Concurrences Revue des droits de la concurrence | Competition Law Review

The Google Shopping decision

On-Topic l Concurrences N° 2-2018 l pp. 25-37

Aurelien Portuese Senior Lecturer in Law, De Montfort Leicester University, Jean Monnet Centre of Excellence on European Governance Visiting Lecturer, Centre for European Law, King’s College London

Nicholas Banasevic Head of Unit, Antitrust: IT, Internet and Consumer Electronics, DG Competition, European Commission, Brussels

Beatriz Marques New York state Attorney LL.B in Law, University of Bristol (UK) LL.M in European Law, Universite Pantheon-Assas Paris II (France) On-Topic The Google Shopping decision

When demotion is competition: Google: Is the competition truly just a click away? Algorithmic antitrust illustrated Beatriz Marques Aurelien Portuese New York state Attorney LL.B in Law, University of Bristol (UK) Senior Lecturer in Law, De Montfort Leicester University, LL.M in European Law, Universite Pantheon-Assas Paris II (France) Jean Monnet Centre of Excellence on European Governance Visiting Lecturer, Centre for European Law, King’s College London

Lessons from the Google Shopping Decision Nicholas Banasevic Head of Unit, Antitrust: IT, Internet and Consumer Electronics, DG Competition, European Commission, Brussels

Abstract

These three articles provide different perspectives on the European Ces trois articles offrent différents points de vue sur la décision Commission’s decision of 27 June 2017 in which Google was fined €2.42 de la Commission européenne du 27 juin 2017 dans laquelle Google Shopping billion. Google has filed an appeal on 11 September 2017 against this decision. a été condamnée à 2.42 milliards d’euros d’amendes, décision contre laquelle The European Commission fined Google for abusing its dominant position Google a fait appel le 11 septembre 2017. La Commission européenne a infligé as a search engine. The abuse was defined as an abuse of Article 102 TFEU à Google cette amende record pour avoir abusé de sa position dominante dans based on the concept of leveraging, where the dominant position in one market la recherche en ligne. L’abus de l’article 102 TFUE a été fondé sur la notion (general search) was used to advantage Google’s product in an adjacent market d’effet de levier, où la position dominante sur un marché (recherche générale) (comparison shopping). a été utilisée pour favoriser le produit de Google sur un marché adjacent (comparateurs de prix). Ce document est protégé au titre du droit d'auteur par les conventions internationales en vigueur et le Code de la propriété intellectuelle du 1er juillet 1992. Toute utilisation non autorisée constitue une contrefaçon, délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende (art. utilisation non autorisée constitue une contrefaçon, d'auteur par les conventions internationalesintellectuelle du 1er juillet 1992. Toute du droit en vigueur et le Code de la propriété au titre Ce document est protégé by copyright laws and internationalNon-authorised use of this document pouvant accompagner ce document. This document is protected copyright treaties. personnelle est strictement autorisée dans les limites de l’articletechniques protection L. 122 5 CPI et des mesures L. 335-2 CPI). L’utilisation constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment € 300 000 fine ( Art.Intellectuelle). Personal use this document is authorised within limits Intellectuelle DRM protection. L. 335-2 Code de la Propriété L 122-5

Concurrences N° 2-2018 I On-Topic I The Google Shopping decision 25 When demotion is competition: Algorithmic antitrust illustrated

Aurelien Portuese aurelien.portuese@gmail.com Senior Lecturer in Law, De Montfort Leicester University, Jean Monnet Centre of Excellence on European Governance Visiting Lecturer, Centre for European Law, King’s College London

shopping service by showing grouped products results”; ii) “in finding that Google favoured a Google comparison shopping I. Introduction service by showing grouped products ad”; iii) “in finding 1. On 27 June 2017, the European Commission fined that the alleged abusive conduct diverted Google search Google €2.42 billion for “abusing dominance as search traffic”; iv) “in finding that the alleged abusive conduct engine by giving illegal advantage to own comparison is likely to have anticompetitive effects”; v) “by treating shopping service.”1 Allegedly, Google has algorithmically quality improvements that constitute competition on the manipulated the search results of products in order merits as abusive”; vi) “in imposing a fine.”4 to promote its own platform, Google Shopping, at the expense of competitors. According to the European 3. No current antitrust infringement has clearly helped Commission, it has infringed Article 102 TFEU because the Commission in its ambition of fining Google: only it i) “has systematically given prominent placement to its recourse to dubious regulatory principles in disguise (II.) own comparison shopping service” and ii) “has demoted and the misconception of self-promotion in algorithm- rival comparison shopping services in its search results.”2 driven strategies (III.) have enabled the Commission to In a nutshell, the European Commission blames Google impose an innovation-deterring fine. on two different grounds for the same thing: promotion of its own services, and demotion of its competitors’ services. But, demotion—meaning, the reduction in the ranking of some things or some individuals—is merely the exact II. Towards opposite of promotion—meaning, the enhancement in the ranking of other things or other individuals.3 a dubious principle From economics perspective, both conducts are equivalent since increasing the prices to rivals’ products is similar to lowering the prices to one’s own products. Therefore, of “search the case is essentially a case against self-promotion. neutrality”? 2. In objection, Google has filed an appeal on September 11, 2017, on the grounds of six pleas. 4. There is no exclusionary conduct by Google, According to Google, the European Commission erred: otherwise the Commission could have simply named i) “in finding that Google favoured a Google comparison it and the classic application of this type of market abuse would not have triggered the current controversy surrounding the Commission’s fine. Market foreclosure is inapplicable here since, not only there is no refusal to 1 European Commission, Antitrust: Commission fines Google €2.42 billion for abusing deal by Google with Google Shopping’s competitors, dominance as search engine by giving illegal advantage to own comparison shopping service (Press Release of 27 June 2017), accessed on 1 September 2017: http://europa.eu/ but most importantly there is no upstream/downstream rapid/press-release_IP-17-1784_en.htm.

2 Id.

3 See A. Portuese (2017), Fine is Only One Click Away (Symposium on Google Shopping

Decision), Competition and Regulatory Law Review, Vol. 3, pp. 1–6. 4 T-612/17 Google and Alphabet v. Commission, 2017/C 369/51. délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende (art. utilisation non autorisée constitue une contrefaçon, d'auteur par les conventions internationalesintellectuelle du 1er juillet 1992. Toute du droit en vigueur et le Code de la propriété au titre Ce document est protégé by copyright laws and internationalNon-authorised use of this document pouvant accompagner ce document. This document is protected copyright treaties. personnelle est strictement autorisée dans les limites de l’articletechniques protection L. 122 5 CPI et des mesures L. 335-2 CPI). L’utilisation constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment € 300 000 fine ( Art.Intellectuelle). Personal use this document is authorised within limits Intellectuelle DRM protection. L. 335-2 Code de la Propriété L 122-5

