Archive for the ‘Online Advertising’ Category

CNIL Continues Investigation – UPDATE

Thursday, February 28th, 2013

On 16th February 2013, France’s National Commission for Computing and Civil Liberties, (CNIL) announced that in response to Google’s Privacy Policy, it would be forming a working group “in order to coordinate their repressive action which should take place before summer”. The probe itself focused on the degree to which the Privacy Policy directly impacts the personal privacy of its users.

This latest announcement indicates that not only has the Data Protection Authority found that the concerns it was investigating are valid, but the advertising giant has also proven to be non-cooperative throughout. The CNIL’s statement noted that Google had not provided “any precise and effective” responses in answer to an EU-wide investigation and that this was a deciding factor in the continuation of the investigation. This has in fact been the disposition of Google throughout the process.

Going back as far as May 2012 just 8 weeks after concerns were initially voiced, the French Data Protection Authority (the CNIL) wrote to Google expressing its regret that responses to earlier questionnaires concerning Google’s privacy policies were “often incomplete or approximate”.

A further indication of Google’s disassociation and even disregard for Europe’s DPAs has been its ever present statement in response to media enquiries, which has not changed at all since the start of the investigation, even though the circumstances have evolved. The statement itself in fact seems to be completely at odds with that of the CNIL, with Google expounding on-going engagement and coordination whilst the regulators saying the complete reverse.

ICOMP Director Auke Haagsma said, “As ICOMP’s director with responsibility for our Privacy Working Group I have been meeting with a number of lawyers, regulators, media and other concerned parties around Europe to discuss how to get the right balance on privacy. One thing stands out from all these conversations: people want to be able to trust that companies to whom they give sensitive personal information use that information very carefully and in full respect of their privacy. Google’s attitude towards the CNIL specifically and European Privacy rules generally seem to fly completely in the face of this reasonable expectation.

Just two days after it refused to even respond to the CNIL and provide clear explanations to the users of its products on what personal data it collects and what it will use this for, Google’s Global Privacy Counsel called Europe’s privacy rules “whacky” and  “hopelessly vague”.  His view is very simple: if Europe wants “fast innovation” which is “the only hope to maintain high rich-world living standards for our aging Western societies” it has to allow Google to act as it pleases, if it wants to protect the privacy of its citizens Google will offer them “slower, less-cutting-edge services”. 

ICOMP will continue to conduct conversations with members, interested parties and media across Europe about digital privacy. The Initiative would like to see Google take this investigation seriously by cooperating with the CNIL, working on behalf of Europe’s citizens to protect their privacy and personal data.

UPDATE, 27 February 2013:

The CNIL has today expanded on an earlier announcement that it would be undertaking coordinated “repressive action” against Google “before the summer” by announcing that the company would be called to appear before a group of EU data privacy watchdogs “in the coming weeks” to answer for its failure to bring its privacy policies into line with European legislation despite being given ample time and opportunity to do so. ICOMP welcomes this decisive step to protect consumer privacy from the pernicious conduct of one dominant player in the online market. 

 

Regards,

The ICOMP Secretariat

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ICOMP Statement: What’s required for a successful settlement?

Friday, February 1st, 2013

“To be seen as a success, any settlement must include specific measures to restore competition and allow other parties to compete effectively on a level playing field.”

“Any settlement must include explicit acceptance by Google of its dominance and that it has damaged European businesses through its anti-competitive practices.”

David Wood, ICOMP Legal Counsel

ICOMP is pleased that Google has finally offered proposed actions to address its 90% plus dominant market share of Europe’s search and search advertising markets. However, we note that this is just the first step and, as Google’s previous attitude to both voluntary and binding commitments has shown, we need to be diligent in ensuring that these proposals are both effective and can be closely monitored to ensure compliance.

There are more than twenty formal complainants in this case from all sides of the online economy, including ICOMP and a number of its members. We all look forward to assisting the Commission in assessing Google’s proposed remedies, once they have been made public. However, in the meantime it is clear that for any settlement based on these proposals to be considered a success there are a number of criteria that must be satisfied.

In May 2012, Vice President Almunia outlined four areas of concern with Google’s practices and behaviour. It is clear that each of these must be fully addressed by Google’s proposals and under-pinned by measures that ensure enforceability and transparency.

In addition, Vice President Almunia has himself publically stated that he believes that Google is dominant and that “my conviction is they are diverting traffic [to their own service]”[1]. Any settlement must recognise and include explicit acceptance by Google of this dominance and that its actions as a dominant player have damaged European businesses through the use of anti-competitive practices.

Almunia has also stated on several occasions that rapidly restoring effective competition, not just ending anti-competitive practices is his goal. To be seen as a success, any settlement must therefore include specific measures to restore competition and allow other parties to compete effectively on a level playing field with Google in the key markets of search and search advertising.

