Google or of its subsidiaries in the AdWords bidding system.
* Lack of transparency and discriminatory implementation of rules defining what content can feature in the AdWords service.
* Sudden closing off of the advertiser’s AdWords account.
The French Study clearly rejects many of the key assertions made by Google over the years. In particular, the argument that the competition authorities do not understand Google or the markets on which it operates is demonstrated to be specious. Other Google arguments such as “antitrust scrutiny comes with the territory when you are big” and “competition is just a click away” are also shown to be without foundation. It remains to be seen if Google will finally begin to acknowledge these findings and heed their consequences or will continue to dismiss antitrust authorities as ignorant whenever they disagree with Google.
The tenor of the French Study and statements made at the time of its adoption make clear that the French Competition Authorities are willing to leave many of the key concerns to the investigation currently being carried out by the European Commission. However, the French Competition Authorities also give a friendly warning designed to leave no-one in doubt: if others do not take action to stamp out abuses of a dominant position in the online advertising sector, it will.
David Wood, ICOMP Legal Counsel