Blog Post

Unbundling Google users from Europe

The European Parliament is about to approve a motion calling for the unbundling of Google's services. But the proposal misses the point: will consumers be better off?

By: Date: November 27, 2014 Topic: Innovation & Competition Policy

Without naming it, the proposal points straight to the Google antitrust case

The European Parliament is set to adopt a non-binding resolution on ‘Supporting Consumer Rights in the Digital Single Market’ on Thursday (27 November). Among other things, this calls on the European Commission ‘to consider proposals with the aim of unbundling search engines from other commercial services’. Without naming it, the proposal points straight to the Google antitrust case, in which it was alleged that Google applies its search algorithm with a bias: in response to a user’s search query, links to websites that provide news or access to business services, for example, are ranked below Google’s own commercial services. The Commission has investigated the case for five years; Google has attempted to settle three times, with no success.

With its initiative, the parliament seems to suggest a radical solution. Unbundling Google’s search engine and commercial services would presumably mean forcing a split in Google’s business between a division that provides the input (the search query results needed to give visibility to business services) and a division that supplies specific products (news, etc). Access to the input would arguably be regulated, a bit like the way incumbent telecoms or energy companies are forced to sell wholesale access to their networks to allow competition in the retail market. The proposal has its own logic. If Google is truly discriminating against downstream players, such a separation would remove Google’s ability to do so.

The parliament’s proposal has no power to oblige the Commission to act. Enforcement of antitrust laws is (and should be) a prerogative of antitrust authorities and any attempt to pressure them to respond to political will is very dangerous because it undermines the fundamental principle of independence in the application of the law.

The proposal has a fundamental flaw: addressing the issue from the point of view of Google’s competitors and not that of final users

Yet, should the Commission consider following the path proposed by the parliament, one might wonder if it would be the right decision. Besides being limited by a number of hurdles of a legal (such an intervention would most likely require new law) and practical (Google should apply two different business models within and outside Europe) nature, the proposal has a fundamental flaw. It seems to address the issue more from the point of view of Google’s competitors and not from that of final users (despite the claimed intention to ‘support consumer rights’).

Any antitrust case requires first the identification of a mechanism through which consumers are negatively affected by the behaviour of the investigated company. This means understanding whether users are currently unhappy with Google’s services and, if so, why they do not use other search engines, since those are available for free and there are no switching costs for leaving Google.

Once the harm is identified, remedies are designed by the authority to stop the harmful behaviour, being mindful that the remedies will have to leave the consumers better-off when implemented. The ‘unbundling solution’ might directly protect Google’s competitors, but it has no straightforward benefits for final users, who might even end up being worse-off. For example, economic theory suggests that vertical integration between complementary services (such as those that the parliament suggests could be split off) can create important synergies. In this case a ‘bundled’ Google might be able to more accurately identify the needs of the users and provide faster answers to their queries. This applies also to telecoms or energy suppliers. But the fundamental difference here is that the loss of synergies resulting from unbundling might be not compensated for by a significant benefit to the downstream market: access to Google’s services is free and if it were not, users could easily click on other comparable services. While regulated access to telecoms networks is essential to allow competition in the retail market and keep prices down and quality up, this is not the case in the market for digital services, where competition is already strong and very dynamic.

Penalising Google by breaking up its business model suggests to any new Google-like innovator not to be too successful

An even bigger risk for users is the signal that such an intrusive remedy would give to the market. No doubt Google has developed a very successful product that Europeans in particular value highly (that explains the high market share). Penalising Google by breaking up its business model would suggest to any potential new Google-like innovator that it should not be too successful otherwise its business model might also need to be broken up one day. This is contrary to the very nature of competition policy, which aims to reward successful companies for being successful, not to punish them, unless it is shown that the company achieved its market power through illegal behaviour. And it is fundamentally contrary to the interest of consumers, because fewer innovators will bring successful products to Europe in the future.

The European Parliament might be rightfully concerned about — and has the power of co-decision over — a number of issues that affect digital markets and that could require legislative action: privacy protection, copyright or cyber-security for example. But when it comes to enforcement of EU law, the parliament should not attempt to influence the Commission.

Full disclosure: Bruegel is supported by a number of public and private members, including Google, Microsoft and Deutsche Telekom. 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

Read more on competition

To the Commissioner for Competition

Held og lykke, Commissioner Vestager

Users could be losers in ‘EU vs Google’

The pros and cons of the EU vs Google settlement

Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

View comments
Read about event More on this topic

Upcoming Event


The Great Reversal-Causes and implications of the rising corporate concentration in the US

During this event, Thomas Philippon will present his thesis on market concentration and explain the reasons behind the rising corporate market power in the US.

Speakers: Thomas Philippon, Georgios Petropoulos and Reinhilde Veugelers Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event More on this topic

Past Event

Past Event

Competition policy in the era of AI – the case of Japan and Europe

How can artificial intelligence have a positive impact on the economy? How does AI impact competition policy? How can the EU and Japan become leaders in AI?