26 Concurrences N° 2-2018 I On-Topic I The Google Shopping decision markets between Google search engine and shopping being algorithmically biased towards Google products at comparison services because of the multi-sided nature the expense of other interesting competitors’ products, of the numerous platforms available (e.g., search engines’ would have either swapped to alternative search engine results, websites, digital apps, etc.). free of algorithmic manipulations or swapped directly to digital applications offering shopping services (e.g., 5. Given the absence of market foreclosure and of any Amazon app; eBay app, etc.). Therefore, it is doubtful exclusionary conduct to be evidenced against Google, that the European Commission can have recourse to the Commission needed to have recourse to a quasi- a quasi-essential facilities doctrine since such doctrine essential facility doctrine applied to Google search hinders the competitive process on the upstream market engine,5 ultimately reinforcing its dominant position without tangible benefit on the downstream market. on search engine market while weakening its outsider position on the shopping services market.6 A facility is 8. Absent any exclusionary conduct by Google and “essential” whenever a facility is, cumulatively, “unique”7 insidiously treating Google as a quasi-essential facility, and “absolutely necessary”8 to anyone wishing to enter the Commission needed (from its prosecuting perspective) the relevant market. Antitrust analysis challenges to elaborate a tailor-made antitrust infringement by the Commission position when the different relevant Google: rivals’ demotion. What are the policy objectives markets are considered. Google search engine is neither of this newly created antitrust infringement on “rivals’ unique nor absolutely necessary (alternative search demotion” in search results? In the absence of any market engines exist) to online shopping services (alternative foreclosure and in the inappropriateness of an overtly selling services exist such as mobile applications and expressed essential facility doctrine, the Commission websites). Furthermore, having not refused to reference needed to construe “rivals’ demotion” as a regulatory rival shopping services (and therefore no refusal to deal mean to achieve a policy goal: search neutrality. can be evidence), Google has only increased the costs of rival shopping services via algorithm-driven strategies. 9. Similarly to the long-lived and indefinable principle of net neutrality, the emerging and also undefined 6. Considering Google search engine as essential facility principle of “search neutrality”11 is evidenced by is both economically wrong9 and competitively flawed. the requirement of “equal treatment” laid down by Indeed, the policy chosen by Google to promote Google the Commission in its press release as a justification Shopping services at the top of its search results may for fining Google. There should be, according to very well end up being a bad strategy for consumers as the competition commissioner, an equal treatment given they could prefer a different ordering of search results— by Google to Google Shopping’s competitors in the namely, without shopping results being promoted. search results. This quest is both disturbingly naïve and Therefore, alternative search engines may, from a regrettably unrealistic.12 Forcing Google search engine competitive viewpoint, emerge as credible substitutes for to give non-discriminated access to Google Shopping’s a shopping-free search engine. competitors would be a “red herring from an antitrust perspective”13 because the placement in search results 7. Also, it would reinforce the status quo regarding placement is tantamount to a price. the dominance of Google’s search engine. Indeed, the Commission is de facto giving Google’s search engine the 10. The complex and innovative algorithm on which status of the essential platform (or “internet gateway”) Google search results are based is the key of Google’s by which most online sales must be fairly referenced.10 success because it corresponds to the qualitative listings A more dynamic and evolutionary perspective would wanted by consumers. There lies the reason for Google’s have considered that customers, by finding search results early competitors loss of market shares: Yahoo! and AOL failed to match consumer needs of qualitative search results. Consequently, the very manipulation of search results via innovative algorithms is both desired by 5 F or an overview of EU essential facilities doctrine and restraints on contracts, see in this Google’s consumers as illustrated by internet history and respect D. Neven and P. Mavroidis, The Interface Between Competition and Contract Law. The Case of Essential Facilities (EUI 2003 EU Competition Law and Policy Workshop/ is essential t o Google’s current success. Non-manipulated Proceedings) accessed on 1 September 2017: http://www.iue.it/RSCAS/Research/ algorithms, according to what could be “search neutrality,” Competition/2003/200306COMP-Neven-Mavroidis- sII.pdf. have never existed nor have ever been innovative. Indeed, 6 See OECD, The Essential Facilities Concept (Report on European Commission in OECD/ complete search neutrality with Google giving “equal GD(96)113, pp. 93–108, at p. 87. treatment” with absent algorithm-manipulated search 7 Joined Cases T-374/94, T-375/94, T-384/94 and T-388/94 European Night Services [1998] ECR II-3141.

8 Case C-79/00 Telefónica de España [2001] ECR I-10057. 11 See D. Crane (2014), After Search Neutrality: Drawing a Line Between Promotion and 9 As of April 2017, it is estimated that Google “only” represents 79.4% of market shares Demotion, Journal of Law and Policy, Vol. 9, pp. 397–406, at p. 400. of the search engine market. See: https://www.netmarketshare.com/search-engine- market-share.aspx?qprid=4&qpcustomd=0&qpcd=1300. Despite considerably large, 12 Indeed, it is the inappropriate and inapplicable principle of “search neutrality” that has led the market shares of Google is both well below 100% (perfect monopoly) and the FTC in the US to close its investigations against Google for the same antitrust blames. declining. Indeed, competitors are progressively gaining great market shares on the search engine market. See: https://www.searchenginejournal.com/googles-search- 13 G . Manne and J. Wright (2016), Google and the Limits of Antitrust: The Case Against market-share-down-in-year-over-year-numbers/139588. the Antitrust Case Against Google, Harvard Journal of Law & Public Policy, Vol. 34, pp.172‑244, at p. 243 (arguing that “no business firm, even a monopolist, has an antitrust 10 Such duty to share its strategic information would contradict the very purpose of duty to reveal to competitors formulas that it uses to set prices (…) Google’s success in antitrust law as the US Supreme Court explained in 540 US 398, Verizon Communications matching keywords to ads will be compromised by disclosure of the algorithm because it

v. Law Offices of Curtis V. Trinko, LLP (2004) at 407–508. would open opportunities to game the auction process”). délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende (art. utilisation non autorisée constitue une contrefaçon, d'auteur par les conventions internationalesintellectuelle du 1er juillet 1992. Toute du droit en vigueur et le Code de la propriété au titre Ce document est protégé by copyright laws and internationalNon-authorised use of this document pouvant accompagner ce document. This document is protected copyright treaties. personnelle est strictement autorisée dans les limites de l’articletechniques protection L. 122 5 CPI et des mesures L. 335-2 CPI). L’utilisation constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment € 300 000 fine ( Art.Intellectuelle). Personal use this document is authorised within limits Intellectuelle DRM protection. L. 335-2 Code de la Propriété L 122-5

Concurrences N° 2-2018 I On-Topic I The Google Shopping decision 27 results as requested by the Commission decision would from an antitrust perspective.16 To what extent does resemble… Yellow Pages listings! There was the time when the “prominent placement” given by Google Inc. objective, unbiased, non-algorithmically manipulated to Google Shopping services differ from the one given results were listed with some well-classified ads. by, say, Tesco Inc. to Tesco food products on end aisle displays? To no extent. It is traditional corporate strategy 11. Innovation is unstoppable. Algorithmic innovation of a parent company to favour its own products that is inevitable: should Google provide an illusory “equal have, through a time-and-error evolutionary process,17 treatment”14 and therefore reinforce its dominant emerged as a reward of the economic efficiency of position as essential facility at the expense of any the original distributing services. Fining by-products and algorithmic innovation and at the detriment of consumer the “prominent placement” parent companies can grant experience? Or should Google invest in algorithm design to these by-products is tantamount to the prohibition so that consumer needs are constantly considered of end aisle displays for products manufactured by and competition in ancillary markets is increased by the parent distributing company. Google acting as new entrant? A positive answer would be tantamount to endorse a slippery slope towards 14. Rivals’ demotion is illustrative of the Commission’s regulatory micromanagement of platforms. Indeed, underpinning antitrust theory. “Demotion” is a word that should Amazon treat equally its end-products and its comes from human resources management—the fact delivery services with those of competitors in its search of downgrading the title or the rank of an employee. results? To extrapolate further, why not therefore forcing “Rivals” refer to individual companies rather than to Uber, the dominant ride-hailing platform, to treat the general concept of competition. Consequently, equally Uber Eats drivers (the food delivery services) rivals’ demotion is an illustrative expression used by with its competitors (such as Deliveroo) on the Uber the Commission which reveals its concern on the harm general platform because Uber app would have become caused to identifiable individual companies rather than the dominant (and inevitable) platform for delivery the general theory of harm to the consumers or to services? Such prospects, desperately legitimised by the the lessening of level of competition. It is explanatory dubious concept of “search neutrality,”15 would provide of the Commission’s approach to its available evidence: no competition benefits but only innovation costs. whereas no harm to consumers or to the competitive process can be evidenced, the entire evidence pertains to 12. Algorithmic governability shall come to the fore in the harm caused onto competitors.18 Indeed, following antitrust investigations and economic considerations the alleged abuses of demoting rivals’ products and/or since data is the currency in algorithmic antitrust. promoting own products,19 the European Commission Nevertheless, algorithmic innovation should not be considered that the harm was evidenced by the “sudden stifled since it would be the overall dynamic efficiency of drops” of the use of competitors’ shopping services markets, reaped out by innovation, which shall be lessened together with an increase in Google Shopping services together with the level of competition. Search neutrality traffic. must therefore be precluded from materialising in the fascinating and emerging world of algorithm-driven 15. Demotion of rivals is nothing different but, companies, of unmapped artificial intelligence, and of alternatively, the promotion of one’s own products.20 captivating blockchain technologies. Nevertheless, the benefit of the expression rivals’“ demotion” is its linguistic twist that encloses the necessary inquisitorial pitch for the elaboration of an ad hoc III. Why demoting 16 New economic behaviours due to the innovative products are more prone to suspicious and to is competing over be sanctioned as Ronald Coase already mentioned in 1972: “If an economist finds something (…) that he does not understand, he looks for a monopoly explanation. And as in the field we are very ignorant, the number of ununderstandable practices tends to be rather large, and the reliance on a monopoly explanation is frequent.” See R. Coase (1972), Industrial Organization: the merits A Proposal for Research, in V. R. Fuchs (ed.), Policy Issues and Research Opportunities in Industrial Organization, New York: National Bureau of Economic Research, pp. 59–73, at 13. In the world of algorithmic antitrust, much p. 67. Similarly, Easterbrook has seminally argued in 1984 that “the tradition is that judges behaviour can easily be seen as a novelty for restricting view each business practice with suspicion, always wondering how firms are using it to harm consumers. If the defendant cannot convince the judge that its practices are an essential feature competition whereas such behaviour once compared of competition, the judge forbids their use,” in F. Easterbrook (1984), The Limits of Antitrust, with traditional corporate strategies, are non-detrimental Texas Law Review, Vol. 63, pp. 1–39, at p. 4.

