ICOMP

This week Lord Watson, ICOMP’s Chairman, had a letter to the editor published in The Economist. His letter highlighted the various antitrust issues facing the online marketplace.

The letter, which was published on July 21st 2011, is attached in full below.

Regards
The ICOMP Secretariat

Internet competitiveness

SIR – Your article on the antitrust issues facing Google glossed over the fact that the online marketplace sees itself as under attack from Google in several significant ways (“Google’s enemies”, July 2nd). Google is the overwhelmingly dominant online connection for customers to business. This dominance, along with its restrictions on access to YouTube and its book-scanning project, are real causes of concern, not least to artists, authors and other content creators.

Google uses Universal Search to leverage its dominance in a panoply of online markets, including video, e-commerce, vertical search, mobile and social media. This follows a spate of strategic acquisitions that has rightly attracted regulatory interest because of the destructive impacts on competitors in each market.

The websites of these highly innovative competitors can be downgraded, penalised and occasionally removed without warning. The well-documented cases of Foundem, OneNewsPage and eJustice.fr are cases in point. The exclusion of competing search engines from Google’s own expanding portfolio of services, and the preferential link provided to it by its Android-powered platforms, suggest its dominance is extending into the rapidly growing mobile world.

Concerns about these anti-competitive strategies are shared by all of us who want an open and trusted internet that enables knowledge and commerce, while empowering citizens and customers. They are echoed by regulators engaged in multiple investigations around the world. It is clear that real competition in search is far from being a click away, and that creativity and true innovation face the delete button.
Lord Watson of Richmond

Chairman
Initiative for a Competitive Online Marketplace
London

On Saturday 16 July, Le Soir, Belgium’s leading Francophone daily newspaper, had a rather unusual front page. News of one long-running saga – the struggle to form a new federal government more than a year after the parliamentary elections – was replaced by another: the battle between Google on one side and Belgium’s Francophone press on the other. The front page illustration was a Google search screen with the text ‘Belgian Francophone newspapers censored’(‘les journaux francophone belges censurés’) in the search box.

The previous day Google had removed French-language Belgian newspapers from its search engine results. The move by Google looked like a retaliatory measure following the most recent decision in a long-running legal battle between Google and Belgium’s French- and German-language newspaper copyright management company, Copiepresse.

Copiepresse had challenged Google’s use of its members’ articles in Google News without permission. After a succession of victories for Copiepresse in the Belgian Courts, the Brussels Court of Appeal found against Google at the end of May 2011 and banned Google from publishing articles from the Belgian newspapers on its Google News service, on pain of a daily fine of €25,000 and pending calculation of damages.

Google’s response was dramatic – to remove the Belgian newspapers from its search results, and not just from Google News. Google claimed that it did this in order to comply with the Court’s judgment. The Belgian newspapers, however, saw this as retaliation and reacted with threats of filing a legal complaint with the Belgian Competition Council.

Le Soir ran the story on its front page, as its leader and on the front of the business section, reminding readers that Google is also “the world’s largest ad agency”. La Libre Belgique (another leading French-language Belgian daily newspaper) provided a guide to finding its articles, instructing readers to type in its website URL and not to use Google.

However by Monday, Google’s ‘boycott’ was over. The newspapers reappeared on Google’s search results, with Google saying that it had received permission from Copiepresse to add its sites back to Google search results, as well as assurances that Copiepresse would not claim copyright infringement in respect of mere listings. The newspapers also had to agree to follow practices such as robots.txt and metadata (excluding itself from crawling) in order to be restored.

The implications are obvious. Google controls the gateway to the Internet and you appear in its search results on Google’s terms or not at all. This is precisely the kind of behaviour that has incensed online companies from all sectors and around the world. Instead of providing a stable platform for innovation, economic growth and the dissemination of content and information (including media plurality), Google’s search service has increasingly become a tool to sell Google’s advertising and related services.

This is a massive conflict of interest and is being exercised in a way that destroys competition, causes consumer harm and damages the public interest. The only surprising aspect is that Google should have acted in such a heavy-handed and oppressive manner at a time when its conduct is under investigation from antitrust authorities around the world. It is likely that those authorities (particularly the ones based in Brussels) will have taken due note and added one more example of abusive behaviour to a growing pile.

By David Wood,
ICOMP Legal Counsel

Google is currently subject to what it should find a worrying number of antitrust investigations around the world. Much of its defence has so far been disingenuous (“we don’t understand their concerns”) or technical (“even a 90% share of search and search advertising does not make us dominant”).

If and when these investigations reach the conclusion that Google’s past and present behaviour does in fact breach EU rules prohibiting the abuse of a dominant position or US rules on monopolization, a decision will need to be taken as to what needs to be done to put right the wrongs done. Punishment and deterrence are obviously important, and competitors which have been damaged or put out of business by Google’s practices may also decide to have recourse to the Courts.

However, the key question is how to restore effective competition in online markets where Google has been exercising its market power to harm the competitive process.

This question has started to exercise minds across the online ecosystem. It is clearly not simply a question of putting an end to certain practices if the existence of those practices has given Google an enduring competitive advantage for the future. Similarly, greater transparency is most unlikely to redress the competitive harm on its own since it cannot address the underlying imbalance of power.

Under the European Union competition rules, the European Commission can impose “any behavioural or structural remedies which are proportionate to the infringement committed and necessary to bring the infringement effectively to an end”.

Typical behavioural remedies include: putting an end to contracts or contract terms which result from or give rise to unlawful behaviour; non-discrimination obligations; and requirements to supply products, services or information etc.

Structural remedies usually involve obligations to dismantle or separate control over infrastructure, so as to ensure that a dominant position over all or part of the infrastructure cannot be used to gain an unfair competitive advantage in downstream or adjacent markets. Structural remedies are less common than behavioural because they are considered to be more radical in nature and are only preferred where behavioural remedies are shown to be inadequate.

The public debate on which remedies are necessary to restore effective competitive has been gathering pace. There are proponents of both structural and behavioural remedies – and it may be that a combination of both will be required. In any event, designing appropriate remedies is a matter in which everyone involved in the online ecosystem should take an interest.

David Wood, ICOMP Legal Counsel