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Big Holes in Google’s EU Antitrust Defense
Submitted by Scott Cleland on Wed, 2015-04-29 11:15
Google’s EU antitrust defense suffers from “Goobris,” a new word because “hubris” is not big enough to describe the behavior of a single company that denies it is dominant in Europe when it commands >90% share of search, >90% share of search advertising in part via Google Analytics 98% share of ad tracking of Europe’s websites, and 5 of the top 6, billion-user, universal web platforms: search, video, mobile, maps, and browser.
Why else does Google’s EU antitrust defense suffer from big holes?
Consider first the core argument of one of Google’s ablest defenders, Geoffrey Manne, in his WSJ op-ed “Google’s Looming Battle Over Search” today, where it becomes obvious how little Google has given Mr. Manne to work with in defending Google against the EC’s Statement of Objections that charged Google is dominant in search and has abused that dominance by favoring its own Google Shopping comparison service over shopping comparison competitors.
Nevertheless, Mr. Manne concludes “there is nothing here that should worry [EU] antitrust regulators.”
Mr. Manne argues that Google’s dominance in “general search… without differentiation… is fast becoming hopelessly outdated.” “It’s a mistake to consider “general search” and “comparison shopping” or “product search” to be distinct markets.” Specifically, he then claims that since Amazon “has so much data on users it will be able to target ads much better than Google, which now identifies Amazon as its primary competitor.”
This is another Goobris-ian hole in Google’s EU antitrust defense, if Google has to offer Amazon as their “primary competitor” in Europe. Consider these facts.
Google serves every EU member country and commands an average ~90% market share in Europe, while Amazon does not show up in any independent search market share rankings.
Amazon operates in only five of the EU’s 28 member countries; Google operates in all 28.
Amazon is Google’s biggest search advertising customer paying Google hundreds of millions of Euros a year to be discovered by Google’s massively larger European user base.
Amazon has a completely different core business model than Google. Amazon’s paying customers are consumers; Google’s paying customers are advertisers.
Google crawls 60 trillion unique URLs to create its search index of the world-wide-web; Amazon does not crawl or search-index the world-wide-web.
If this is the best defense Google can present publicly, they obviously are in deep trouble.
This week Google also pushed the narrative that because eBay is a strong ecommerce competitor in Europe -- Google can’t be dominant in Europe. This eBay-as-Google-competitor argument also disintegrates once one realizes that the same Amazon arguments and facts above apply to eBay as well.
It is also Goobris-ian for Google to implicitly argue that none of the other major general search engines in the world per StatCounter: Yahoo, Bing, Baidu, Ask Jeeves, & "other," are its primary competitors in Europe!
At core here, Google’s desperate public defense against the EC’s Statement of Objections is effectively Google Chairman Eric Schmidt’s famous boast in 2009 when Google’s dominance became apparent: "Our model is just better… Based on that, we should have 100% share.”
The fatal flaw in Google’s effective main line of defense is that Google can’t be dominant if they can point to a potential competitor that exists in Europe (no matter how tortuously-contrived that “competition” is) when the EU legal threshold for dominance is ~40%.
Does anyone not on Google’s payroll believe that Google’s search competitors can collectively win-back 61% of the European search market in the foreseeable future?
At bottom, Google’s EU antitrust defense is all public relations and not substantive.
Their antitrust defense is a long-shot at best, because it essentially boils down to: Google should not be held accountable to EU law; Google is not dominant in its eyes so it should not be dominant in the EU’s eyes; and Google does not recognize EU law as legitimate since it sets a threshold of market dominance at ~40% and has a law that says that dominant companies have “a special responsibility not to allow its conduct to impair competition on the common market.”
Google’s chauvinistic EU antitrust defense, that America’s greatest company should not have to submit itself to a foreign authority that does not fully appreciate its munificence, is neither smart legal strategy nor smart politics.
Something else in Google’s EU antitrust defense is not smart politics either.
This week Google announced the donation of ~$150m over three years to form a European “Digital News Initiative.”
Let me quote a “Bloomberg View” op-ed entitled: “Google is Buying Media Friends” by Leonid Bershidsky -- that succinctly exposes this suspect scheme to politically influence and curry favor with EC antitrust authorities:
“Little of this should appeal to responsible news organizations. It's wrong to accept financial support -- no matter how it is administered -- from a company your journalists are supposed to cover objectively. Google can buy advertising or sponsor subscriptions like anyone else, but it shouldn't be able to establish a slush fund for publishers. Equally, it's unhealthy for journalists to accept free training from a company they have to write about as it goes through the circles of European antitrust hell.”
Apparently, Google is engaging in this tawdry conflicting behavior because it may have worked before.
Many may not be aware that Google conveniently settled its longstanding copyright dispute with Brussels’ newspapers, the EC hometown media, for a reported $5m Euros in December 2012, right in the middle of the time EC DGComp-Google settlement negotiations were going on to settle antitrust charges that Google anti-competitively favored its own content in its search rankings.
At a minimum the timing and locale created the appearance of potential impropriety or political influence.
Given the substantial evidence that Google’s political influence led the FTC and DOJ to make their legal problems go away in the U.S., it would be wise for Europe to be especially vigilant that Google cannot use improper political influence to evade sovereign EU accountability for its actions that harm European consumers, innovation and competition.
Forewarned is forearmed.