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Can Google finally get the Commission off their back this time?

Over the past few years Google has faced accusations across the globe for taking advantage of its leading, monopolist role in the generalist Web search market – it owns over 70% of the world market, with the number being closer to 80% with China removed – to compete unfairly in markets for specialized search websites, such as travel or shopping search.

In fact, a host of competing companies in these markets – including Microsoft, Oracle and Tripadvisor – have joined efforts in a group called FairSearch.org, who has lobbied with political entities, and tried to raise public awareness against Google in this domain.

In Europe, these companies presented formal complaints to the Commission, who, in November 2010, decided to open an investigation into possible abuse of dominant position by Google. After an extensive period of investigative proceedings, Joaquin Almunía set forth the four main concerns distinguished by the Commission.

After a lengthy negotiation sequence involving Google proposing two proposals of remedies which were assessed, market-tested, and rejected by the Commission, a third proposal of “commitments” was finally announced, last month, to be seen as adequate by the Commission. After a final round of feedback involving the complainants and third-parties, the Commission may decide to accept Google’s proposal, turn those “commitments” legally binding, and close the investigation.

From a market analysis perspective, the more interesting issue is that related to the first concern stated by the Commission, which has to do with «the way Google displays [its own] specialised search services (such as hotel, restaurant or flight search engines) [more favourably than competing services] on its own web search results pages». The basic problem here is that Google is using its dominant position in general web search to restrict the ability of other firms to compete in the specialized search market, guiding the user to its own offers in that market and preventing the user to freely access information about the existence of competing platforms.

What Google proposes to eliminate this issue is to continue to display more attractively its own specialised search services, but in a way that makes it clear to the viewer that those are specially promoted elements, instead of seeming to be normal (“organic”) web results (e.g. Google Shopping links would appear in a box clearly stating the word “Sponsored”) However, in the cases where Google charges fees to firms that use its specialised search service to advertise their product – the most important services such as shopping and travel search are among these cases – it will be allowed, under the proposal, to charge rivals for their specialised search results to appear in web searches in the same conditions. This was, of course, met with much controversy when made public by the Commission.

FairSearch.org has already reacted to this, claiming, quite reasonably, that this would not solve the problem at hand, as this would essentially maintain an uneven playing field between Google, which would obviously not pay to have its specialised links appear in its own web results, and its rivals.

The Commission is yet to make a public statement on the feedback received related to Google’s latest proposal. In any case, considering how quickly trends in Internet tools use can shift, the question is still very much open as to whether or not people will still be using traditional web search engines by the time the Commission makes a final decision on the matter…

From my perspective, FairSearch.org’s issue with Google’s latest proposal seems justified. Even that the proposed way to charge rivals for their specialized search results to be displayed is very reasonable, as it is based in an auction mechanism in which Google is forced to display those results no matter the price level that comes out of that auction, this still enables Google to benefit from its dominant position in the general web search market to gain an upper hand against its competitors in specialized search. I would think that this will be a major focal point of FairSearch.org companies in the feedback round that the Commission is now receiving.

Luís Teles Morais (#747, MSc Finance)

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Author: studentnovasbe

Master student in Nova Sbe

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