Archive for March, 2011

Microsoft Joins Growing Chorus of Concern against Google Dominance

Thursday, March 31st, 2011

ICOMP member, Microsoft Corporation today announced its decision to join a growing number of advertisers, publishers, content owners and consumers across Europe expressing their concerns about Google’s dominance in the online search market to European antitrust regulators.

Brad Smith, Microsoft’s Senior Vice President & General Counsel announced in a blog post this morning that the company is filing a formal complaint with the European Commission driven by “a broadening pattern of conduct aimed at stopping anyone else from creating a competitive alternative” in a market where Google has a 95% market share.

Microsoft’s complaint increases the breadth of the already wide-ranging investigation by the European Commission into whether Google Inc. has violated European competition rules, calling on the EU authorities to examine the “pattern of walling off access to content and data that competitors need to provide search results to consumers and to attract advertisers.” Specifically, this refers to “technical measures” restricting competing search engines and mobile phone operating systems from “operating properly” with Google’s services and limiting interoperability between advertising platforms.

ICOMP believes Google’s conduct and its 95% market share in Europe are of concern not only to Microsoft, but to a broad range of advertisers, publishers and others across Europe. Search is the gateway to the internet and a gateway that is closed to competitors can only have harmful effects on consumers and Europe’s Digital Agenda. Indeed, the economic impact of search dominance in the information society is explored in a, recently published, academic research paper commissioned by ICOMP and co-authored by Martin Cave, London School of Economics and Howard Williams, Oxford Internet Institute and Strathclyde Business School.

The Commission’s competition investigation is crucially important to the preservation and enhancement of competition in the online marketplace. This complaint, coming on top of the many complaints and other submissions already received, will assist DG Competition in understanding not only the facts but also the legal and economic context of Google’s behaviour.

Innovation and the development of online content and the means to access that content is a wonderful thing. The best way of ensuring we continue to enjoy those benefits is to ensure that markets remain open to competition. When you have a 95% market share, you cannot behave in any way you please: you have to ensure that competitors have a chance to compete too.

David Wood
ICOMP Legal Counsel

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Unfair, Inadequate & Unreasonable: the Google Book Settlement

Wednesday, March 23rd, 2011

Wanting to use a small part of the proceeds from an armed robbery for good causes does not make someone a good person, it makes them an armed robber.

Turning to the Google Book Settlement, the work of literally hundreds of objectors from around the world seems to have paid off. This week, the New York Judge in charge of the case ruled that it did not satisfy the legal test of being fair, adequate and reasonable.

The background to the Google Book Settlement is familiar to many people and ICOMP has written extensively about it in the past. To cut a very long story short, the proposed settlement – which would have needed to be sanctioned by a US Court – was intended to let Google off the hook for having scanned (and used for search purposes) over twelve million books without having obtained the approval of the copyright owners in advance, almost certainly in flagrant breach of international law. The settlement was also forward looking and purported to give Google a unique licence to scan and use so-called orphan works – thereby giving Google a monopoly for the commercial use of the works and the data they contain.

Literally hundreds of objections flooded in to the New York Court from around the world, including from France, Germany, Belgium, Italy, Spain, UK, Switzerland, Japan and New Zealand as well as from authors and other concerned parties in the US and Canada. European Governments objected, as did the US Department of Justice. Few voices in support were heard.

The proposed settlement was complex – at a public hearing held by the European Commission in September 2009 even its principal architects didn’t seem to understand all of its provisions (or at least pretended not to). The concerns were wide-ranging and focussed principally on:

• how it would overturn accepted notions and international agreements relating to copyright (it would “expropriate rights of individuals involuntarily”),

• how it would have major anti-competitive effects by entrenching Google’s monopoly in search (“Google’s ability to deny competitors the ability to search orphan books would further entrench Google’s market power in the online search market.”) and,

• how it created significant privacy concerns by allowing Google to track what people were reading (“The privacy concerns are real”). (Quotations are from the US Court’s Opinion.)

The US Court agreed with the European and other objectors and found that the proposed settlement was not fair, adequate and reasonable.ICOMP and others will review the fine detail of the judgment over the coming days and weeks. Although a long judgment, it is necessarily condensed and its implications will need to be carefully considered. In the meantime, there are a number of conclusions we can already reach.

