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Keywords: Google, European Commission. Anyone Feeling Lucky?

Lia Vitzilaiou, Jan 27, 2011

On November 30, 2010, the European Commission issued a press release which many were worried about, others looking forward to, but almost everyone anticipated: Google is under formal antitrust investigation with regard to an alleged abuse of dominance in the online search market.

The Commission will investigate three main issues. The first is whether Google has manipulated its unpaid or "algorithmic" search results by giving preferential placement to its own results while lowering the ranking of those offered by competitors, i.e. vertical search engines. The second issue is whether Google has imposed exclusivity contracts on its advertising partners, preventing them from placing ads on competitive websites. Finally, the Commission will look into whether Google has restricted the portability of online advertising campaign data to competing online advertising platforms.

This development was expected by most, not only because Google has recently been the center of attention for many national competition authorities (the latest being the Italian antitrust investigation in the Google News Service which ended by compromise) but also because the Commission seems to have lately targeted powerful technology companies. Since 2004, when Microsoft was fined EUR 497 million for abuse of dominance, to 2008 when a further EUR 899 million penalty was imposed for failure to comply with the 2004 ruling, up to 2009 when Intel was fined a historic EUR 1.1 billion, also for abuse of dominance, the Commission has shown a strong interest in the high-tech industry, apparently feeling confident it has the sophistication to tackle the complex issues arising in such innovative markets.

This Commission investigation targets the core of the Google business, i.e. its search engine, and naturally has attracted a lot of controversy. For example, there is speculation that this is an attack partly assisted by Microsoft, which recently merged its search business with Yahoo's in order to challenge Google's market lead.This assertion is based on the fact that Microsoft owns one of the plaintiffs (Ciao!) as well as a price comparison service in Germany, and it sponsors a trade grouping called ICOM, a member of which is another plaintiff called Fodem, a British price comparison service.If this is the case, then there might be more competition in the search engine market than initially appears.

Also controversially, Benjamin Edelman, an assistant professor at Harvard Business School, recently published the results of a study conducted of Google's search engine, which allegedly show that there exists what he calls a "hard coded bias" that overrides the normal algorithmic results in order to put a Google answer first. In another study, he suggests that this "distortion" is identified with almost all leading search engines, including Yahoo!, but supposedly Google promotes its own services significantly more than others.

Google can be expected to bring forth evidence to contest such arguments. As we are not yet in a position to reach solid conclusions on such complex technical issues to answer the core question of whether Google tampers with its search results or not, it is safer to look at the available facts and pose some other questions also relevant to the competition analysis.

The first question is whether Google has a motive to tamper with its search results, in view of the two-sided platform market it operates. The second question is whether it is Google or the Commission who should "be feeling lucky" in the present dispute. And finally, if the "holy grail" of a neutral search engine is behind the Commission investigation, is this a realistic pursuit?

 

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