Google launches counteroffensive in battle with EU

Google launches counteroffensive in battle with EU

US tech group accuses commission of misunderstanding economics and law
Nonmember 4, 2016

Google accused the EU of misunderstanding economics and law as the US tech group launched a counteroffensive on Thursday in its long-running antitrust battle with Brussels.

Defending itself against charges of anti-competitive behaviour in online shopping search and advertising, Google sought to pick apart Brussels’ evidence and market definitions in a bid to avert a potential fine and prohibition decision.

The Google cases are flagship investigations in Brussels’ wide-ranging crackdown on alleged misconduct by various Silicon Valley groups — a drive that has caused deep disquiet in Washington, most notably over a €13bn tax bill served to Apple in August.

After years of fruitless on-off settlement talks over Google’s search practices, the European Commission under Margrethe Vestager changed tack and served Google with charges covering three probes.

The so-called “statements of objections” concern Google’s shopping search service, its Android mobile operating system and past practices in its AdSense online advertising business.

Google filed a reply to the charges relating to its shopping search and AdSense services on Thursday. Its defence in the Android case is expected next week.

Google hit back at the commission’s probe into its shopping search, saying the case “lacks evidence and is wrong on the facts, the law, and the economics”. Brussels had alleged that the group systematically favoured its own shopping service, to the detriment of rivals, by giving it undue prominence in general search results.

Google argues that the commission defined the online shopping market too narrowly. “Search engines, price comparison sites, merchant platforms, and merchants [all] compete with each other in online shopping,” said Kent Walker, Google’s general counsel, in a blog post on Thursday.

The commission’s exclusion of big competitors such as Amazon and eBay also featured in Google’s response last year to Brussels’ initial set of shopping charges. The company also protests that, even in that narrow market of price comparison sites, the commission’s analysis focused on too small a sample that was unrepresentative of the total market.

Google said online shopping was “robustly competitive”.

It said: “The surest signs of dynamic competition in any market are low prices, abundant choices, and constant innovation — and that’s a great description of shopping on the internet today.”

Competition law needs reform to challenge search engine’s ‘market dominance’

The commission acknowledged receipt of Google’s 100-page replies and said it would “carefully consider Google’s response before taking any decision on how to proceed and cannot at this stage prejudge the final outcome of the investigation”.

The AdSense charges, issued in July, raised concerns that contract terms for third-party websites displaying Google’s search box prevented them displaying search ads from competitors. Google sees this case as covering a past conduct in a narrow part of its business that is financially relatively insignificant.

Still outstanding and most worrying for Google, because of the greater implications for its business, is the commission’s charge that it set conditions on the use of its Android operating system that stifled competition.

The case focuses on some of contract terms and incentives with hardware manufacturers and mobile networks over pre-installation of their services on Android devices.

The commission worries that these helped Google’s market dominance and restricted competition. But the company believes the limits are necessary to create a sustainable Android “ecosystem” that encourages innovation. It denies they stifle competition.

The Google cases have wider implications for the tech sector. Over the years the commission has struggled with the political sensitivity of the probes as well as the challenge of concluding them in a timely, effective manner that remains relevant to fast-moving sectors.

Following its review of Google’s defence, the commission will decide whether to drop the cases, potentially reach a settlement with the company, or end the cases with a prohibition decision and fine.

“We believe it is the European Commission that has the interests of consumers in mind,” said Thomas Vinje, counsel to interest group FairSearch.

“When consumers look at Google ads they do not get the best, most relevant results. Instead, they get results from advertisers willing to pay Google the most money.”

Copyright The Financial Times Limited 2016. All rights reserved.



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