First, this was a US Court procedure, based on US rules and considering primarily US interests. That is not a criticism – Google deliberately tried to structure the settlement so as to avoid other jurisdictions. What it shows is that the online ecosystem is global and that European authors and publishers (and those from other parts of the world) were denied the chance to defend their interests on their home territory, and had to do so in the unfamiliar forum of a court in New York. But as a result, they have achieved what they set out to do.

Second, the attempt to dress up the settlement as a way of bringing old books to life has been seen for what it is. Of course, everyone wants to have better access to scientific and literary works. It was at best condescending to suggest the objectors were opposed to disseminating of knowledge. The concerns were that Google was not being straightforward in describing its motives. The small print of the proposed settlement revealed that this was primarily about the world’s largest online advertising company obtaining massive competitive advantages through what the US Court called “wholesale, blatant copying without first obtaining copyright permission”.

Third, what happens now? Millions of works have been scanned already and Google has the data and is using it. To our knowledge, Google has no intention of voluntarily putting right these wrongs and so will maintain its competitive advantages. Whilst the refusal of the US Court to approve the proposed settlement is great news for IP, competition and privacy, it does not tackle the de facto monopoly achieved by Google through the unauthorised exploitation of property belonging to others. One of the objectors wrote to the US Court that Google’s negotiating position was “So, sue me”. We wait to see the evidence of a change in that attitude.

David Wood
ICOMP Legal Counsel

Posted in Book Search, Healthy Marketplaces, Online Marketplace | Comments Off

Mike Weatherley MP on the Launch of Rock The House and the Importance of the UK Music Industry

Tuesday, March 22nd, 2011

The music sector is an important and growing part of the UK economy, representing a £3.9bn industry and acting as a significant source of foreign exports and domestic employment.

I believe that the future of the industry lies in the hands of the up and coming artists and the live music venues that support them. Artists and venues, however, are finding it increasingly hard to break through in a sector where many consumers think it is their right to access content for free. This is likely to be further exacerbated by the Government’s “Intellectual Property and growth” review which will have an impact on the ability of the music industry to be rewarded for the content they create.

Without recognition that music constitutes the creative and intellectual property rights of artists, the future contribution the sector makes to the economy will be in jeopardy. This is particularly bad news for anything outside of mainstream genres and will serve only to stifle the diversity of the British music scene.

With this in mind, I recently launched Rock the House, the first ever parliamentary competition to find the best live band and live music venue in the UK. Designed to capture the imagination of the public and legislators, it aims to promote the intellectual property rights of unsigned and up and coming musicians as well as highlight the importance of live music venues to local communities.

I’ve been astounded at how well Rock the House has been received by other MPs and the public. Many MPs have shown their support for the live music sector through blogging about how they are organising the next stages of the competition locally and in my Hove & Portslade constituency we will be having a ‘Battle of the Bands’ competition in April. It’s also fantastic to have on board Chris Ingham, Group Publisher of Future Publishing, musicians and music professionals, alongside John Robertson MP (Chair of the APPG on Music).

Yet much more needs to be done to support the music industry if the UK is to preserve and protect this sector from intellectual property rights abuses. My hope is that the competition will help to drive awareness of the rights of musicians and encourage the Government to think twice about its potentially hugely damaging proposals that will restrict the ability of musicians and others in the creative industry from receiving the benefits they are entitled to from the content they generate.

For more details or to enter the competition please see www.rockthehouse.me.uk or contact me at
Mike.Weatherley.mp@parliament.uk by the 31st March.

Mike Weatherley MP
Hove and Portslade

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French Privacy Watchdog Bites

Monday, March 21st, 2011

On 21 March 2011, the French Data Protection Authority (La Commission Nationale de l’Informatique et des Libertés – CNIL) announced that it had imposed a record fine of €100,000 on Google for legal infringements relating to Google Maps, Street View and Latitude.

The background was the collection of personal data by Google from unsecured Wi-Fi networks, widely known as Spi-Fi. The French Data Protection Authority considered that these activities were in breach of French data protection rules and put Google on notice in May 2010 to correct its behaviour. It was the failure to respond to this notice that led to the imposition of the fine.

The Authority stated that the purpose of Google’s infringing activities was to develop a high performance database for its GPS services and by those means to develop a dominant position in the market for GPS services.

The French Data Protection Authority also described how following various inconsistent statements of Google as to what data had been collected and why, it told Google to stop the infringing activities and to hand over a complete copy of the captured data. The Authority found that Google had registered not only SSID and MAC addresses for Wi-Fi access points but also lots of personal information including passwords, emails, as well as information relating to the health and sexual orientation of individuals.