This is essential in order to address not just current unlawful practices but also to ensure that Google is not allowed to profit from the fruit of its illegal behaviour.

1] As reported by the Financial Times 10th January 2013 http://www.ft.com/cms/s/0/42a827b2-5b24-11e2-8d06-00144feab49a.html#axzz2JTjv4xab

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Google’s submission: what happens next?

Friday, February 1st, 2013

Google has submitted a settlement offer to remedy the effects of its anticompetitive behaviour. What happens next?

Below is a simple flow-diagram which outlines the procedure we should expect to see the investigation following in the coming weeks.

Kind regards

ICOMP Legal Counsel

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The Root of the Google Problem: a Conflict of Interests

Friday, February 1st, 2013

Competition authorities in Europe and other jurisdictions are investigating claims by dozens of companies and associations that Google is abusing its monopoly power in search, search advertising, and other markets.  Many of these claims come down to a fundamental conflict of interests at the heart of Google’s business model which acts to the detriment of both consumers and online businesses, and ultimately causes great harm to jobs, growth and innovation.

The conflict of interests stems from Google’s role as a supposedly neutral search engine serving the interests of its users, and its interests in driving profits through advertising (the source of 96% per cent of its revenue last year). This conflict was even described as long ago as 1998 by Google co-founders Sergey Brin and Larry Page in their seminal work “The Anatomy of a Large-Scale Hypertextual Web Search Engine”.  In that paper, Brin and Page describe their expectation that “advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumer.” As they go on to say, “this type of bias is very difficult to detect but could still have a significant effect on the market. Furthermore, advertising income often provides an incentive to provide poor quality search results.”

It is true that many businesses face similar conflicts, but in the Commission’s view (explained in the Guidance on its Enforcement Priorities in applying Article 102 and supported by many other antitrust agencies around the world), it is the combination with Google’s unassailable dominant position across a growing range of markets that poses such a major threat to competition.

Google’s effective monopoly in search allows it to play a gatekeeper role to the Internet. The fact that Google is able to exploit its conflicts of interest to advance its own commercial goals in ways that run directly contrary to the interests of business users and consumers is evidence in itself of Google’s market power.  In a competitive market with effective alternatives to Google, Google’s behaviour would be constrained by the threat of loss of market share.  Absent such competition Google therefore has a special responsibility as a dominant undertaking not to distort competition more than it has already been distorted.

As long as it persists in abrogating this responsibility, the impact of Google’s conflict of interests will continue to be felt across the online marketplace, on advertisers, publishers, vertical search providers and, latterly, mobile phone operators and manufacturers. Just as important is the impact on consumers who (though Google does a very good job of hiding this from them), are paying for Google’s conflict of interests with the personal data they surrender, the lack of choice they are forced to accept and ultimately the dearth of innovation which arises from an uncompetitive marketplace.

It is now incumbent on regulators to eliminate the Google conflict of interests by ensuring that Google no longer has the opportunity and incentive to leverage that dominance into and harm competition in other markets.

Regards,

The ICOMP Secretariat

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Almunia issues strongest warning yet to Google

Friday, January 11th, 2013

Last night, the European Commissioner for Competition Joaquin Almunia issued his clearest criticism to date of Google’s business practices, revealing to the Financial Times his “conviction” that Google “are diverting [search] traffic”. “They are monetising this kind of business, the strong position they have in the general search market and this is not only a dominant position, I think – I fear – there is an abuse of this dominant position,” Mr Almunia remarked.

These comments represent a stark contrast to the stance taken by the US Federal Trade Commission at the start of the month. After a shorter investigation into Google’s alleged abuse of dominance, the FTC opted for what ICOMP member Marc Pinter-Krainer called  “light-handed approach” and let the company off with a voluntary agreement in respect of two other abusive practices being investigated by the European Commission but nothing with respect to the way it orders its search results. In the aftermath of the Federal Trade Commission’s decision, ICOMP called upon the European Commission to take a more robust approach on behalf of the online community and Mr Almunia’s remarks last night constitute a welcome statement of intent to do so.

Indeed, dismissing suggestions that his position would cause a breach with the US, Mr Almunia said: “I have never received a single message coming from the other side of the Atlantic saying, ‘hey, what are you doing?’ Everyone knows this is global.”

Google is thought to have argued that a simple way to remedy the harmful business practices at the heart of this investigation would be to label more clearly Google’s own services which Google is artificially elevating to the top of its search results. However this cosmetic measure would not solve the underlying issue that Google continually leverages its vast reserves of advertising revenue to dominate new markets and destroy competitors. Moreover, labeling will not repair the egregious damage Google’s behaviour has already caused to hundreds of companies in the online marketplace.  Still less would it address the market power that Google has grabbed through unlawful practices and the need to restore effective competition.

