The European Commission has extended the scope of its investigations into Google’s alleged breach of Article 102 of the Treaty on the Functioning of the European Union (TFEU) by abusing of its dominant position in the market (case numbers 39740 and 40411).
On 14 July 2016 the Commission sent two Statements of Objections to Google. In one, a supplementary Statement of Objection presents additional evidence and data that reinforces the Commission’s preliminary views that Google’s comparison shopping services breach EU rules. In the other, a new Statement of Objections call into question Google’s abusive conduct with regard to certain advertising-related practices. Furthermore, the Commission initiated proceedings to Google’s parent company Alphabet. The two Statement of Objections are addressed to both companies.
The anticompetitive and abusive character of Google practices in the online search and search-related markets has been reported by numerous complainant and organisations representing businesses operating in digital markets such as Fair Search and Icomp.
We outline below each of the Commission’s new initiatives.
The extended investigation on comparison shopping
The Commission has adopted a supplementary Statement of Objections which reinforced the previous investigations into Google’s practices concerning the online shopping market (a first Statement of Objections was issued in the same case in April 2015), and its preliminary conclusion that Google has abused its dominant position by systematically favouring its comparison shopping service in both positioning and display of its own products in its search result pages.
Following the steps taken in April 2015, the Commission has now carried out further investigations into Google’s response in September 2015 as well as following on from the information collected from complainants and informed third parties. The supplementary Statement of Objections outlines a broad range of additional evidence and data that reinforces the Commission’s preliminary conclusions that Google has abused its dominance. According to the Commission the additional evidence relates, amongst other things, to the way Google favours its own comparison shopping service over those of competitors, the impact of a website’s prominence of display in Google’s search results on its traffic, and the evolution of traffic to Google’s comparison shopping service compared to its competitors. The Commission’s concern is that Google’s behaviour might prevent users from seeing the most relevant results in response to queries, hindering consumers’ choice and stifling innovation.
The Commission has examined in detail Google’s argument that comparison shopping services should not be considered in isolation, but together with the services provided by merchant platforms, such as Amazon and eBay. However, the Commission continues to consider that comparison shopping services and merchant platforms belong to separate markets. The supplementary Statement of Objections finds that even if merchant platforms are included in the market affected by Google’s practices, comparison shopping services are a significant part of that market and Google’s conduct has weakened or even marginalised competition from its closest rivals.
The supplementary Statement of Objections allows the Commission to reinforce its preliminary conclusions and address points the company has raised in its reply to the first Statement of Objections. It also protects the company’s rights of defence by giving it an opportunity to respond formally to additional evidence. Google and its parent company Alphabet have 8 weeks to respond to the supplementary Statement of Objections.
The new investigation on AdSense
Separately, the Commission has sent a new Statement of Objections that it has abused its dominant position by artificially restricting third party websites from displaying search advertisements from Google’s competitors. According to the Commission, these practices have enabled Google to protect its dominant position in online search advertising. It is alleged to have prevented existing and potential competitors, including other search providers and online advertising platforms, from entering and growing in this commercially important area.
The Commission alleges that Google places search ads directly on the Google search website and also acts as an intermediary on third party websites through its “AdSense for Search” platform (“search advertising intermediation”). These include websites of online retailers, telecoms operators and newspapers. The websites offer a search box that allows users to search for information. Whenever a user enters a search query, in addition to the search results, search ads are also displayed. If the user clicks on the search ad, both Google and the third party receive a commission.
The Commission considers that Google is dominant in the market for search advertising intermediation in the European Economic Area (EEA), with market shares of around 80% in the last ten years. A large proportion of Google’s revenues from search advertising intermediation stems from its agreements with a limited number of large third parties, so-called “Direct Partners”. The Commission has concerns that in these agreements with Direct Partners, Google has breached EU antitrust rules by imposing the following conditions:
- Exclusivity, by requiring third parties not to source search ads from Google’s competitors;
- Premium placement of a minimum number of Google search ads, by requiring third parties to take a minimum number of search ads from Google and reserve the most prominent space on their search results pages to Google search ads. In addition, competing search ads cannot be placed above or next to Google search ads;
- Right to authorise competing ads, by requiring third parties to obtain Google’s approval before making any change to the display of competing search ads.
The Commission preliminary assessment considers that such practices, which have been in place for ten years, hinder competition on this commercially important market. Google and its parent company Alphabet have 10 weeks to respond to the new Statement of Objections.