In its decision, the Authority remarked that although Google has undertaken to put an end to the Spi-Fi activities of “Google Cars”, it has not undertaken not to use all the information illegally collected. The Authority also noted that Google has now found a different means to collect the data it needs for its GPS services: smartphones and other mobile devices.

The calculation of the fine took into account Google’s refusal to accept the applicability of French law, the seriousness of the infringements and the commercial nature of the benefits derived by Google from its illegal activities. This last point may be particularly significant given that Google has denied ever actually using the data.

A copy of the Authority’s press release (in French) can be found here

Other Data Protection Authorities in Europe continue to investigate and further findings that serious breaches of the law took place are highly likely. A number of criminal investigations are also underway in Europe.

David Wood
ICOMP Legal Counsel

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ICOMP celebrate 10th Council Meeting in Brussels

Friday, March 18th, 2011

ICOMP has celebrated its 10th Council Meeting; its most successful to date. Over 60 attended the meetings in Brussels including professionals from across government, business, legal and academic experts. They gathered to discuss the key importance and complexity of the internet ecosystem that is the online search market.

The key messages emerging from a lively and engaging debate were:-

• The internet is no longer a virtual world but the real world. One in which new business models and interactions are changing the nature of how people do business, and services and goods are consumed.

• Healthy competition in online search is absolutely essential for a dynamic and growing digital economy. Search engines play the fundamental role in enabling customers to make informed choices between different, competing providers of goods and services.

• The principle of search neutrality is at the very core of trust between search engines and their users/customers. Trust should guide search engines in their management of this ‘key infrastructure’ of the digital economy and regulators need to on the watch for abuse of this trust.

The event saw the timely launch of two whitepapers on this key role of search.

The first was an independent study commissioned by ICOMP entitled “The perils of dominance: exploring the economics of search in the information society”. The study was undertaken by leading economists Martin Cave of London School of Economics and Howard Williams, of the Oxford Internet Institute and Professor at Strathclyde Business School. It examines the significant economic benefits of a free and competitive internet, and the real threat posed by the market dominance of one player; Google.

The other study is the third in the series of ICOMP White Papers entitled “Why Search Matters”. This explores of the importance of search in spurring job creation, economic advancement, and innovation in the online space.

Both the commissioned academic research paper and ICOMP white paper provide expert insights into this important and topical debate. They are available here.

The ICOMP Council, presided over by its Chairman; Lord Alan Watson, welcomed three new attendees including representatives of the English Premier League also present was the Chair of ICOMP India; Mr Mahendra Swarup. The Council ratified the appointments as a special advisor of Shivaun Raff, CEO and co-founder of Foundem and leading French lawyer Marie-Anne Gallot Le Lorrier as ICOMP spokesperson in France. Mdm Gallot Le Lorrier is the third of our national spokesperson in Europe joining Herr Dr Christoph Waitz (Germany) and Signor Andres Font Galarza (Spain).

In addition the Council also welcomed the recruitment of seven new members and signatories since its last meeting, including, most notably, SPQN (the French national newspaper union) and the addition of AEDE (Association of Spanish Editors of Newspapers). The number of ICOMP members and signatories now totals 60.

You can read our press statement in full here.

Regards,

The ICOMP Secretariat

Posted in Healthy Marketplaces, Online Marketplace, Search | Comments Off

Google further expands in vertical search

Wednesday, March 9th, 2011

Google has announced its further expansion in vertical search with the acquisition of BeatThatQuote.com. BeatThatQuote.com is a UK-based price comparison engine that provides comparative information on a range of UK financial services products. According to the Financial Times, it competes with UK rivals such as Moneysupermarket.com and Comparethemarket.com as well as providing the underlying technology for price comparison services on other sites.

Google is paying £37.7 million, which may seem a lot for a fledging business which reportedly made a loss of £2 million in the last period for which accounts were filed, but which represents a mere 0.21% of Google’s 2010 revenues.

The proposed acquisition raises a number of troubling questions.

First, it demonstrates another step in Google’s strategy to extend its near-monopoly in search and search advertising to vertical search. We have already seen similar moves in relation to videos, maps, shopping, local directories, travel and real estate so a move into financial services is not surprising – but it is certainly worrying for those businesses already in that space.

