Faculty : Law Study area : Law, notaryship and criminology Programme : Master in Intellectual Property Rights Search neutrality as a regulation principle for Internet search engines A multidisciplinary approach Master thesis submitted by Ines GEORGIEVA Student number: 0465533 To obtain the degree of Master in Intellectual Property Rights Promoter: Prof. Dr. Peggy VALCKE Co-reader: Prof. Dr. Eva LIEVENS Academic year 2013 - 2014 Search neutrality as a regulation principle for Internet search engines A multidisciplinary approach "To exist is to be indexed by a search engine" (L. Introna & H. Nissenbaum) Acknowledgements I would like to express my sincere gratitude to my promoter Prof. Dr. Peggy Valcke for the useful comments, guidance, encouragements and her availability. Furthermore I would like to thank my close relatives and friends, who have supported me during six year of law studies, which means thirteen exam sessions, seventy-one exams and two master theses. Without their support, I don't know how I could have reached my goals. Ines Georgieva Brussels, August 2014 1 Table of contents Introduction ...................................................................................................................................... 6 1. Background and research question ........................................................................................ 6 2. Structure ................................................................................................................................ 7 3. Research approach and method ............................................................................................. 8 Chapter 1. Internet search engines: general overview ...................................................................... 9 1. Internet search engines .......................................................................................................... 9 1.1. Definition ....................................................................................................................... 9 1.2. Distinction between horizontal and vertical search ..................................................... 10 2. Functioning of search engines ............................................................................................. 10 2.1. Crawling and indexing ................................................................................................. 10 2.2. Algorithms and ranking ............................................................................................... 11 2.3. The user interface design of search engines................................................................. 11 3. Evolution of search engines: from Ten blue links to Universal search ............................... 13 4. The functional and societal role of search engines ............................................................. 15 4.1. Functional role ............................................................................................................. 15 4.1.1. Informational search ............................................................................................. 15 4.1.2. Navigational search .............................................................................................. 15 4.1.3. Transactional search ............................................................................................. 16 4.2. Societal role of search engines ..................................................................................... 16 5. Market structure of Internet search engines: a microeconomic analysis............................. 17 5.1. A three-sided market .................................................................................................... 18 5.2. Network effects ............................................................................................................ 19 5.3. Innovation driven industries and fast moving markets ................................................ 20 5.4. Economies of scale ...................................................................................................... 21 5.5. Highly concentrated markets and high fixed costs ...................................................... 21 5.6. Switching costs and lock-in ......................................................................................... 21 6. Search engines business models .......................................................................................... 23 6.1. Contextual advertising ................................................................................................. 23 6.2. Current market leaders’ business models .................................................................... 24 6.2.1. Google .................................................................................................................. 24 2 6.2.2. Bing and Yahoo! ................................................................................................... 25 6.3. Search engines market shares in the US and the EEA ................................................. 26 7. Conclusion ........................................................................................................................... 28 Chapter 2. Search neutrality and competition law: the Google antitrust investigation .................. 29 1. Antitrust as the starting point of the search neutrality debate ............................................. 29 1.1. The European Commission investigation saga ............................................................ 29 1.1.1. Google’s business practices .................................................................................. 29 1.1.2. The stakeholders’ claims ...................................................................................... 30 1.1.3. Google’s commitments ......................................................................................... 31 1.2. The Federal Trade Commission investigation ............................................................. 35 2. Competition law and search neutrality ................................................................................ 37 2.1. The concepts of search bias and search neutrality ....................................................... 37 2.2. Search bias as an abuse under article 102 TFEU ......................................................... 38 2.2.1. Relevant market .................................................................................................... 38 2.2.2. Dominance ............................................................................................................ 39 2.2.3. Abuse .................................................................................................................... 40 2.3. Competition law is not sufficient to guarantee search neutrality ................................. 42 2.3.1. All search engines are biased ................................................................................ 43 2.3.2. Narrow interpretation of the notion of search bias ............................................... 44 3. Conclusion ........................................................................................................................... 45 Chapter 3. Search neutrality and net neutrality: a single principle? ............................................... 47 1. An introduction to net neutrality ......................................................................................... 47 1.1. Concept of net neutrality .............................................................................................. 47 1.2. Net neutrality debate in context ................................................................................... 48 1.3. Legal framework .......................................................................................................... 49 1.3.1. United States ......................................................................................................... 49 1.3.2. European Union .................................................................................................... 52 1.3.2.1. Current legal framework ................................................................................... 52 1.3.2.2. The Connected Continent proposal ................................................................... 54 2. Are European net neutrality principles applicable to search engines? ................................ 55 2.1. Search engines and the Telecoms Package .................................................................. 55 3 2.1.1. Are search engines electronic communication services? ..................................... 55 2.1.2. Are search engines associated facilities? .............................................................. 56 2.2. Conclusion ................................................................................................................... 57 3. Search neutrality and net neutrality: a comparative approach ............................................ 57 3.1. Search engines and net neutrality................................................................................. 58 3.2. Information gatekeepers ............................................................................................... 59 3.3. Traffic managers .......................................................................................................... 59 3.4. Transparency is problematic .......................................................................................