Google Refuses To Acknowledge The Law In Response To European Antitrust Complaint

Earlier this year, the European Commission (EC) sent a Statement of Objections (formal complaint) to Google for violating European antitrust (competition) laws.   In particular, the EC alleges Google “has abused its dominant position in the markets for general internet search services in the European Economic Area (EEA) by systematically favouring its own comparison shopping product in its general search results pages.  The Commission's preliminary view is that such conduct infringes EU antitrust rules because it stifles competition and harms consumers.” 

Yesterday, Google responded to the EC's complaint with a 100 plus page defiant response and blog post.  Interestingly, Google did not request a hearing on the matter and this tactic has provided credibility to Google's opponents' claims that if Google is confident that its legal position is correct as a matter of law it would request a hearing to defend itself.  A spokesman for the EC told Bloomberg News that "[i]t's common for companies to ask for an oral hearing but it doesn't happen all the time".

In my experience, guilty parties generally hide behind written submissions and avoid direct confrontation with their accusers.  According to Bloomberg News, "[h]earings can make a difference. Thirteen of the world's biggest banks succeeded at a face-to-face confrontation last year to unsettle an EU case into the credit-default swaps market...No fines have been issued in that case."  Therefore, Google's refusal to face the EC in an oral hearing indicates to me that it believes it has violated European competition law.

Google's cavalier behavior over the years in regards to competition, privacy, and accepting illegal ads clearly demonstrates that it believes its above the law.  Since the EC opened its antitrust investigation into Google, the company has paid hundreds of millions of dollars in fines and settlements due to illegal behavior.  In each of these situations, Google has dragged its heels when it was caught intentionally misleading regulators, and/or consumers, and/or the media.  

In 2011, Google paid a $500 million fine for knowingly accepting illegal advertisements from Canadian pharmacies.  Subsequently, it paid multiple million dollar fines in the United States and in Europe for privacy violations in connection with its Street View data collection project, its Buzz social network, its 2012 privacy policy change, and the Safari hack incident. 

Illegally abusing market position in Internet search (and/or other areas) is intertwined with data collection, usage, and privacy issues because in order to receive the most "relevant" search results to a search query a search engine must be able to access and process voluminous amounts of data very quickly.  For years, 90% to 96% of Google’s revenue has come from advertising which means it is dependent upon being able to obtain massive amounts of personal information at a low cost to feed its behavioral advertising machine. 

Countries have different legal criteria when determining whether a company has violated antitrust laws or if a potential merger will create an anti-competitive market.  Europe has a long history in regulating anti-competitive markets. Since Roman times, the continent has regulated commerce to ensure competition and fair play.  The EC is not targeting Google out of nationalistic fervor to boost EU based companies. Google is being targeted because it is clearly utilizing its dominant position to violate antitrust laws.

The EC has actively enforced its competition laws for years.  Last year, a $1.44 billion dollar fine against Intel was upheld for anti-competitive behavior after at least a fiver year plus fight. In 2013, Microsoft was fined $731 million dollars for not adhering to its previous antitrust agreements.  So, why does Google think they are are above the principles that have governed European markets for more than 2000 years?    

My hope is that the EC utilizes all of the legal and regulatory tools at its disposal to ensure that Google and other companies that violate EC competition and privacy laws are held accountable. Internet users around the globe are harmed when companies such as Google violate antitrust laws.

Copyright 2015 by the Law Office of Bradley S. Shear, LLC. All rights reserved.

European Commission: Google's Conduct Infringes on Antitrust Rules

The European Commission (EC) has sent a Statement of Objections (i.e. a formal complaint) against Google for violating European antitrust laws.  In particular, the EC alleges Google “has abused its dominant position in the markets for general internet search services in the European Economic Area (EEA) by systematically favouring its own comparison shopping product in its general search results pages.  The Commission's preliminary view is that such conduct infringes EU antitrust rules because it stifles competition and harms consumers.”

