Opinion

Users could be losers in ‘EU vs Google’

The debate misses a crucial point: the purpose of antitrust law is to protect consumers, not competitors. Google’s undue penalization of a particular vertical-search site matters only if the demotion of the site’s links harms end users.

By: Date: October 17, 2013 Innovation & Competition Policy Tags & Topics

Is Google’s dominance of online search coming to an end? That is a question worth asking, as the European Commission investigates antitrust allegations regarding Google’s online-search business model.

Type “Restaurant Florence” into Google’s search field, and a list of restaurants that you might want to visit during your next trip to Italy will appear. The top suggestions are Google’s own. Farther down the page, links to so-called “vertical search” sites – such as TripAdvisor, Fodor’s, ViaMichelin, and Lonely Planet – appear.

But users often do not see these links. With Google’s links capturing most of the site’s search traffic, concerns have been raised that Google manipulates its search algorithm to suppress the results of its competitors, while unfairly promoting its own services – a practice known as “search bias.” The European Commission has other concerns, too – namely, that Google might be using third-party content without authorization and entering into agreements to prevent its advertising partners from displaying ads on rival search engines.

Reservations about the use of third-party content could easily be addressed through carefully designed rules that would allow, say, content providers to opt out of Google’s results. Addressing concerns about Google’s display of vertical-search sites, which target specific industries or sectors, would be trickier.

Google controls roughly 90% of Europe’s search-engine market. Though other search engines exist, almost everyone surfs the Internet via Google. While this has attracted the antitrust authorities’ attention, it also highlights how much users value Google’s service.

Antitrust intervention is warranted if there are serious concerns to address. But unnecessarily invasive intervention could undermine the product that Google provides and deprive users of what they want: easy access to information.

Earlier this year, in an effort to dispel the Commission’s concerns, Google offered to flag search results that draw users to Google’s own services. The company also proposed increasing the visibility of its rivals’ links by pushing them higher up on the results page, next to Google’s results. But the European Commission deemed the proposals inadequate.

Google’s next set of proposals extended its commitments to all devices, including mobile phones and tablets, and offered to increase its competitors’ visibility by allowing rivals to display logos next to their links. It also refined the auction mechanism to select rival links for display directly adjacent to Google’s.

On October 1, the European Union’s antitrust chief, Joaquín Almunia, responded to these proposals, saying that Google had “improved the commitments it [initially] offered.” Almunia is optimistic that a settlement will be reached next spring, so long as Google buttresses its proposals with evidence proving their effectiveness.

Google’s competitors remain skeptical. They believe that enhanced visibility for their links will not increase traffic to their Web sites, and claim that the only way to avoid abuse is to prevent Google from using its algorithm to rank search results. If they get their way, it could mean the death of Google’s business model.

But this debate misses a crucial point: the purpose of antitrust law is to protect consumers, not competitors. Google’s undue penalization of a particular vertical-search site matters only if the demotion of the site’s links harms end users.

Less than a year ago, the US Federal Trade Commission’s antitrust department heard a similar case. The FTC determined that, although Google sought an advantage over rival search engines, “the evidence did not demonstrate that Google’s actions…stifled competition.” After all, users can access other vertical-search engines if they so choose. The fact that they often do not indicates that users find Google’s search engine more appealing.

To be sure, the FTC’s findings are not directly applicable to Europe, because the European and US markets are different. Not only is Google’s market share in the EU much greater; European users may have different preferences. But it does not follow that the European Commission’s concerns are self-evident. Unfortunately, if there is a settlement, the Commission will not have to explain its investigation thoroughly, so we are unlikely to know how sound its case is.

There is certainly merit in seeking a settlement: concerns are addressed quickly, which is especially important in highly dynamic industries like Google’s. But settling is also a gamble, and Almunia has a tough call to make. If Google’s search practices really do harm consumers, Almunia risks agreeing to a settlement that does not solve the problem. If consumers are not suffering, Google’s proposed remedies are unnecessary. In the worst-case scenario, Google’s proposals are implemented, and users discover that Google’s products are not as good as they used to be. Such an outcome would be bad for competition – and for consumers.

This article was first published by Project Syndicate.

Full disclosure: Bruegel is supported by a number of public and private members, including Google and Microsoft. Neither was involved in the writing of this commentary, and their contributions amounted to 1.3% of Bruegel’s total 2012 budget. A full list of members and their contributions can be found here.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint.

Due to copyright agreements we ask that you kindly email request to republish opinions that have appeared in print to communication@bruegel.org.

View comments
Read article More on this topic More by this author

Blog Post

IMG_20151119_103626

Brexit and competition policy in Europe

If the UK leaves the EU without any agreement in place, this could change the way that competition law is applied. It could also make antitrust cases more costly and competition policy instruments less effective.

