Introducing... A call for greater competition
Competition issues are coming to the fore in Brussels and beyond; as European Competition Commissioner Joaquin Almunia decides to take a closer look at antitrust issues in Europe, eyes should also be cast more further afield to explore the cumulative impacts of Google's recent succession of acquisitions in the United States, as well as its hotly debated partnership plans with Yahoo! Japan.
Furthermore, as location based services move into the mainstream and mobile internet usage more widespread, the mobile marketplace is emerging as the new competitive battleground, as Apple's new iAds platform is positioned as a competitor to the dominant AdMob.
ICOMP in this month's newsletter, issues a call to action to promote market best practice and regulatory reform that protects today's new online innovators from market activity that may close the doors to success tomorrow.
Contents of today's ICOMP newsletter:
» Why the competition is not a click away
» Inside Brussels
» ICOMP Updates
» In the News
Why the competition is not a click away
By ICOMP Secretariat
The Financial Times ran a series on the global search advertising marketplace in July that raised considerable questions. At stake is not just the future of the 'sponsored links' and online display ads that fund many free services, but also the health of a new $100 billion economy that has grown up around the search bar. Search is now the primary gateway to a emerging global industry that has put millions of businesspeople just a few clicks away from billions of potential customers.
Industry leaders, influencers and politicians are increasingly considering whether Google's dominance of Internet search distorts the market and as such, warrants closer regulatory scrutiny. To adequately address this question, the widely held viewpoint that the competition is one free click away in search advertising needs to be clarified.
Firstly, this viewpoint is based on the narrow perspective that the only customers of search providers are the public. The reality is that in a multi-sided market such as search, there are many types of 'customer' including those individuals and organisations that bid to have their services advertised as 'sponsored links' in response to search queries related to their products or services.
Secondly, Google's three pronged approach of purchasing (shown this month by its acquisition of Metaweb and ITA); partnerships (with Yahoo! Japan to provide search content, affording the company a near 100% share in the world's second largest online advertising market) and penalties (in France, local authorities filed against Google for its unfair treatment of online GPS company Navx, for removing the company from its search results) culminates in an unassailable competitive advantage in search that makes it ever less viable for advertisers to use any platforms that exist outside of the Googleplex.
It is vital that competition authorities look at these issues through the lens of all customers, including the content creators, advertisers and partners contribute some 99% of Google's revenues. For them, given Google's dominance of search queries – which according to Europe's Competition Commissioner are over 95% in many European markets – the competition is most certainly not one click away.
So what does all this mean? In short, Google's huge market power means it has a special responsibility not to harm competition. It should ensure its search results are fair, transparent and objective. Fairness implies that everyone gets a chance to be found, transparency helps things get put right when they go wrong, and objectivity means that Google should not favour its own commercial services over those of others. These will not ensure that competition is one click away – but make it more likely to happen.
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Brussels regulators scrutinise online marketplace
By Michiel van Hulten, ICOMP Secretariat
Brussels regulators are paying close attention to developments in the online search and advertising market. Speaking at a competition law conference in London on 7 July, European Competition Commissioner Almunia said: "My services are currently examining some allegations of anti-competitive conduct in relation to search. The work is at an early stage, but given the importance of search to a competitive online marketplace, I am looking at the allegations very carefully."
This was the first time the Commission commented publicly on the issue since February, when UK price comparison site (and ICOMP member) Foundem, along with the German site Ciao and the French e-Justice, lodged formal complaints with the Commission about alleged abuse by Google of its dominant position in search. "If companies do establish themselves in a strong position on a market, there may be risks that they will use this position to foreclose other markets," Almunia said, without naming the search giant directly.
"If results on a search engine for instance are being manipulated, it may well make a difference on the market if consumers know about it," Almunia stated in his speech, adding: "The principles of competition must be maintained in the digital economy with the same intensity that they are imposed in the brick and mortar world" to ensure that the sector "grows to its full potential," which has been outlined as one of the key objectives of the new EU2020 strategy set out by Commission President Barroso earlier this year.
"By enforcing competition, I want to ensure that no firm able to provide value, create or expand a market in whatever way is prevented from doing so through anticompetitive foreclosure," Almunia concluded.