17 G . Manne and J. Wright (2016), Google and the Limits of Antitrust: The Case Against the Antitrust Case Against Google, Harvard Journal of Law & Public Policy, Vol. 34, pp. 171–244.

14 See A. Diaz (2005) who demonstrates “how designs for technologies encode certain 18 See G. Marvin (2017), What to make of the EU’s absurd antitrust ruling against values about what sort of content is ‘important,’ ‘relevant,’ or ‘authoritative’” (A. Diaz, Google, SearchEngineLand, 29 June 2017, available at: https://searchengineland. Through The Google Goggles: Sociopolitical Bias in Search Engine Design (May 2005), com/google-shopping-absurd-eu-antitrust-fine-278157, last accessed on 29 November 2017. unpublished M.A. thesis, Stanford University Program on Science, Technology & Society, cited in F. Pasquale (2016), Platform Neutrality: Enhancing Freedom of Expression in 19 Eur opean Commission, Antitrust: Commission fines Google €2.42 billion for abusing Spheres of Private Power, Theoretical Inquiries in Law, Vol. 17, pp. 487–513, at p. 511). dominance as search engine by giving illegal advantage to own comparison shopping service (Press Release of 27 June 2017), accessed on September 1: http://europa.eu/rapid/ 15 Or “platform neutrality.” See F. Pasquale (2016), Platform Neutrality: Enhancing press-release_IP-17-1784_en.htm. Freedom of Expression in Spheres of Private Power, Theoretical Inquiries in Law, Vol. 17, pp. 487–513. For, if a case of any sort of “neutrality” is to be made, it should be on the 20 See D. Crane (2014), After Search Neutrality: Drawing a Line Between Promotion and

basis of consumer protection regulations, not antitrust/competition policy. Demotion, Journal of Law and Policy, Vol. 9, pp. 397–406. délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende (art. utilisation non autorisée constitue une contrefaçon, d'auteur par les conventions internationalesintellectuelle du 1er juillet 1992. Toute du droit en vigueur et le Code de la propriété au titre Ce document est protégé by copyright laws and internationalNon-authorised use of this document pouvant accompagner ce document. This document is protected copyright treaties. personnelle est strictement autorisée dans les limites de l’articletechniques protection L. 122 5 CPI et des mesures L. 335-2 CPI). L’utilisation constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment € 300 000 fine ( Art.Intellectuelle). Personal use this document is authorised within limits Intellectuelle DRM protection. L. 335-2 Code de la Propriété L 122-5

28 Concurrences N° 2-2018 I On-Topic I The Google Shopping decision antitrust infringement. Yet, Google has succeeded in the new digital economy because it precisely pioneered IV. Conclusion the sector with the design of complex and innovative algorithms aimed at both improving consumer experience 18. Without expressly stating it, the European and, presumably, favouring its own products when Google Commission condemns Google for having leveraged Shopping was created.21 The competitive advantage its dominant position in the search engine market onto obtained by Google, through a fair and transparent the comparison shopping market—in a nutshell, leveraging competitive process,22 in designing complex algorithms by demoting. I have demonstrated that demotion is part enables Google to enter (and even create!) other markets of the competitive process. Consequently, the fine has a which improve customer experience on Google search deterring effect by creating innovation costs. engine. Indeed, by deploying other activities than the sole search engine, Google is progressively and innovatively 19. Indeed, this record-breaking fine on Google becoming a general platform increasing thereof imposes prohibitive innovation costs and undoubtedly consumers’ satisfaction. lessens the competition level and inappropriately stifles innovation without providing competitors any 16. In the present case of Google search engine substantial benefits. Antitrust analysis concludes to results having allegedly demoted rivals of the Google the presence of efficiency net benefits for society of Shopping comparison service, such demotion of rivals demotion as competition strategy for new entrant is tantamount to bundling discounts. Indeed, by using as illustrated by Google Shopping, or by incumbents as Google search engine, consumers are incentivised illustrated by the widespread practice of Amazon placing through Google self-promote conduct,23 to use Google prominently its own end-products on its platform’s shopping when they shift from one relevant market where search results. The Google decision is based on dubious Google is dominant—namely, search engine market— conceptual principles—such as the implicit quest for to another relevant market where Google Shopping is search neutrality—and flawed perceptions of Google’s not dominant—shopping comparison services market. competitive strategies in different markets. Google bundles one market with another so that it can effectively compete with incumbent companies on 20. Furthermore, the Google decision is detrimental shopping comparison market such as Amazon, eBay, in light of the so-called “error-cost framework.”24 Zalando, etc. The European Commission overlooks This framework helps understanding that the social cost the absence of any dominance of Google Shopping on of Type I errors (false positive) is always greater than the shopping online markets: digital application platforms social cost of Type II errors (false negative): Type I errors and other selling websites such as Amazon and eBay have (i.e., erring by committing flawed antitrust interventions) much more established reputations on selling services are more costly than Type II errors (i.e., erring by markets. omitting appropriate antitrust interventions) because market forces compensate for the latter error type (but 17. Bundling discounts can either have pro- or anti- not the former). From an error cost perspective which competitive effects. But, when it is carried out in targeted encapsulates the cost of error in curbing firms’ practices market where the company is not dominant, there in expect of limiting anti-competitive behaviours, cannot be an abuse of dominance according to Article the cost of errors is clearly greater than the benefits 102 TFEU. In that respect, Google Shopping being not derived from the future behaviour of Google in line with dominant in its own relevant market, Google’s bundling the Commission’s requirements.25 discounts granted to Google Shopping via a “prominent placement” of ads is a legitimate self-promote behaviour 21. To conclude, the Google decision is fraught with which fosters competition since Google Shopping is a zealous antitrust which is fuelled by a politically dictated new entrant facing powerful incumbents in the shopping (if not populist-driven) antitrust agenda rather than by comparison services market. Thereby, demotion— sound economic reasoning and legal coherence. Digital or alternatively self-promotion—in absence of market platforms are only a nascent market: this wrong-headed dominance strengthens competition. fine is undoubtedly imposed too early and too heavily. Such unfortunate decision, except providing the media numerous headlines, should be overturned in favour of a more economic and innovation-laden perspective during the coming litigation procedure. n

21 See A. Renda (2015), Searching for harm or harming search? A look at the European Commission’s antitrust investigations against Google, CEPS Report No. 118, September 24 F . Easterbrook (1984), The Limits of Antitrust, Texas Law Review, Vol. 63, pp. 1–40; 2015, at pp. 4–8. G. Becker and S. Salop (1999), Decision Theory and Antitrust Rules, Antitrust Law Journal, Vol. 67, pp. 41–76; D. Evans and J. Padilla (2005), Designing Antitrust Rules for Assessing 22 Google’s current super-dominance is the result of the business strategies and Unilateral Practices: A Neo-Chicago Approach, University of Chicago Law Review, Vol. 72, innovations which trumped Yahoo as the main search engine. See Knowledge@Wharton, pp. 73–98; see G. Manne and J. Wright (2010), Innovation and the Limits of Antitrust, A Tale of Two Brands: Yahoo’s Mistakes vs. Google’s Mastery (2016), University of Journal of Competition Law & Economics, Vol. 6, p. 153 at p. 157; see also G. Manne and Pennsylvania, accessed on 1 September 2017: http://knowledge.wharton.upenn.edu/ J. Wright (2016), Google and the Limits of Antitrust: The Case Against the Antitrust Case article/a-tale-of-two-brands-yahoos-mistakes-vs-googles-mastery. Against Google, Harvard Journal of Law & Public Policy, Vol. 34, pp. 171–244.

