April 16, 2015
So it finally happened. Yesterday the European Commission announced it had sent Google a Statement of Objections (SO), accusing it of abusing its dominant position in search to unfairly give advantages to its comparison shopping service, Google Shopping.
This is obviously hugely important. As I have argued here before, the outcome of this case has implications for the competitiveness of large sections of the European economy. Like so many others, I am delighted that the Commission has given itself the leverage it needs to bring Google into a serious discussion after the frankly laughable settlement offers Google made to Vice President Almunia in 2013 and 2014. Commissioner Vestager can count on us to do what we can to support her team. We’d like to see DG COMP and the Commission come out of this process with strengthened credibility and authority, so that it can be better placed to deal with other competition problems in our sector as they arise. I am convinced that success in this case would reduce the pressure for legislative regulation of all “platforms” – which is a concept so vague and nebulous that it carries considerable risks for European Internet companies.
Moreover, along with the strengthened credibility and authority that success would bring, this case could play an important part in rebuilding the image of the EU with citizens. This is certainly not to say that one should approach this as a front in a battle with the United States, or a struggle between Europe and American Internet companies, or even a war against Google itself. On the contrary, this case should be seen as part of a process of helping a fantastic, exciting, world-changing company that still wants to behave like a startup to understand that its scale and power give it great responsibility, and that it needs to take that responsibility seriously if it wants to retain the long-term trust of its customers.
That’s why it was so disappointing to see Google hit back publicly in the way it did yesterday, with colourful graphs implying that Google Shopping is primarily a web site with traffic.
In fact, of course, what complainants have alleged is precisely that Google Shopping takes traffic away from them not because it has a web site, but because it is inserted into the best real estate on the search results page. Users don’t have to go onto the Google Shopping site (and thereby contribute to the numbers shown on the graph) in order to use the service. It’s exactly this ability to avoid one of the major barriers to entry that is problematic.
While some might interpret this as a deliberate deception, I tend to believe it must have been a mistake. Because if you look closely at the graphs, you can see that the introduction of the Google Shopping service coincides with substantial reduction in the traffic going to the “competing” sites shown, or at minimum noticeable drops in the rate of growth. The German market (see above) certainly seems to have suffered from the introduction of Google Shopping, with traffic dropping for all but the most insignificant players.
The French market looks fundamentally more competitive, but only Amazon’s traffic seems to have grown since the launch of Google Shopping.
Take a look at the UK graph. Big drop in traffic for eBay, slight drop for Amazon, and pretty stable traffic for the non-threatening small fry.
Of course Google has to tread a fine line here. It needs to argue to regulators that Google Shopping hasn’t had a significant impact on the market, while presumably reassuring investors that it’s a product with a future.
In short, these graphs seem to me to undermine, rather than strengthen, Google’s case. But perhaps we should not be surprised. Google is not a machine – it is a collection of human employees. And making mistakes under pressure is only human.