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Google on April 15 strongly rebutted a formal complaint in the European Union that it has abused its market position to hurt rivals in the online search and Android marketplaces.
In two blogs, Google executives insisted the company has done no harm to others and has actually fostered more choice and innovation in some of the areas in which it competes.
“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,” Senior Vice President of Google Search Amit Singhal said in one blog post. “Yet that is exactly what’s happening in our world.”
Earlier, the Competition Office at the European Commission, which oversees industry trade practices, announced that it had sent Google a formal Statement of Objections outlining the EU’s concerns over the company’s favorable treatment of its Google Shopping comparison-shopping site.
Typically, the Competition Office issues a Statement of Objections just before filing formal antitrust charges against an entity. In this case, Google has 10 weeks to respond to the complaints listed in the statement by Internet rivals.
“I will carefully consider its response before deciding how to proceed,” EU antitrust chief Margrethe Vestager said in a statement. “Dominance is, as such, not a problem under EU competition law. However, dominant companies have a responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in neighboring markets.”
One of the main complaints in the Statement of Objections is that Google gives preferential treatment to products in its own comparison-shopping site when people use its general search engine to look for particular products. Vestager said her investigations have shown that Google’s comparison-shopping site is systematically given prominence in search engine results regardless of whether the results are relevant to the query. By artificially boosting its presence in the comparison-shopping market, Google may be denying consumers the benefit of seeing the most relevant results to their queries and depriving rivals of an opportunity to put their products in front of potential customers, she said.
The Statement of Objections focuses mainly on Google Shopping because that is one area where Google has been unfairly favoring its products the longest, but that does not preclude the Commission from pursuing complaints in other areas of Google’s business, Vestager said.
“If an infringement is proven, a case focusing on comparison shopping could potentially establish a broader precedent for enforcing EU competition rules in other instances of Google favoring its own services over competing services,” she said.
In announcing the complaint, Vestager said her office has also opened up a second, separate investigation of Google’s business practices with regard to its Android mobile operating system. She said the investigation was prompted by complaints about Google requiring smartphone and tablet manufacturers to exclusively preinstall Google’s own search engine and applications on their Android devices and its tendency to bundle multiple applications and services with certain products. The Commission will also look at whether Google is keeping mobile device manufacturers from using and developing other open-source versions of Android, she said.
Google Denies It Harms Rivals After EU Files Antitrust Charges
In his response, Singhal said that the complaints raised about the comparison-shopping service are simply not borne out by the facts.
When Google launched the service, many online travel companies such as Expedia, Travelocity and Kayak had feared Google would siphon off their Web traffic and customers. But that has not proved to be the case. In the United States, for instance, Google Flight is well behind rivals like Expedia, Priceline, Orbitz and Travelocity, which together account for 95 percent of total market share. The numbers are not very different in Europe as well.
Suggestions that Google’s dominance is killing off rivals are also not true because there’s plenty of competition in all of the areas that it competes in, Singhal said, pointing to search engines such as Bing, Yahoo and Quora and specialized online services like Amazon, eBay and Idealo. Mobile apps have also given companies an option to go directly to the application or service they want from their devices, he said.
“It’s why we respectfully but strongly disagree,” with the EU’s antitrust investigation, Singhal said.
Hiroshi Lockheimer, Google vice president of engineering for Android, similarly challenged the Android investigation and said that Android has helped create more choice and innovation in the mobile market than any other platform. Google’s application bundling requirements help ensure that its applications work across all sorts of different Android devices, Lockheimer said, adding that it’s not just Google that has benefited from Android, but others in the ecosystem as well, including developers, manufacturers and consumers.
Ken Odeluga, a senior market analyst at City Index, a financial trading authority in Leeds, U.K., said it could take years before there is any outcome to the case.
At the moment, although the EU has formally accused Google of specific wrongdoing, the case is still in the investigative phase. “What needs to happen first is for the investigation to be complete. In fact, the scope of the probe itself is not even decided yet—even though reports say it will focus mostly on online shopping,” Odeluga said in emailed comments to eWEEK.
It’s highly unlikely the investigation will be completed anytime soon, according to Odeluga. “We can expect a strong campaign by Google to re-frame the investigation in many ways,” he said. If the case ever goes to court, Google is sure to appeal any negative outcome and request other remedial actions. “We could be looking at 3-5 years before there’s any sort of outcome,” he said.
Ezra Gottheil, an analyst with Technology Business Research, said the issue pertaining to Google’s comparison-shopping site will have little impact on Google even if it complies with the EU’s requirement to make sure all shopping services are given equal prominence.
With the Android investigation, if Google is asked to decouple its applications from the operating system, the company will likely start charging a licensing fee and pay for installation of its services. “The one difference will be that Microsoft will be in a position to compete with Google for placement of its services. This will reduce Google’s revenue, but we believe not greatly,” Gottheil said via email.” Google’s services are largely preferred by users.”