23 See D. Crane (2014), After Search Neutrality: Drawing a Line Between Promotion and 25 See A. Portuese (2017), Fine is Only One Click Away (Symposium on Google Shopping

Demotion, Journal of Law and Policy, Vol. 9, pp. 397–406. Decision), Competition and Regulatory Law Review, Vol. 3, pp. 1–6, at pp. 3–4. délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende (art. utilisation non autorisée constitue une contrefaçon, d'auteur par les conventions internationalesintellectuelle du 1er juillet 1992. Toute du droit en vigueur et le Code de la propriété au titre Ce document est protégé by copyright laws and internationalNon-authorised use of this document pouvant accompagner ce document. This document is protected copyright treaties. personnelle est strictement autorisée dans les limites de l’articletechniques protection L. 122 5 CPI et des mesures L. 335-2 CPI). L’utilisation constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment € 300 000 fine ( Art.Intellectuelle). Personal use this document is authorised within limits Intellectuelle DRM protection. L. 335-2 Code de la Propriété L 122-5

Concurrences N° 2-2018 I On-Topic I The Google Shopping decision 29 Lessons from the Google Shopping decision

Nicholas Banasevic* [email protected] Head of Unit, Antitrust: IT, Internet and Consumer Electronics, DG Competition, European Commission, Brussels

5. The first market which the Decision defined was that of general search, the market where Google was found to I. Introduction be dominant with its flagship product, its search engine. 1. On 27 June 2017, the European Commission A search engine allows users to search for information (“the Commission”) adopted a prohibition Decision across the internet, and based on its algorithms, in response (“the Decision”) concluding that Google had abused to search queries from users, it crawls and indexes the Web its dominant position in general search in 13 markets and delivers ranked results to users. It may also return text in the EEA by favouring in its general search results its advertisements responsive to the search query (search ads) own product in an adjacent market, that of comparison as well as specialised search results, which group together shopping. A fine of €2.42 billion was imposed. results based on a specific category of products, services or information (more on this below when comparison 2. The case took place against the backdrop of a broader shopping is discussed). The Decision found that general debate in recent years about the role of competition search was a product market which was distinct both on policy in high-tech markets. This article will analyse some the demand and supply side from inter alia other products of the key elements of the case itself as well as placing such as content sites and social networks. General search it in the context of two broader questions—the first is one side of a two-sided platform, the other side being relating to the legal standard for Article 102 TFEU cases, online search advertising. i.e., what must be shown to conclude that conduct by a dominant company is abusive, and the second on the 6. The Decision found that Google was dominant in broader question of the role and place of competition general search based on a range of factors. First, in terms policy in high-tech markets. of market shares, Google has held consistently very high market shares in all national EEA markets—since 2008, 3. Section II will provide a brief overview of the Decision’s above 85% in all such markets with the exception of the findings on market definition and dominance, section III Czech Republic and Slovenia, where its market shares will detail some of the key elements relating to the abuse, have nevertheless been consistently over 70% since 2011. whilst section IV concludes by looking at some of the Of course, it is important to complement market share broader lessons that can be drawn from the case. analysis with an examination of barriers to entry, and here the Decision found a number, including: 1) the fact that development of a search engine requires significant investments in terms of time and resources; II. Market definition 2) the importance of data and volume of queries improving a search engine’s results; and 3) the positive feedback loop deriving from the two-sided nature of the market, which and dominance essentially means that the higher the number of users of 4. This article will not dwell in great detail on issues of a search engine, the more advertisers are attracted to it on market definition and dominance, although there is an the other side, and hence the greater the search engine’s extensive analysis on both in the Decision. The core revenues which can be reinvested to attract more users, findings are nevertheless relevant to an understanding of and so on. Finally, the Decision found that there was no the abuse. countervailing buyer power in the market because each user only represents a tiny fraction of the volume of total search queries.

* The views expressed in this article are the personal views of the author and do not necessarily represent the position of the European Commission. I am grateful for their comments and inputs to Guillaume Loriot, Brice Allibert, Max Kadar, Cecilio Madero, Rainer Wessely, Marieke Scholz and Anthony Dawes. Ce document est protégé au titre du droit d'auteur par les conventions internationales en vigueur et le Code de la propriété intellectuelle du 1er juillet 1992. Toute utilisation non autorisée constitue une contrefaçon, délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende (art. utilisation non autorisée constitue une contrefaçon, d'auteur par les conventions internationalesintellectuelle du 1er juillet 1992. Toute du droit en vigueur et le Code de la propriété au titre Ce document est protégé by copyright laws and internationalNon-authorised use of this document pouvant accompagner ce document. This document is protected copyright treaties. personnelle est strictement autorisée dans les limites de l’articletechniques protection L. 122 5 CPI et des mesures L. 335-2 CPI). L’utilisation constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment € 300 000 fine ( Art.Intellectuelle). Personal use this document is authorised within limits Intellectuelle DRM protection. L. 335-2 Code de la Propriété L 122-5

30 Concurrences N° 2-2018 I On-Topic I The Google Shopping decision 7. The second market which the Decision defined was the argument that it only displayed its comparison shopping adjacent market for comparison shopping services. These service when it judged it relevant to a query missed the are specialised search services that allow users to search point because it did not engage with the issue of Google for products and compare their prices and characteristics treating its product more favourably than those of rivals. across the offers of different online merchants and merchant platforms/marketplaces. They are in particular 11. The abuse was defined as an abuse of Article 102 distinct from such merchant platforms. Comparison TFEU based on the concept of leveraging, where the shopping services play an important role in allowing dominant position in one market (general search) was consumers to identify the best deals at the lowest prices, used to advantage Google’s product in an adjacent the core essence of competition. Google was not the first market (comparison shopping) in a way that did not player in comparison shopping, and entered the market constitute competition on the merits. The categorisation with its first product, Froogle, in 2004. of the abuse has led to a legal debate both in the context of the case as well as more broadly. Google argued that 8. Google argued that comparison shopping services the case imposed on it a duty to provide access to a and merchant platforms were part of one broader significant proportion of its general search results pages market, the consequence of which would be, according to rivals, and hence that it should be assessed under the to Google, that there would be no harm to competition indispensability or essential facility criteria of Bronner. since merchant platforms such as Amazon and eBay However, the case did not involve any type of refusal by would be present and flourishing in such a market. Google but rather, as described above, more favourable The Decision analysed a broad range of evidence on this issue, and found inter alia that comparison shopping treatment of Google’s own product in an adjacent market services allowed an across-the-board comparison of compared to those of rivals. merchant offers whereas merchant platforms in contrast were a venue on which to actually buy products and to 12. More generally, there have been arguments that the the extent that they offered any comparison function, this type of abuse is new and does not fit into any established was limited to merchants on the platform. The Decision categorisation. Beyond the legal point that Article 102 also found that merchant platforms were customers TFEU does not establish a closed list of types of abuse,26 of comparison shopping services—they were thus in there is nothing in EU competition law that is new about a vertical commercial relationship. Tellingly, Google the concept of leveraging a dominant position from allowed merchant platforms to appear in its comparison one market to another. It is, of course, true that the shopping service but did not allow rival comparison leveraging in the Google case took place in a manner shopping services to do so. The commercial behaviour specific to the markets concerned (the combination of of a company can in itself often constitute important demoting and promoting) and that the markets came into evidence in relation to market definition. being around the turn of the century and had not been considered previously by competition law. But neither had the markets for nails and nail guns before Hilti, nor those for PC operating systems and media players III. Abuse before Microsoft, to give just two examples.27 9. The Decision defined the abuse as the more favourable treatment by Google in its general search results of its own 13. What then of the concept of competition on the comparison shopping service compared to competing merits, a constant principle which underpins virtually all comparison shopping services. This conduct manifested cases of abuse? It is sometimes argued that this concept itself in two combined ways, which were two sides of the is vague and general, but this is in my view not the case— same coin. First, in response to relevant product-related it is a concept that is given practical meaning when it queries, Google demoted rival comparison shopping is analysed in the context of the specific evidence in an services in its general search results. Second, whilst individual case. In the leveraging context, the notion not subjecting its own comparison shopping service to of not competing on the merits reflects how a product this treatment, Google systematically displayed its own may perform better in the market not because of its own comparison shopping results prominently at or near merits, but due to an advantage that it derives via the the top of its general search results, and in a rich format. dominant product. In line with the case law that outlines that when analysing potential anti-competitive effects in 10. To be clear, the Decision neither questioned the design abuse cases, the relevant analysis should not be abstract of Google’s generic search algorithms as such, nor that comparison shopping results appeared prominently and with a rich format in Google’s general search results. 26 As encapsulated inter alia by the AstraZeneca case, where the practices were of a nature The issue was rather that, on the one hand, Google did not that had not been seen before but where the Union courts confirmed that they were caught by Article 102 TFEU—proof that Union competition law can adapt to evolving practices subject its comparison shopping service to the same generic while relying on constant principles. search algorithms and demotion mechanism as rivals and 27 It is perhaps ironic against the backdrop of the Intel case, where the Commission was at the same time, whenever comparison shopping results criticised for seeking to fit the conduct into a category of abuse where it did not need were triggered, it was systematically Google’s product that to analyse potential anti-competitive effects (even though the Decision extensively analysed such potential effects), that some of the criticism of the Google case has been appeared prominently irrespective of its merits compared that the Commission has not fitted the abuse into one specific category or another despite

