Google's dominant market position under European Commission scrutiny

Google is faced with a potential battle with the European Commission which says it will be investigating whether the search engine has abused its dominant market position.

The European Union’s anti-trust investigators will be looking into whether Google has been shutting out competitors by lowering the ranking of unpaid search results of competing services which are specialised in providing users with specific online content such as price comparisons (so-called vertical search services).

The Commission will also look into allegations that Google lowered the 'Quality Score' for sponsored links of competing vertical search services. The Quality Score is one of the factors that determine the price paid to Google by advertisers.

Another issue under probe involves the restrictions that Google puts to the portability of online search advertising campaigns from its platform AdWords to the platforms of competitors.

Google has 68 percent market share of the American market and 90 percent share in many European markets.

Storm in the teacup?

Some market observers feel the Commission’s move will be nothing but a storm in the teacup given the Commission has a tough task proving Google’s business is anti-competitive. There are also elements of politics, with American and German players behind the lobby for Commission investigation.

Reuters reported a senior European Union official saying: “The American companies are using the European Commission as a battleground among themselves. They are the ones coming to us with complaints.  They are the ones who are not happy when rivals present concessions and say these are not enough."

FairSearch is one such group – made up of firms including Microsoft, Oracle and Twenga – bringing their grouse against Google with the European Commission. Others reported to be in the lobby are two German media giants Axel Springer and Hubert Burda Media.

"Never has a competition case brought together such a geographical or industrial breadth of concerned parties. There's just never been anything like it," Thomas Vinje, a partner in the Brussels office of London law firm Clifford Chance who is advising FairSearch was quoted saying.

Misguided

Michael Wade, professor of Innovation and Strategic Information Management at IMD, says the EU’s actions are completely misguided.

“Google is successful largely because it offers a good product for free. The vast majority of people use the Google search engine by choice and find the results to be helpful. Users are not forced to use Google search in a monopolistic manner. They have the choice to use other free-of-charge competing services like Bing or Yahoo.”

Competitors exist, but they are simply not as good as Google, which has an estimated 90% internet search market share in Europe, he adds.

“Google uses an algorithm to predict the most relevant results. Of course this is biased – towards Google’s interpretation of the most relevant results. But the vast majority of users agree with what a Google search presents. And at any rate what would a neutral search yield? Random results? It is difficult to see how this could be at all helpful to internet users.”

Wade notes that in the case of Google’s second largest revenue source – Adsense – the company gives back a healthy 70 percent of all revenue to clients.

“From a business perspective, Google is in trouble in the long term due to its high reliance on clicks to advertisers’ websites,” he says.

He is also of the view that that Apple is a much more dangerous potential monopolist. Google’s Android is open but Apple’s iOS isn’t. Apple’s ecosystem is largely closed and tightly controlled, he adds.

The Economist holds the same view. It notes: “Google’s behaviour is not in the same class as Microsoft’s systematic campaign against the Netscape browser in the late 1990s: there are no e-mails talking about “cutting off” competitors’ “air supply”. What’s more, some of the features that hurt Google’s competitors benefit its consumers."