Second, it demonstrates the inability of Google to develop its own expertise in vertical search. Instead of innovating, Google seeks to acquire where it can and snuff out the competitive threat of others where it can’t. The massive profits earned by Google from its near-monopoly in search advertising has given it a war chest to fund its boast of acquiring one technology company a month.

Third, Google has loudly and persistently criticised search comparison sites for providing no original content. Apart from the fact that Google itself provides no original content, Google has imposed search penalties on vertical search engines with dramatic adverse effects on a number (perhaps many) vertical search businesses apparently for this very reason. The lawfulness of these penalties is currently being investigated by competition authorities.

Fourth, news reports have pointed out that BeatThatQuote.com appears to breach Google’s rules on paid links that affect page rank. Sites falling foul of these rules have seen themselves penalised and falling down search rankings (including such well-known businesses as JC Penney ). It is unclear whether Google will change its rules to accommodate its new business or whether it will make that business change its practices.

Fifth, it was widely reported that Google had recently modified its search algorithm to ‘weed out’ lower quality sites. There has been a widely held suspicion that modifications to the algorithm take place just before Google launches a new service or announces an acquisition. Many will question whether the recent modifications to the algorithm were intended to smooth BeatThatQuote.com’s admission into the Google stable rather than to improve the quality of search results.

Sixth, there is solid evidence that Google prefers its own services in search rankings.If and when BeatThatQuote.com gets to benefit from the same favourable treatment, other financial services comparison sites will suffer from a competitive advantage that will be impossible to overcome given Google’s near monopoly in search. It will also mean that consumers will be deprived of choice and be directed not to the best site but to Google’s own service. Worse, consumers may well not even be aware that they are seeing biased search results.

Finally, no announcement has been made as to which regulatory authorities will get a chance to review this transaction. The closest connection seems to be to the UK which operates what is known as a ‘voluntary’ merger notification regime: this means that parties do not have to notify acquisitions which meet the relevant thresholds in order to obtain clearance but must take their own views on whether to do so. The counterpart to this is that the UK Office of Fair Trading can review those acquisitions even if they have not been notified.

Anyone with concerns about Google’s acquisition of BeatThatQuote.com has two possibilities. First, the European Commission is currently investigating Google’s behaviour relating to vertical search. They welcome third party comment on how competition is being affected. Second, the UK Office of Fair Trading is likely to be considering whether to review the acquisition to determine if it is likely to lead to a substantial lessening of competition in the UK. They too would no doubt welcome the views of any third parties who can shed light on that question.

David Wood
ICOMP Legal Counsel

Update: SEOBook reports that BeatThatQuote.com has in fact been penalised by Google but adds that the penalty will be irrelevant because the news coverage from the acquisition will more than outweigh the effect of the removal of the paid links in affecting its ranking.

Posted in Online Marketplace, Search | Comments Off

Independent Review of Intellectual Property and Growth: ICOMP submits evidence

Monday, March 7th, 2011

Following Friday’s deadline, ICOMP has today (March 7th 2011) published its written submission to Professor Ian Hargreaves’ Independent Review of IP and Growth (The Review).

In submitting our evidence, which can be viewed here, we welcome the opportunity to respond to The Review and engage on a topic we see as fundamentally important to the sustainable growth of the Internet.

The Review is likely to draw upon evidence from a great many interested parties, some of which will be based on a particular industry perspective or a company’s short-term revenue interests. Recent press articles, notably Jeremy Warner’s Intellectual Property reform cannot be dictated by Google and Andrew Orlowski’s British biz roasts Hargreaves’ ‘Google Review’, have warned against the dangers of weakening content creators’ rights, and thereby damaging the UK’s creative industries, in the hope that, from the ashes of one of the “crown jewels” of British industry, a new Google of Facebook might emerge.

We see a balanced, fair IP framework as key to the continued growth of the Internet as an engine of the economy. In order to succeed therefore, the Review must distil from a no doubt complex range of submissions a workable, sustainable vision for IP rights in the 21st Century. We believe the Review should be guided by the following core principles and outcomes against which all proposals should be measured:

• The IP system should promote the creation and availability of quality content, without which the Internet could not survive.
• The IP framework should support the “virtuous cycle” of the Internet that benefits creators, online services and intermediaries, infrastructure providers, and consumers alike.
• Given the inherently cross-border nature of the Internet and online commerce, the UK should maintain an IP framework that is harmonised with other EU member states.

Regards,

The ICOMP Secretariat

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