to the products of rivals—in this regard, Google’s the Decision outlining a detailed effects-based analysis. délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende (art. utilisation non autorisée constitue une contrefaçon, d'auteur par les conventions internationalesintellectuelle du 1er juillet 1992. Toute du droit en vigueur et le Code de la propriété au titre Ce document est protégé by copyright laws and internationalNon-authorised use of this document pouvant accompagner ce document. This document is protected copyright treaties. personnelle est strictement autorisée dans les limites de l’articletechniques protection L. 122 5 CPI et des mesures L. 335-2 CPI). L’utilisation constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment € 300 000 fine ( Art.Intellectuelle). Personal use this document is authorised within limits Intellectuelle DRM protection. L. 335-2 Code de la Propriété L 122-5

Concurrences N° 2-2018 I On-Topic I The Google Shopping decision 31 and hypothetical,28 the Decision indeed examined in 16. The notion of competition not being on the merits detail the potential anti-competitive effects based on the in this particular case therefore related to the advantage specific evidence of the case. that Google’s comparison shopping service obtained via its dominant product, rather than its own merits, as 14. In this regard, the Decision contains a detailed demonstrated empirically. The Decision concluded that analysis of the potential anti-competitive effects of Google’s conduct foreclosed competition in all 13 EEA Google’s conduct based on many different types of markets concerned, with its comparison shopping service evidence, including requests for information to around becoming the market leader in all these markets, in many 800 companies, traffic data of around 360 websites, by a large amount. The Decision also found that Google’s empirical data on the importance of traffic and the conduct reduced genuine choice and innovation— commercial importance of visibility in Google’s search consumers would rarely see, let alone click on, rival results, user behaviour studies on visibility and click- comparison shopping services, and these were deterred through, 1.7 billion real-world search queries as well as from innovating because they knew that however good evidence from internal documents. they are, this would be the case.29

15. Having established that traffic is important for 17. In terms of objective justification, Google argued that comparison shopping services to build and develop their consumers benefitted from seeing visually rich product- business and that Google is a commercially important related information at the top of its general search source of traffic for comparison shopping services, the results. This was not something that the Decision took Decision establishes a clear link between visibility and issue with as such—once again, the issue was that it was format in Google’s general search results and the amount systematically Google’s product that was displayed in the of clicks that a site receives. This is perhaps an intuitive relevant space, irrespective of its merits.30 conclusion, but the Decision demonstrates it based on a range of detailed empirical evidence, concluding 18. The Decision has led to some debate about whether it that the same search results, for the same queries, has implications beyond the case in terms of the favouring attract significantly more clicks when they are higher of downstream subsidiaries by dominant companies, and in a more visible format than when they are lower both as regards Google and other companies that might or beyond the first page. It shows a close link between be dominant. As regards Google, it is clear that the the trigger rate of results from Google’s comparison Decision establishes a legal framework for the analysis shopping service and clicks to that service whilst also of this same type of conduct by Google in other areas, demonstrating the significant impact of demotions on something that needs to be looked at in each individual traffic to rival comparison shopping services. On average, case according to the evidence. Beyond Google, I would rivals appeared on the fourth general search results page, caution against overstating the implications, in particular which based on the data, was as good as being virtually with regard to claims that the Decision in itself puts invisible. What is more, internal documents confirmed into question the ability of dominant companies to that Google was well aware of the link between visibility treat downstream subsidiaries more favourably in all and traffic and that when Froogle was subjected to the circumstances. The Decision does not establish such same algorithmic treatment as the products of rival a general rule, but as outlined above, identifies how in comparison shopping services, it ranked poorly and the specific circumstances of the case, Google’s conduct hence did not get clicked on significantly. was anti-competitive. Claims that there is a more general effect are reminiscent of similar ones made shortly after the 2004 Microsoft decision where fears were expressed that the floodgates would open with respect to obligations to deal, fears that have apparently not materialised.

29 I find the argument that there cannot be an abuse since it still remains possible for consumers to access alternative products unconvincing, both in this case and in abuse of dominance cases generally. It would void Article 102 TFEU of useful effect if the mere possibility of obtaining a product in a less effective way or via an alternative channel would in itself defeat any identified harm to competition. In the end, this will be an empirical matter of how consumers act in practice in each case concerned that can be incorporated in the usual legal and economic analysis. In the Google Shopping case therefore, this related inter alia to how often consumers clicked on results that were on average displayed on page 4 of the general search results. In the Microsoft media player tying case, where consumers could download and use alternative media players, it related in particular to how much they actually did so, and whether this was sufficient to counteract the inherent advantage of pre-installation resulting from Windows Media Player being tied to Windows. A similar framework should also apply to dominance itself. It is one thing to state that “competition is only a click away” to seek to demonstrate that consumers can access alternatives, but quite another to look at whether this is actually 28 See Case C-23/14 (Post Danmark II), para. 65: “In that regard, and as the Advocate General occurring to a significant extent in practice. stated in point 80 of her Opinion, the anticompetitive effect of a particular practice must not be (…) purely hypothetical.” See in this regard para. 80 of the Opinion of Advocate- 30 This has echoes of the Microsoft media player tying case, where Microsoft argued that General Kokott: “It should be noted in that regard that the exclusionary effect of such a there was a benefit in consumers obtaining “out of the box” a PC with various products rebate scheme must not be of a purely hypothetical nature. In other words, the schemes in preinstalled, including a media player, and that consumers did not want a PC without a question must be capable not only in the abstract but also in practice of making it difficult or media player. This may very well be the case, but it did not mean that Microsoft should have impossible for the dominant undertaking’s competitors to gain access to the market and for been able to de facto determine through the tying of its media player to its monopoly PC

its co-contractors to choose between various sources of supply or trading partner.” operating system that it should be its media player that should be systematically preinstalled. délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende (art. utilisation non autorisée constitue une contrefaçon, d'auteur par les conventions internationalesintellectuelle du 1er juillet 1992. Toute du droit en vigueur et le Code de la propriété au titre Ce document est protégé by copyright laws and internationalNon-authorised use of this document pouvant accompagner ce document. This document is protected copyright treaties. personnelle est strictement autorisée dans les limites de l’articletechniques protection L. 122 5 CPI et des mesures L. 335-2 CPI). L’utilisation constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment € 300 000 fine ( Art.Intellectuelle). Personal use this document is authorised within limits Intellectuelle DRM protection. L. 335-2 Code de la Propriété L 122-5

