The European Commission doesn’t take kindly to tech companies when they get too big.
The continent that brought us Linux, the Opera browser, and a political party based entirely on reforming copyright and patent law (the Pirate Party) aggressively enforces fair competition in the tech world.
Today, the EC has accused Google of abusing its dominance in the world of product searches. Specifically, the commission says Google favors its own comparison shopping product over others on general search results pages.
It also opened an inquiry into Google’s leading mobile operating system, Android.
These types of inquiries usually result in huge fines, but they also often have a direct impact on the shape of a company’s product within EU boundaries. It’s worth remembering a few historical examples when we think about the present objections raised by the Commission.
The EC’s Complaint
A statement from the European Commission on April 15 said:
[Google] has abused its dominant position in the markets for general internet search services in the European Economic Area (EEA) by systematically favouring its own comparison shopping product in its general search results pages. The Commission’s preliminary view is that such conduct infringes EU antitrust rules because it stifles competition and harms consumers. Sending a Statement of Objections does not prejudge the outcome of the investigation.
The Commission started watching Google Shopping back in November 2010 based on complaints that Google was lowering the rankings of price comparison sites so its own site would show up higher in search results.
Five years of observation later, and the Commission feels it’s found compelling evidence that Google is indeed acting in violation of European antitrust laws.
The Commission’s primary conclusions are:
- Google has been putting its own shopping results higher “irrespective of merits” since 2008.
- It does not penalize its own shopping service the same way it penalizes others.
- Google’s first shopping site (then known as “Froogle”) was treated equally to third-party shopping sites and it failed.
- The subsequent builds, “Google Product Search” and now “Google Shopping,” have experienced higher growth rates than their competitors.
- Users are not seeing the most relevant shopping results.
Google Responds
Always quick with an answer, Google posted a blog immediately following the EC’s announcement, naming the people who complained and listing the many reasons why competition is robust in Europe.
Amit Singhal, Senior Vice President of Google Search, called Axel Springer, Expedia, TripAdvisor, and Yelp “vociferous complainants in this process.”
Singhal goes on to say, “Any economist would say that you typically do not see a ton of innovation, new entrants or investment in sectors where competition is stagnating — or dominated by one player. Yet that is exactly what’s happening in our world.”
He cites German shopping site Zalando (XETRA: ZAL) and its $6.8 billion IPO in 2014 as a prime example of how robust product search is in Europe.
“We’re seeing innovation in voice search and the rise of search assistants — with even more to come. It’s why we respectfully but strongly disagree with the need to issue a Statement of Objections and look forward to making our case over the weeks ahead,” he concludes.
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Europe’s Aggressive Tech Antitrust History
The European Commission takes competition seriously, and the last decade is littered with examples of how it can enforce it.
If you’re not from Europe, you might not be familiar with the browser selection screen. We don’t have it in America.
That’s because it’s the result of an EC antitrust suit against Microsoft for packing Internet Explorer into Windows.
The EC didn’t like that Internet Explorer was the default browser for all Windows computers, so in 2009, it forced Microsoft to give users a choice of five browsers when they first run new computers. This obligation lasted only until 2014, and the browser selection screen has been eliminated from new Windows computers.
But that’s the power of the EC. They literally forced Microsoft to offer up competing browsers right next to their own.
Could this happen to Google Shopping results? It’s entirely possible.
The other likely outcome is the leverage of huge fines against Google. When the Commission cracked down on LCD TV price fixing in the 2000s, it resulted in more than 3 billion euros in fines.
Either way, e-commerce and shopping sites will see some major action against their biggest competitor in Europe soon.
Good Investing,
Tim Conneally
For the last seven years, Tim Conneally has covered the world of mobile and wireless technology, enterprise software, network hardware, and next generation consumer technology. Tim has previously written for long-running software news outlet Betanews and for financial media powerhouse Forbes.