Complainant Foundem conducted an analysis that showed that after Google changed its search algorithms in autumn 2009, traffic for Google's own search services rose by 130% in the UK and 1200% in the US while other search engines (such as Foundem) suffered sharp decreases, according to Shivaun Raff, co-owner of Foundem, who was speaking at a ICOMP High-Level Roundtable on the implementation of Europe's Digital Agenda that took place in Brussels on 22 June.
In a recent editorial the Financial Times backed closer scrutiny of Google's market dominance, writing: "It would be wrong for Google to be hamstrung by regulators simply because its services are superior to rivals, but it needs to be watched with care. Google is not obviously being evil but it is such a powerful technology company that it has the potential to go astray." ('Google should be watched carefully', 16 July)
National competition authorities are also playing close attention to Google's activities. On 30 June, a French competition watchdog accused Google of unfair practice by blocking the Navx, a provider of online road travel data, from taking advertising on its website.
In the European Parliament, senior MEPs from across the political spectrum have backed the Commission's stance. The Commission can fine companies up to 10 percent of global turnover for breaching EU competition rules.
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ICOMP Intellectual Property on the Internet: The Search for Sustainable Business Practices (London, 12th July 2010)
By ICOMP Secretariat
July 12th 2010 marked the launch of the latest ICOMP White Paper on intellectual property rights (IPR) entitled "Intellectual Property On The Internet: The Search For Sustainable Business Practices".
The event, which took place at Copyright House consisted of a cross-industry panel discussion involving David Wood, Andrew Orlowski, Executive Editor of The Register, Author Nick Harkaway, Frances Lowe, Regulatory and Corporate Affairs Director at PRS for Music and Premier League spokesman Tim Vine, following a keynote by chairman of the PRS, Ellis Rich. The event was also well-attended by authors, academics, trade organisations and media owners.
The event was introduced by Ellis Rich as a forum to encourage the discussion of ideas around protecting IP online, preventing copyright abuse and raising awareness of the power of dominant players.
Following the introduction, David Wood introduced ICOMP and its particular concern with adopting a cross-sectoral approach to regulatory issues facing the online world.
The event encouraged discussion and debate around several issues that are important for ICOMP and its members including the current copyright landscape and the need to establish a mature content market that re-establishes a social contract that includes IP, the significance of collective licensing online as a valuable model to bring economies of scale, and the need to find a way to find a route to incentivise all players in the value chain to help build a legal market for content.
Implementing Europe's Digital Agenda: Creating Conditions for a Free and Fair Online Marketplace (Brussels, 22nd June 2010)
By ICOMP Secretariat
ICOMP hosted this roundtable discussion in Brussels bringing together MEPs, officials and representatives from industry and the media to 'market test' ICOMP's 'Internet Imperatives' at a time when the European Council and the European Commission are finalising their policies for the next five years.
The roundtable discussion consisted of two panels:
- IPR enforcement, self-regulation and online trust
- User choice, privacy and transparent business practices
Speakers at these discussions included Jessica Sänger, Börsenverein, Matthieu Moreuil, Premier League, Jonathan Hill, European Commission, Cabinet of Commissioner Vassiliou, Shivaun Raff, Foundem and Howard Williams, Professor Emeritus, Visiting Associate, Oxford Internet Institute, University of Oxford.
Simon Davies of Privacy International was due to speak at the latter panel and was eager to join the debate due to its relevance; however, he was unable to attend the event due to being in London to finalise Privacy International's complaint against Google over the interception of wireless communications that took place around the world as a part of the company's Street View project and sent his apologies.
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In the News
Google and Yahoo! Japan deal
Last month, Google and Yahoo Japan announced that Google will power Yahoo! Japan's web searches. The partnership, due to come into effect in Autumn, will become the dominant player in the world's second largest market in advertising with Yahoo Japan handling more than 50 percent of search queries and Google handling more than 30 percent of search queries in Japan.
Considering the impact this partnership will have on the search market in Japan, David Wood, ICOMP Legal Counsel writes:
"A combined Google/Yahoo! Japan would win almost every bid to provide online advertising services or search syndication deals. It would deprive their competitors of the necessary scale to continue to compete in these markets. It would also increase the ability of Google and Yahoo Japan! to exercise their market power by increasing advertising prices whilst at the same time reducing the share of advertising revenue paid to online publishers. There should be very great concern that Google would achieve a near-monopoly position in Japan, given the many significant antitrust investigations taking place in countries where it has already acquired a near-monopoly position"
See here for the full post.
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