32 Concurrences N° 2-2018 I On-Topic I The Google Shopping decision and there is a natural tendency, either because of an IV. Conclusions evolutionary dynamic or because of the nature and types of arguments that dominant companies bring, to always 19. The Decision comes at an interesting moment in the seek to show “more.” It is, of course, important for the broader context of Union competition law. Commission to outline a coherent theory of harm with concrete analysis of potential anti-competitive effects 20. First, there is an ongoing debate, perhaps crystallised which relies on the evidence at hand. The Google case is further following the European Court of Justice’s Intel one such recent example, where as described above, based judgment of September 2017, about what needs to be on real-world evidence, it was inter alia demonstrated that demonstrated in order to prove an abuse under Article there was a clear link between visibility and traffic and it 102 TFEU. In the Intel case, much of this discussion was concluded that Google’s favouring of its comparison focussed on whether anti-competitive effects could shopping service harmed competition. At the same time, be assumed from the nature of the conduct at stake common sense and sound judgment should be exercised (exclusivity/loyalty rebates) or whether potential anti- to ensure that competition enforcement remains competitive effects need to be demonstrated in the grounded in such real-world evidence—otherwise, there specific circumstances of the case. This debate, whilst is in my view a risk that the pendulum shifts too far important, was in one sense too narrow, since it related against the enforcement of unilateral conduct.32 to only one category of abuse—namely, exclusivity rebates. However, the case law for most other types of 22. Second, there is a broader debate about the role abuse has always required a potential anti-competitive of competition policy in high-tech markets. One view effect or capability of foreclosure to be demonstrated. is that since these markets are characterised by rapid Given this, and given that the Commission in its technological innovation, there is essentially no need decisional practice in any case analysed potential anti- for competition law since there can be no positions of competitive effects also for exclusivity rebates (not least entrenched market power—these will be swept away in the Intel case), the real debates or disagreements by the pace of technical change and paradigm shifts in rather seem to relate to what is meant by “potential technology. Another view that has been more frequently anti-competitive effects” and what the Commission, or espoused recently is that competition law is not well indeed national competition authorities applying EU equipped to analyse new phenomena that high-tech competition law, needs to prove to show such potential markets exhibit, such as free services, the role of data or anti-competitive effects. markets that are two- or multi-sided, and that its tools are not nimble enough to keep up with rapidly evolving 21. My own views are the following. First, proper account markets. Such a view therefore advocates either that should be taken of the implications of the dominant there need to be new tools or parameters to facilitate position in the market of the company concerned. competition law enforcement or that regulatory solutions Of course, dominance as such is not an issue, dominant are necessary. companies should be allowed to compete on the merits, and competition law should not protect inefficient 23. It is in my view not plausible to argue that competitors. At the same time, I do not believe that technology will in all cases quickly displace market the Union courts’ continued references to the special positions. Experience in cases such as Microsoft, Intel responsibility of a dominant company not to harm and Google shows that whether in software, hardware competition are or should be considered as mere lip or digital, whilst the pace of technological innovation service to past case law. The reality is that a dominant may be rapid, markets may be characterised by network position gives a company the possibility to harm effects or economies of scale, which means that there competition in a way that a non-dominant company can be entrenched positions of market power, and cannot,31 and this should be properly recognised. Second, hence the need for antitrust vigilance. At the same time, when a potential anti-competitive effects analysis is overgeneralisation is dangerous—lumping together carried out, conclusions cannot be based on theoretical products as diverse as search engines, operating systems, or abstract reasoning, but must be grounded in the ebooks, computer chips, music stores, retail platforms or circumstances and evidence of the case. This should be smartphones—to give just a few examples—into a broad uncontroversial and has been outlined in the case law. category of “high-tech” markets and arguing that they Third, there cannot be any prescribed way or hierarchy have common characteristics distinct from the rest of of method of how potential anti-competitive effects the economy is not appropriate.33 In fact, every market should be demonstrated, not least since it will very much or sector, whether it is “high-tech” or not, has its own depend on the specific evidence of the case. How this will specificities and what competition law has demonstrated look will therefore differ in every case. Over the years, over the years is that whilst its core principles are the effects analysis in Commission decisions on abuse constant, its tools are adaptable and can fully analyse, has generally become more sophisticated and detailed,

32 In any case, it is not that it can be said that the Commission is interventionist, as it is sometimes portrayed. Between the beginning of 2010 and the end of 2017, excluding 31 F or example, it is one thing if a dominant company which is a must-have for most of a cartels, there were 13 prohibition decisions out of a total of 590 registered cases customer’s supplies makes a payment to that customer only on condition that it obtain all (ex officio and complaints). of its supplies from the dominant company—it is quite another if a company with a low market share trying to penetrate the market tries to do the same thing. The former is not 33 Neither indeed are characteristics such as free goods, two-sided markets or the role of data

competitively neutral, and the two are not competitively equivalent. parameters new or specific to “high-tech” markets. délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende (art. utilisation non autorisée constitue une contrefaçon, d'auteur par les conventions internationalesintellectuelle du 1er juillet 1992. Toute du droit en vigueur et le Code de la propriété au titre Ce document est protégé by copyright laws and internationalNon-authorised use of this document pouvant accompagner ce document. This document is protected copyright treaties. personnelle est strictement autorisée dans les limites de l’articletechniques protection L. 122 5 CPI et des mesures L. 335-2 CPI). L’utilisation constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment € 300 000 fine ( Art.Intellectuelle). Personal use this document is authorised within limits Intellectuelle DRM protection. L. 335-2 Code de la Propriété L 122-5

Concurrences N° 2-2018 I On-Topic I The Google Shopping decision 33 from a competition perspective, issues such as two-sided changes to competition law tools are not necessary if the markets, network effects, lock-in, free products, the role current ones are applied to their full extent in a realistic of data and so on. This is not to say that competition law and reasonable manner. This, of course, does not mean should complacently rest on its laurels, but just a recap that competition law is the answer to every problem— of antitrust cases that the Commission has dealt with in in this regard, to the extent that there are issues of a the high-tech sphere this century34 shows the capacity of general nature that can be properly identified beyond competition law to deal with different types of practices competition law, these may be for different policy tools in different markets.35 In my view therefore, radical to deal with. n

34 Micr osoft (interoperability and tying), Rambus (patent ambush), Intel and Qualcomm (exclusivity rebates/payments), Motorola and Samsung (standard-essential patents), Amazon (ebooks MFNs), Google.

35 The same goes for mergers where the Commission has consistently demonstrated its ability to analyse and deal with “new economy” issues, such as interoperability (e.g., Intel/ McAfee), data (e.g., Facebook/WhatsApp) and product integration (e.g., Microsoft/

LinkedIn). délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende (art. utilisation non autorisée constitue une contrefaçon, d'auteur par les conventions internationalesintellectuelle du 1er juillet 1992. Toute du droit en vigueur et le Code de la propriété au titre Ce document est protégé by copyright laws and internationalNon-authorised use of this document pouvant accompagner ce document. This document is protected copyright treaties. personnelle est strictement autorisée dans les limites de l’articletechniques protection L. 122 5 CPI et des mesures L. 335-2 CPI). L’utilisation constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment € 300 000 fine ( Art.Intellectuelle). Personal use this document is authorised within limits Intellectuelle DRM protection. L. 335-2 Code de la Propriété L 122-5

34 Concurrences N° 2-2018 I On-Topic I The Google Shopping decision Google: Is the competition truly just a click away?

Beatriz Marques [email protected] New York state Attorney LL.B in Law, University of Bristol (UK) LL.M in European Law, Universite Pantheon-Assas Paris II (France)

1. Google has faced heightened scrutiny by numerous competition authorities worldwide since 2007. Most significantly the European Union fined Google a record I. Google’s antitrust €2.4 billion ($2.7 billion), for abusing its dominant position as a search engine. This article examines troubles in the EU Google’s recent antitrust troubles in the EU and US and 5. In 2009, industry trade groups and competitors filed analyzes whether the EU fine is likely to ignite further complaints against Google throughout Europe alleging investigations against Google. its vertical search favored its own services, over both Google’s sponsored links39 and unpaid search results 2. In December 2002 Google launched “Froogle” a notwithstanding of the results’ merit. In other words, product and shopping price comparison search engine, Google leveraged its dominance in general search renamed “Google Product Search” in 2007. Google to give its comparison shopping services more favorable made changes to this search in 2008, which gave rise to treatment whilst demoting its competitors. This resulted allegations of anticompetitive behavior. in the European Commission opening an investigation into Google in November 2010 for abuse of dominant 3. Today, Google controls search in both the EU and US position in online search, in breach of Article 102 of markets. In the EU, Google has accounted for 90% of the Treaty on the Functioning of the European Union the market since 2008.36 In the US, it has held 68.8% of (TFEU).40 EU competition law does not aim to protect the market as of January 2016.37 competitors but to preserve competition on the merits for the benefit of consumers. Having a dominant position 4. As attention grows towards the “data economy’s is not itself unlawful; however, dominant undertakings oligopolies” the question whether the competition is truly have a special responsibility not to allow their conduct to just a click away has caught the attention of regulators. impair genuine undistorted competition.41 Network effects where data is used to attract more users who then generate more data, improving services 6. In May 2012, the Competition Commissioner Joaquín and thereby attracting more users, allows for market Almunia gave Google an opportunity to offer remedies dominance to arise more naturally.38 This can lead pursuant to article 9 of Regulation 1/2003. Pressure to high barriers to entry, affecting competitors’ potential from Google’s competitors escalated in 2013 asking to innovate and compete effectively. the Commission to discontinue the legally binding commitment approach of Article 9 in favor of Article 7, the normal procedure, which prohibits anticompetitive practices, imposes fines and is far more punitive. As a result, by September 2014, which marked the end of Commissioner Almunia’s term no settlement had

39 Google’s competitors alleged that Google gave its own services a more prominent placing by lowering the “Quality Score” of its competitor’s sponsored links (http://europa.eu/ rapid/press-release_IP-10-1624_en.htm).