By: Georgios Petropoulos Topic: Innovation & Competition Policy Date: July 6, 2016
Read about event More on this topic

Past Event

Past Event

The role of market definition in a globalised economy

Have competition authorities kept up with globalisation? Geographic market definition is one of the most pressing issues.

Speakers: Raphaël de Coninck, Giulio Federico, Amelia Fletcher, Hans W. Friederiszick, Bruce Lyons, J. Scott Marcus and Volker Stapper Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 30, 2016
Read article Download PDF More on this topic

Working Paper

WP 03 2016

Challenging prospects for roam like at home

In 2015 the European Union adopted new rules seeking to implement a roam like at home regime for member states. This Working Paper highlights challenges in implementing roam like at home, and it provides insights on the economics of international mobile roaming.

By: Georgios Petropoulos and J. Scott Marcus Topic: Innovation & Competition Policy Date: June 15, 2016
Read article More on this topic More by this author

Blog Post

Scott Marcus

New EU net neutrality guidelines are a pragmatic next step

The new guidelines issued on the implementation of European net neutrality rules by national regulators are sensible and pragmatic.

By: J. Scott Marcus Topic: Innovation & Competition Policy Date: June 8, 2016
Read about event More on this topic

Past Event

Past Event

Internet taxation: challenges and policy recommendations

As the economy moves online, it becomes more difficult for national tax authorities to collect revenue. How great is the impact, and what should corporate taxation look like in the digital age?

Speakers: Francis Bloch, Caroline Edery, Dmitri Jegorov, Helena Kiurusalmi, J. Scott Marcus and Georgios Petropoulos Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: June 7, 2016
Read article More on this topic

Blog Post

Scott Marcus
IMG_20151119_103626

European e-commerce needs better visibility into cross-border delivery prices

Consumers, retail shippers, and European and national regulatory authorities could benefit from enhanced visibility into the price of shipping goods across borders in Europe.

By: J. Scott Marcus and Georgios Petropoulos Topic: Innovation & Competition Policy Date: May 25, 2016
Read article Download PDF More on this topic

Policy Contribution

E-commerce in Europe: parcel delivery prices in a digital single market

E-commerce in Europe: parcel delivery prices in a digital single market

The expansion of e-commerce, a substantial growth opportunity for Europe, is hampered by high cross-border parcel delivery prices. This paper analyses the economics of cross-border parcel delivery and it draws a comparison with the telecommunications sector.

By: J. Scott Marcus and Georgios Petropoulos Topic: Innovation & Competition Policy Date: May 25, 2016
Read about event More on this topic

Past Event

Past Event

E-commerce in Europe: Lessons for parcel delivery from electronic communications

Bruegel was pleased to welcome Andrus Ansip, Vice-President of the European Commission and European Commissioner for the Digital Single Market. He discussed the place of parcel delivery in the DSM, and commented on research by Bruegel scholars suggesting there are useful parallels with telecommunications interconnection and roaming.

Speakers: Andrus Ansip, Jean-Paul Forceville, Annegret Groebel, J. Scott Marcus and Guntram B. Wolff Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 3, 2016
Read article More on this topic

Blog Post

IMG_20151009_103117 (3)
IMG_20151119_103626

German Facebook probe links data protection and competition policy

On March 2, 2016, the German Federal Cartel Office opened an antitrust investigation into Facebook’s contract clauses on data use, in what appears to be the first antitrust case in Europe based on a breach of data protection rules. We discuss the link between data protection rules and competition policy, which is still underexplored.

By: Nuria Boot and Georgios Petropoulos Topic: Innovation & Competition Policy Date: March 14, 2016
Read article More on this topic

Blog Post

Elena Vaccarino
Zsolt Darvas

"Social dumping" and posted workers: a new clash within the EU

European companies often post employees to another EU country to work there temporarily. These ‘posted workers’ must be paid at least the minimum wage of the host country, yet their wages can be lower than the wages of local workers. Now proposals for ‘the same pay for the same work at the same place’ are creating new clashes between EU countries.

By: Elena Vaccarino and Zsolt Darvas Topic: European Macroeconomics & Governance Date: March 7, 2016
Read about event More on this topic

Past Event

Past Event

Sustainability and green innovation in competition policy

The green agenda is a top priority of the Juncker commission. In this event we will focus the role of competition policy in promoting sustainability and green innovation.

Speakers: Céline Gauer, Maarten Pieter Schinkel, Yossi Spiegel and Reinhilde Veugelers Topic: Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: March 2, 2016
Read article More on this topic

Blog Post

Tommaso Aquilante
Oscar F. Bustinza
Ferran photo

Services in European manufacturing: servinomics explained

Making the manufacturing sector more competitive is vital to restore economic growth in Europe. Changing business models to sell services as well as products can provide useful revenue to manufacturers.

By: Tommaso Aquilante, Oscar F. Bustinza and Ferran Vendrell-Herrero Topic: Innovation & Competition Policy Date: March 1, 2016
Load more posts