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From Antitrust Law Daily, April 15, 2015

EC sends statement of objections on Google search services, opens probe on Android

By Greg Hammond, J.D.

The European Commission (EC) has sent Google a Statement of Objections, asserting that the company abused its dominant position in the general Internet search services markets in Europe by continually favoring its own comparison shopping product in search results. The EC additionally opened a separate, formal antitrust investigation into Google’s conduct concerning its mobile operating system, Android.

Comparison shopping services. With a 90 percent market share in most European Economic Area countries, Google has a dominant position in providing online search services throughout most of Europe, according to the EC. The Commission is concerned that Google users do not see the most relevant results in response to queries in Google’s comparison shopping services product, “Google Shopping,” which is detrimental to consumers and competitors and stifles innovation.

Specifically, the Statement of Objections alleges that Google treated “Google Shopping” and earlier service, “Google Product Search,” more favorably in its general search results pages than competing comparison shopping services.

The EC’s preliminary conclusions are: (1) beginning in 2008, Google has regularly positioned and prominently displayed its comparison shopping service in general search results pages, regardless of whether the results are the most relevant; (2) Google does not apply the “system of penalties” to its own comparison shopping service, which affects ranking in search results; (3) Google’s first comparison shopping service, “Froogle,” performed poorly; (4) by favoring its newer comparison shopping services, the services had higher rates of growth, which negatively affected competing comparison shopping services; and (5) Google’s conduct has negatively impacted consumers and innovation because users may not actually see the most relevant comparison shopping results, and competitors understand their product will not benefit from the same prominence as Google’s product.

“Our preliminary view is that to remedy this conduct, Google should treat its own comparison shopping service the same way in its general search results as its rivals,” stated EU Commissioner in charge of competition policy, Margrethe Vestager. “To be clear, we would not want to interfere with Google’s design choices or how its algorithms work. Rather, the purpose of such a potential remedy would be to ensure that consumers see the best comparison shopping results. They should not just be shown Google’s own shopping results, if they are not the most relevant response to a particular query.”

“[W]e respectfully but strongly disagree with the need to issue a Statement of Objections and look forward to making our case over the weeks ahead,” stated Google Search Senior Vice President, Amit Singhal in a Google Europe Blog post. “[I]f you look at shopping—an area where we have seen a lot of complaints and where the European Commission has focused in its Statement of Objections—it’s clear that (a) there’s a ton of competition (including from Amazon and eBay, two of the biggest shopping sites in the world) and (b) Google’s shopping results have not the (sic) harmed the competition.”

Android investigation. The EC has also opened a formal investigation against Google to investigate whether Google’s conduct with regard to its Android mobile operating system, apps, and services violated EU antitrust rules. Specifically, the EC will determine whether Google, by entering into anticompetitive agreements or through abusing its dominant position, illegally prevented the creation and market access of competing mobile operating systems, mobile communication applications, and services in the European Economic Area.

Commissioner Vestager identified three areas in which the EC will focus its investigation: (1) whether Google required or incentivized smartphone and tablet manufacturers to exclusively pre-install Google’s own applications or services, such as its search engine; (2) the alleged bundling of certain Google products with other apps and services; and (3) whether Google is hindering smartphone and tablet manufacturers’ abilities to use and develop other open-source versions of Android.

“Smartphones, tablets and similar devices play an increasing role in many people’s daily lives and I want to make sure the markets in this area can flourish without anticompetitive constraints imposed by any company,” Vestager stated.

Google disagrees with the EC’s preliminary findings, noting that Android has created more mobile choice and innovation than ever. “We are thankful for Android’s success and we understand that with success comes scrutiny,” said Android VP of Engineering Hiroshi Lockheimer in a Google Official Blog post. “The Android model has let manufacturers compete on their unique innovations. Developers can reach huge audiences and build strong businesses. And consumers now have unprecedented choice at ever-lower prices. We look forward to discussing these issues in more detail with the European Commission over the months ahead.”

Companies: Google Inc.

MainStory: TopStory Antitrust

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