36 http://gs.statcounter.com/search-engine-market-share/all/europe/2016. 40 Id.

37 https://www.statista.com/statistics/267161/market-share-of-search-engines-in-the-united-states. 41 Article 102 states that “Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible 38  https://www.justice.gov/atr/speech/competition-innovation-and-antitrust-enforcement-dynamic- with the internal market in so far as it may affect trade between Member States.” ( See Treaty

network-industries. on the Functioning of the European Union (TFEU)). délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende (art. utilisation non autorisée constitue une contrefaçon, d'auteur par les conventions internationalesintellectuelle du 1er juillet 1992. Toute du droit en vigueur et le Code de la propriété au titre Ce document est protégé by copyright laws and internationalNon-authorised use of this document pouvant accompagner ce document. This document is protected copyright treaties. personnelle est strictement autorisée dans les limites de l’articletechniques protection L. 122 5 CPI et des mesures L. 335-2 CPI). L’utilisation constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment € 300 000 fine ( Art.Intellectuelle). Personal use this document is authorised within limits Intellectuelle DRM protection. L. 335-2 Code de la Propriété L 122-5

Concurrences N° 2-2018 I On-Topic I The Google Shopping decision 35 been reached. In November 2014, Margrethe Vestager, It is unlikely, however, that the General Court will find the current commissioner for competition, took over for Google; the CJEU is not known to have overturned bringing forth a new era—a tougher Commission. many Commission abuse of dominance decisions over On April 2015, the European Commission sent a the years. Google faces an uphill battle in Europe, with Statement of Objections to Google alleging it abused its more unfavorable decisions from the Commission likely dominant position in search services by systematically to come its way soon, and a discouraging battle on search favoring its own comparison shopping product and results at the CJEU. demoting competitors. The Commission’s Opening of Proceedings took place in 2016.

7. On 27 June 2017 the European Commission fined II. Google’s antitrust Google a record €2.4 billion ($2.7 billion), for abusing its dominant position in giving an illegal advantage to its own comparison shopping service through its search troubles in the US engine. In its Prohibition Decision (following Article 7 10. As a consequence of complaints by competitors in procedure) the Commission underlines that a website’s 2010 the Federal Trade Commission (FTC) launched traffic is directly related to the prominence in which it is its formal investigations against Google for abuse of its shown in Google search. Moreover, traffic is paramount monopoly power in relation to Google Search, based on for effective competition of comparison shopping Section 1 and Section 2 of the Sherman Act.45 The FTC’s services. As per market definition, the Commission investigation was sparked by Google’s alleged abuse of deems merchant platforms (Amazon and eBay) are its dominant position by favoring its own products and in a different market than Google being that they are services in Google search whilst it demoted competitors’ customers, not competitors, and even if Google were links. to be in direct competition with them, Google’s actions would have nonetheless harmed competition. Google 11. In January 2013, the FTC closed its investigation harmed consumers by not giving them the most relevant into Google search by a 5-0 bipartisan vote. It found that search results, which can lead to higher fees for merchants Google did not favor its own services or products without and as a result higher prices for consumers,42 and stifled legitimate justification.46 The aim of the changes was innovation and competitors’ ability to compete on the recognized as improving the user experience. Chairman merits by preventing competitors’ visibility despite their Jon Leibowitz underlined, “while not everything Google relevance. The Commission recognized no objective did was beneficial, on balance we did not believe that justification or efficiency claims. The Prohibition the evidence supported a FTC challenge to this aspect Decision required Google to stop its illegal conduct of Google’s business under American law.”47 American within 90 days, and thereby treat its competitors neutrally. law, like EU law, is concerned with the protection of Non-compliance can lead to fines of up to 5% of the competition, not competitors. average daily worldwide turnover of Alphabet (Google’s holding company) for each day of non-compliance. 12. Recently, following the EU Commission’s decision, renewed interest as to Google’s alleged search bias has 8. The Commission’s fine was the first time that Google resurfaced in the US. By way of contrast to Europe, has been sanctioned by a big competition regulator. in the US, the FTC and DOJ must win their case in This not only lays a bedrock for further investigations court. Unlike the EU Commission, American regulators as per Google’s behavior toward other specialist search cannot prohibit abuse of dominant position without markets but also adds fuel to the flame of critic’s distaste a court order. Results like the EU’s would be harder for Google’s size and influence.43 Private antitrust to accomplish in the US, despite many of Google’s lawsuits against Google may also follow by competitors competitors support the EU decision.48 whose business was allegedly wiped out in the course of the Commission’s investigation. 13. In November 2017 Missouri Attorney General Josh Hawley announced its antitrust investigation 9. In August 2017 Google sent a proposed fix to against Google as to whether Google search benefits its the Commission. As a result, Google has begun allowing own products and services (the investigation also covers price comparison websites to bid for space in results at scraping under antitrust laws and privacy issues). So far, the top of the page; however, many argue that whilst only a subpoena has been issued and the investigation some competitors have secured prime space, the main is at an early stage. Jim Hood, the attorney general of beneficiary remains Google.44 The Commission is Mississippi, has an ongoing privacy battle with Google monitoring the fix at this time. In September Google filed an appeal with the General Court of the CJEU.

45 http://uscode.house.gov/view.xhtml?path=/prelim@title15/chapter1&edition=prelim.

46 https://www.ftc.gov/news-events/press-releases/2013/01/google-agrees-change-its-business -practices-resolve-ftc. 42 Sections 593–594 and 597–599 explain consumer harm (http://ec.europa.eu/ competition/antitrust/cases/dec_docs/39740/39740_14996_3.pdf). 47 https://www.ftc.gov/sites/default/files/documents/public_statements/opening-remarks- federal-trade-commission-chairman-jon-leibowitz-prepared-delivery/130103googleleib 43 https://www.ft.com/content/9554a8bc-5b12-11e7-b553-e2df1b0c3220. owitzremarks.pdf.

44 https://www.ft.com/content/b3779ef6-b974-11e7-8c12-5661783e5589. 48 https://www.ft.com/content/f16372d2-5aea-11e7-9bc8-8055f264aa8b. délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende (art. utilisation non autorisée constitue une contrefaçon, d'auteur par les conventions internationalesintellectuelle du 1er juillet 1992. Toute du droit en vigueur et le Code de la propriété au titre Ce document est protégé by copyright laws and internationalNon-authorised use of this document pouvant accompagner ce document. This document is protected copyright treaties. personnelle est strictement autorisée dans les limites de l’articletechniques protection L. 122 5 CPI et des mesures L. 335-2 CPI). L’utilisation constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment € 300 000 fine ( Art.Intellectuelle). Personal use this document is authorised within limits Intellectuelle DRM protection. L. 335-2 Code de la Propriété L 122-5

36 Concurrences N° 2-2018 I On-Topic I The Google Shopping decision and announced a competition law inquiry would be investment and should not be punished without an abuse. next.49 As the tension between privacy, big data and Discriminatory practices do stifle the competition further competition law arises, from US state attorney generals than just a click away. In highly innovative industries to Germany50 and other EU Member States, it is likely the market’s ability to autocorrect was presumed as that Google’s troubles escalate. well as its competitive nature. Data, however, may give an anticompetitive edge and proposals for allowing 14. The political winds in Washington have shifted; add competitors to access particular data in order to avoid to this the Commission’s record fine against Google and barriers to entry should be weighed. Buy out acquisitions, an ever-rising appetite to scrutinize the “data economy’s arguably seen in Facebook’s acquisitions of WhatsApp oligopolies”: the investigation into Google for abuse of amongst others, ensure there are no new competitors to its monopoly power in relation to Google search seems challenge the dominant undertakings. Authorities should far from extinguished in the US. If Google’s search where remain vigilant not only in terms of abuse of dominance to be re-examined it is uncertain whether on balance but also when reviewing mergers and acquisitions. it would be found not to be demonstrably uncompetitive. US law differs from EU law; a US judge may rightly not 16. Antitrust enforcement should always seek to promote find the same problems as the European Commission did dynamic competition, innovation and consumer and continue to recognize a legitimate justification. protection. Proper enforcement requires balance. It should not be manipulated by competitors or political 15. The market is generally able to autocorrect and appetites nor left untouched where the market itself quickly address any undertakings that stifle competition, cannot autocorrect. The data economy will surely lead but when it cannot do so, regulators should intervene. competition law itself to acclimate and it has the ability to This must be done whilst keeping in mind that a do so as it stands, as for the Google comparison shopping dominant position is not in itself unlawful. Dominant EU decision it applies both to the brick-and-mortar and companies should be recognized for their innovation and online spheres. n

49 https://www.ft.com/content/12f9e432-caec-11e7-aa33-c63fdc9b8c6c.