According to the EC’s press release, it has also “formally opened a separate antitrust investigation into Google's conduct [regarding] the mobile operating system Android. The investigation will focus on whether Google has entered into anti-competitive agreements or abused a possible dominant position in the field of operating systems, applications and services for smart mobile devices.”

These announcements have come after an almost five year investigation into Google’s European business practices.  The EC has tried three times to settle this matter to no avail.  New EC Competition Commissioner Margrethe Vestager, reinvigorated the investigation last year when her office requested additional information from various Internet vendors of online services to determine if consumers have been harmed by Google’s behavior and to figure out if Google has utilized its dominant market position to illegally hinder competition.

The EC’s investigation appears to have picked up momentum after The Wall Street Journal recently obtained a confidential 2012 U.S. Federal Trade Commission (FTC) report where key staff recommended suing Google for antitrust violations after finding real harm to consumers and innovation.  While the FTC report focused on Google’s U.S. behavior, the company most likely acted in a similar fashion in the European Union where it controls more than 90% of the Internet search market.

Since the EC opened its antitrust investigation into Google, the company has paid 100s of millions of dollars in fines and settlements due to illegal behavior. For example, in 2011 it paid a $500 million fine for knowingly accepting illegal advertisements from Canadian pharmacies.  Subsequently, it has paid multiple million dollar fines in the United States and in Europe for privacy violations in connection with its Street View data collection project, the deceptive privacy practices in Google's roll out of its Buzz social network, its 2012 privacy policy change, and the Safari hack incident. 

Illegally abusing market position in Internet search (and/or other areas) is intertwined with data collection, usage, and privacy issues because in order to receive the most relevant search results to a search query a search engine must be able to access and process voluminous amounts of data very quickly.  For years, 90% to 96% of Google’s revenue has come from advertising which means it is dependent upon being able to obtain massive amounts of personal information at a low cost to feed its behavioral advertising machine. 

Data dominance also appears to be a growing concern of the EC.  For example, Commissioner Vestager recently stated that she’s studying the U.S.’s “stringent approach to dealing with personal data as a means to payment” in its review of deals.  This appears to signal that regulators are beginning to understand that personal and corporate data issues are intertwined with antitrust matters.

The EC’s announcement that it has also opened up an investigation into whether Google has entered into anti-competitive agreements and/or abused its dominant position in regards to its Android operating system demonstrates that it wants to ensure that consumers are not harmed and that innovation is not stifled by illegal market activities in the growing mobile space.  Last year, The Wall Street Journal and The Information reported that Google’s confidential Android agreements have been “increasing the number of Google apps that must be pre-installed on [each Android] device to as many as 20, placing more Google apps on the home screen or in a prominent icon folder and making Google Search more prominent.” 

Google’s Android contract requirements are very troubling when comparing them to Microsoft’s pre-2002 agreements with PC vendors which “required PC manufacturers to bundle and promote the Internet Explorer Web browser and other software in prominent locations on the computer screen.” Therefore, it doesn’t surprise me that the EC is investigating whether Google’s Android agreements violate antitrust law. 

This enforcement action and the announcement of another investigation into Google’s other market activities demonstrates the need for users of its services to carefully read their contracts with Google and be familiar with their terms of service and troubling world-wide privacy policy.  Google's terms and privacy policy allows for unfettered data mining and profiling of consumer, education, corporate, and government data. Multiple European Data Protection Authorities have already fined Google for its privacy practices and ordered Google to change it privacy policy; unfortunately that has had virtually no effect on its market behavior.

Today’s European Commission announcement is the first step in what may be a long drawn out legal process, which in theory could lead to a fine up to $6.4 billion dollars and require Google to change some of its business practices.  As a long time Google user, my hope is that Google soon begins to once again abide by its corporate motto by not being “evil”.

Copyright 2015 by The Law Office of Bradley S. Shear, LLC All rights reserved.