It is worth noting that Mr Almunia also mentioned the fact that the EC’s investigation was, quite rightly, focused on “the way [Google] present their own services” and that he was “not discussing the algorithm” – the method used to determine the ranking of search results. ICOMP welcomes this announcement: the key solution is not to require Google to divulge its business secrets but to ensure it applies the same algorithms to all sites, both its own and its competitors.

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Online Travel Sector Faces a Significant New Challenge

Thursday, August 16th, 2012

Google has stepped up its assault on the online travel sector by announcing the acquisition of Frommer’s, the leading online and print travel guide business.   Frommer’s follows earlier acquisitions of ITA, the number one travel software and database provider, and Zagat, the leading restaurant review site.  These acquisitions are part of a strategy to leverage Google’s monopoly of search and search advertising into closely related adjacent markets, such as online travel.  The strategy has several components.

First, by monopolising vital sectors such as online travel, Google increases the amount of data it captures and entrenches its super-monopoly position in search.  The importance of scale in search is widely recognised, including by Google.  Scale in search is about not only numbers but the quality of the search results.  The more queries that are made, the more relevant the results are likely to become.  It is already impossible for rivals to compete effectively with Google in search because of the much greater scale that Google has achieved and this deal will only lengthen that gap.  In Europe, with the multitude of languages used for search queries, the gap is probably insurmountable as things stand.

Second, the strategy harms the ability of competitors in the online travel space to compete with Google and create rival pools of consumer data.   Google achieves this through its manipulation of search results and its discriminatory practice of directing consumers to its own results, rather than to objectively the most relevant sites.  By granting preferential search rankings to its own sites, Google demotes rivals to places in the listings where consumers are much less likely to click on them.  It has done this in other sectors and can be counted upon to do so in travel, unless prevented by regulators.

Third, it has a chilling effect on other online content providers who must fear Google’s ability to enter their markets at will and undermine their ability and incentives to compete.  Google is in a unique position as the owner/operator of the monopoly search platform to oversee the efforts of others to develop their online activity.  Where it sees others succeeding, Google can cherry-pick those ideas and launch its own competing commercial services, to which it grants highly uncompetitive advantages.  As such, there is a huge disincentive to invest in activities which Google might  decide to compete with.

The implications stretch far beyond attempts to monopolise travel guides or restaurant review sites.  In the immortal words from All the President’s Men: “Follow the money”.  Here, the money is in advertising.  Google generates about $2 billion to $3 billion per year from selling travel-related ads on its search engine and hotel- and flight-booking service, according to Herman Leung, a stock analyst at Susquehanna International Group LLP. Google entrenches its monopoly in search, and thereby protects its monopoly in search advertising.  Google extends its monopoly into online travel, and thereby monopolises travel-related ads.  Google discriminates in favour of its own local content sites, and thereby creates the conditions to monopolise local ads. 

These effects are felt not only by brands faced with a single outlet for their search, travel or local ads.  Rivals demoted in search rankings will effectively be obliged to increase their advertising spend with Google to regain some prominence with consumers.  For Google, it is a win-win situation.  For its rivals, it is lose-lose.

Consumers should care about these changes.  There may be superficial or short-term improvements in certain activities.  But the actual and potential downside is enormous.  Google’s acquisitions are not competition on the merits.  They are financed by deep pockets filled by years of monopoly rents in search-related advertising.  They are strategically designed to entrench Google’s monopoly and to snuff out any competitive threat to Google.  They reduce choice and destroy incentives to invest in jobs, growth and innovation.

It is so far unclear what regulatory hurdles Google will have to surmount to complete its purchase.  It can be assumed that the authorities will want to take a very close look at the competition implications of the proposed transaction and may well want to impose conditions, such as commitments not to discriminate in favour of Frommer’s in search rankings.  In any event, as with all of Google’s strategic acquisitions, this is a worrying development in which all other providers of online content will want to take a close interest.

ICOMP Legal Counsel, David Wood

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News analysis: Exploring payment models for online publishing

Friday, January 29th, 2010

Aside from Apple’s major announcement, the past weeks have seen heated debate on the subject of pay walls. With the New York Times recently announcing its pay wall plans and the London Times set to follow suit, voices have emerged both questioning a percieved reliance on the pay wall model as a form of ‘salvation’, as well as those commending the subscription approach for the potential for online advertisers to be associated with ‘premium’ quality content. It has attracted so much attention that it led The Economist to label 2010 as “The Year of the Pay Wall”.
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A busy week for ICOMP

Friday, May 1st, 2009

This week ICOMP both put on a conference in Brussels and hosted a session at the Internet World Expo in London.

Monday’s conference was on the subject of Privacy and Competition and focused on the best ways to improve privacy practices on the internet. This covered the ways in which regulators use the ‘carrot and stick’ approach of encouraging high standards and prosecuting offenders. It also looked at the ways in which the competition rules need to take into account the effects on privacy of business behaviour.
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