50 From 2016 the Bundeskartellamt is investigating whether Facebook has abused its dominant position through its terms of service in failing to inform users about the “type and extent of data collected.” In other words, imposing unfair conditions on users through its dominant position (http://www.bundeskartellamt.de/SharedDocs/

Meldung/EN/Meldungen%20News%20Karussell/2016/02_03_2016_Facebook.html). délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende (art. utilisation non autorisée constitue une contrefaçon, d'auteur par les conventions internationalesintellectuelle du 1er juillet 1992. Toute du droit en vigueur et le Code de la propriété au titre Ce document est protégé by copyright laws and internationalNon-authorised use of this document pouvant accompagner ce document. This document is protected copyright treaties. personnelle est strictement autorisée dans les limites de l’articletechniques protection L. 122 5 CPI et des mesures L. 335-2 CPI). L’utilisation constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment € 300 000 fine ( Art.Intellectuelle). Personal use this document is authorised within limits Intellectuelle DRM protection. L. 335-2 Code de la Propriété L 122-5

Concurrences N° 2-2018 I On-Topic I The Google Shopping decision 37 Concurrences

Editoriaux Droit & économie Jacques Attali, Elie Cohen, Claus‑Dieter Emmanuel Combe, Philippe Choné, Ehlermann, Jean Pisani Ferry, Ian Forrester, Laurent Flochel, Frédéric Jenny, Eleanor Fox, Douglas H. Ginsburg, Gildas de Muizon, Jorge Padilla, Laurence Idot, Frédéric Jenny, Arnaud Penelope Papandropoulos, Anne Perrot, Montebourg, Mario Monti, Gilbert Parleani, Nicolas Petit, Etienne Pfister, Francesco Rosati, Jacques Steenbergen, Margrethe Vestager, David Sevy, David Spector... Bo Vesterdorf, Denis Waelbroeck, Marc van der Woude...

Concurrences est une revue Chroniques trimestrielle couvrant l’ensemble Ententes des questions de droits de Interviews Ludovic Bernardeau, Anne-Sophie Choné l’Union européenne et interne Sir Christopher Bellamy, Lord David Currie, Thierry Dahan, Jean-Louis Debré, Isabelle Grimaldi, Michel Debroux, Etienne Thomas de la concurrence. Les analyses de Silva, François Fillon, John Fingleton, Pratiques unilatérales de fond sont effectuées sous Renata B. Hesse, François Hollande, forme d’articles doctrinaux, William Kovacic, Neelie Kroes, Laurent Binet, Frédéric Marty, de notes de synthèse ou Christine Lagarde, Johannes Laitenberger, Anne Wachsmann de tableaux jurisprudentiels. Emmanuel Macron, Robert Mahnke, Pratiques commerciales L’actualité jurisprudentielle Ségolène Royal, Nicolas Sarkozy, déloyales et législative est couverte par Marie‑Laure Sauty de Chalon, Tommaso Valletti, Christine Varney... Frédéric Buy, Valérie Durand, onze chroniques thématiques. Jean‑Louis Fourgoux, Rodolphe Mesa, Marie‑Claude Mitchell Distribution Dossiers Nicolas Ereseo, Dominique Ferré, Jacques Barrot, Jean-François Bellis, Didier Ferrier, Anne-Cécile Martin David Bosco, Murielle Chagny, John Connor, Damien Géradin, Assimakis Komninos, Concentrations Christophe Lemaire, Ioannis Lianos, Jean-François Bellis, Olivier Billard, Pierre Moscovici, Jorge Padilla, Emil Paulis, Jean‑Mathieu Cot, Ianis Girgenson, Robert Saint-Esteben, Jacques Steenbergen, Sergio Sorinas, David Tayar Florian Wagner-von Papp, Richard Whish... Aides d’État Jacques Derenne, Bruno Stromsky, Raphaël Vuitton Articles Procédures Guy Canivet, Emmanuelle Claudel, Pascal Cardonnel, Alexandre Lacresse, Emmanuel Combe, Thierry Dahan, Luc Gyselen, Christophe Lemaire Daniel Fasquelle, Barry Hawk, Nathalie Homobono, Laurence Idot, Frédéric Jenny, Régulations Bruno Lasserre, Luc Peeperkorn, Anne Perrot, Orion Berg, Hubert Delzangles, Nicolas Petit, Catherine Prieto, Patrick Rey, Emmanuel Guillaume Joseph Vogel, Wouter Wils... Mise en concurrence Bertrand du Marais, Arnaud Sée Pratiques Actions publiques Tableaux jurisprudentiels : Actualité Jean-Philippe Kovar, Francesco Martucci, des enquêtes de concurrence, Stéphane Rodrigues Contentieux indemnitaire des pratiques Droits européens et anticoncurrencielles, Bilan de la pratique étrangers des engagements, Droit pénal et concurrence, Legal privilege, Cartel Profiles in the EU... Walid Chaiehloudj, Sophie‑Anne Descoubes, Marianne Faessel, Pierre Kobel, Silvia Pietrini, Jean‑Christophe Roda, François Souty, Stéphanie Yon-Courtin International Belgium, Brésil, Canada, China, Germany, Hong‑Kong, India, Japan, Luxembourg, Switzerland, Sweden, USA... Livres Sous la direction de Stéphane Rodrigues

Revues Christelle Adjémian, Mathilde Brabant, Emmanuel Frot, Alain Ronzano, Bastien Thomas Tarifs 2018

Devis sur demande Abonnement Concurrences + Quote on request

Revue et Bulletin : Versions imprimée (Revue) et électroniques (Revue et Bulletin) (avec accès multipostes pendant 1 an aux archives) Review and Bulletin: Print (Review) and electronic versions (Review and Bulletin) (unlimited users access for 1 year to archives)

Conférences : Accès aux documents et supports (Concurrences et universités partenaires) Conferences: Access to all documents and recording (Concurrences and partner universities)

Livres : Accès à tous les e-Books Books: Access to all e-Books Abonnements Basic

HT TTC Revue Concurrences l Review Concurrences Without tax Tax included

Version électronique (accès monoposte au dernier N° en ligne pendant 1 an, pas d’accès aux archives) 545,00 € 654,00 € Electronic version (single user access to the latest online issue for 1 year, no access to archives)

Version imprimée (4 N° pendant un an, pas d’accès aux archives) 595,00 € 607,50 € Print version (4 issues for 1 year, no access to archives)

e-Bulletin e-Competitions l e-Bulletin e-Competitions

Version électronique (accès monoposte au dernier N° en ligne pendant 1 an, pas d’accès aux archives) 760,00 € 912,00 € Electronic version (single user access to the latest online issue for 1 year, no access to archives)

Renseignements l Subscriber details

Prénom - Nom l First name - Name ...... Courriel l e-mail ...... Institution l Institution ...... Rue l Street ...... Ville l City ...... Code postal l Zip Code ...... Pays l Country ...... N° TVA intracommunautaire l VAT number (EU) ......

Formulaire à retourner à l Send your order to: Institut de droit de la concurrence 68 rue Amelot - 75 011 Paris - France l [email protected]

Conditions générales (extrait) l Subscription information Les commandes sont fermes. L’envoi de la Revue et/ou du Bulletin ont lieu dès réception du paiement complet. Consultez les conditions d’utilisation du site sur www.concurrences.com (“Notice légale”).

Orders are firm and payments are not refundable. Reception of the Review and on-line access to the Review and/or the Bulletin require full prepayment. For “Terms of use”, see www.concurrences.com. Frais d’expédition Revue hors France 30 € l 30 € extra charge for shipping Review outside France