Speakers: Eric Badiqué, Grazia Cecere, Taiji Hagiwara, Yuko Kawai, J. Scott Marcus, Noritsugu Nakanishi, Tatsuji Narita, Agata Wierzbowska and Guntram B. Wolff Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: October 24, 2019
Read article More by this author

Blog Post

Questions to the Competition Commissioner-designate

Commissioner Vestager has been given two portfolios; Executive Vice-President for a Europe fit for the Digital Age and Competition Commissioner. While having more than one portfolio may not be new, combining an important policy coordination function and an enforcement function is a novel approach. This raises a number of important questions related to how the objectives of either portfolio can be delivered cleanly.

By: Mathew Heim Topic: Innovation & Competition Policy Date: September 27, 2019
Read article More on this topic


Banking, FinTech, Big Tech: Emerging challenges for financial policymakers

FinTech and Big Tech firms are both increasingly stepping on banks’ traditional turf. This column introduces the 22nd Geneva Report on the World Economy, which looks at the challenges generated by new technology-enabled entrants to the global banking industry and the public authorities that oversee it. It argues that to respond adequately to the FinTech/Big Tech challenge, authorities will need to raise their game and enter uncharted territories.

By: Kathryn Petralia, Thomas Philippon, Tara Rice and Nicolas Véron Topic: Finance & Financial Regulation Date: September 26, 2019
Read article More on this topic

Blog Post

Addressing the EU’s Global Challenges Locally: the EU’s Competition and Antitrust Tightrope

This blog is part of a series following the 2019 Bruegel annual meetings, which brought together nearly 1,000 participants for two days of policy debate and discussion.

By: Rebecca Christie and Mathew Heim Topic: Innovation & Competition Policy Date: September 23, 2019
Read about event

Past Event

Past Event

China-EU investment relations: Exploring competition and industrial policies

This is a closed-door workshop jointly organised by MERICS and Bruegel looking at China-EU investment relations.

Speakers: Miguel Ceballos Barón, Alicia García-Herrero, Mikko Huotari, Yi Huang and Xu Sitao Topic: Finance & Financial Regulation, Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: September 9, 2019
Read article More on this topic More by this author



Backstage at BAM19: Designing a competition policy fit for Europe's needs.

Backstage at the Bruegel Annual Meetings, Rebecca Christie talks with Mathew Heim on competition policy.

By: The Sound of Economics Topic: Innovation & Competition Policy Date: September 5, 2019
Read article More on this topic More by this author



Backstage at BAM19: How can Europe's economy thrive in the digital age?

Backstage at the Bruegel Annual Meetings, Giuseppe Porcaro talks with session chair Reinhilde Veugelers on Europe's economy in the digital age.

By: The Sound of Economics Topic: Innovation & Competition Policy Date: September 4, 2019
Read article More on this topic

Blog Post

European champion-ships: industrial champions and competition policy

This blog post investigates the debate on whether European competition rules should foster European industrial champions, or allow national champions to grow to a European scale. It explores the criteria that one would intuitively ascribe to industrial champions, illustrating the difficulties in defining either ‘European’ or ‘Champion’. It then conducts a brief look into whether EU Merger decisions have impeded the formation of ‘European Champions’.

By: Mathew Heim and Catarina Midoes Topic: Innovation & Competition Policy Date: July 26, 2019
Read article More on this topic More by this author

Blog Post

Modernising European Competition Policy: A Brief Review of Member States’ Proposals

French, German and Polish governments have jointly proposed options for modernising EU competition policy. The debate to recalibrate European competition rules was already well underway. So, it is not surprising that proposals are consistent with other statements made by France and Germany. Yet, proposals do not address current issues weighing on the international competition community, such as conglomerate effects theory or algorithmic collusion.

By: Mathew Heim Topic: Innovation & Competition Policy Date: July 24, 2019
Read article More on this topic More by this author

Blog Post

How should the relationship between competition policy and industrial policy evolve in the European Union?

Competition policy aims to ensure that market practices and strategies do not reduce consumer welfare. Industrial policy, meanwhile, aims at securing framework conditions that are favourable to industrial competitiveness, and deals with (sector-specific) production rules as well as the direction of public funds and tax measures. But, how should competition policy and industrial policy interact? Is industrial policy contradicting the aims of competition policy by promoting specific industrial interests?

By: Georgios Petropoulos Topic: Innovation & Competition Policy Date: July 15, 2019
Read article Download PDF More on this topic


Digitalisation and European welfare states

EU policymakers must find answers to pressing questions: if technology has a negative impact on labour income, how will the welfare state be funded? How can workers’ welfare rights be adequately secured? A team of Bruegel scholars, with the support of the Mastercard Center for Inclusive Growth, has taken on these questions.

By: Georgios Petropoulos, J. Scott Marcus, Nicolas Moës and Enrico Bergamini Topic: Innovation & Competition Policy Date: July 9, 2019
Load more posts