How Europe could cut Google down to size without splitting it up

With a new competition commissioner re-examining the long-running Google antitrust case, it’s worth revisiting what she needs to achieve, particularly as the European Parliament has now called for EU antitrust law’s nuclear option – the unprecedented splitting-up of the company – to be on the table.

The resolution that the Parliament passed on Thursday refers to the possibility of separating Google’s search business from its other interests. It is, more than anything, a reflection of how politicized and overstuffed the [company]Google[/company] case has become. It forms part of a wider broadside against Google’s dominance in Europe – an offensive that is coalescing not so much out of a common cause, but out of varied interests seeing an opportunity to take a chunk out of a common adversary.

So here’s a rundown of where things stand, and what I – a journalist rather than a competition lawyer, of course — respectfully suggest EU antitrust chief Margrethe Vestager should consider doing next. And no, breaking up Google is not the answer. Instead, she should come up with something that sensibly prepares for the future of search.

Why is Google being targeted?

Google has a share of the EU search market that exceeds 90 percent, giving it what antitrust nerds call a “dominant position” in search. This is much higher than Google’s share of the U.S. market, which is around two-thirds. It’s essential to note that this isn’t simply a matter of Europeans choosing Google over rival services, though that is obviously a key factor. Over recent years, Google Search has become the default option, and people rarely change those.

In three of the four most widely-used browsers in Europe — Chrome, Firefox and Safari, with a current combined market share of almost 80 percent — people have become used to typing keywords rather than addresses into the address bar at the top of the screen, because they know the search engine will save them from having to remember accurate addresses.

In all of those browsers, Google is the default search engine (and yes, it will remain the European default in Firefox despite the end of Mozilla’s Google deal.) On top of that, Android has more than 70 percent of the European smartphone market, meaning even more defaulting to Google Search, even when someone is just using the in-OS search function as opposed to firing up the bundled Chrome browser.

So, there’s Google’s dominant position for you – it has become the default window onto the web for almost all Europeans. EU competition law is supposed to ensure that companies with that level of market power don’t abuse their position by:

  • directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions
  • limiting production, markets or technical development to the prejudice of consumers
  • applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage
  • making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts

And here’s how those rules relate to Google.

What has Google done wrong?

This case is truly epic in scale. It began four years ago with several key complaints that have mostly been resolved – these are points on which Google was most definitely abusing its position, and where it has now promised to play fair. However, the solution to one particular complaint has proven very difficult to find, and the endless back-and-forth bargaining over this point has provided a window for other companies to pile in less-than-usefully.

padlockLet’s start with the relatively easy stuff. Google locked publishers into its platform by banning them from displaying ads from competing search platforms on their websites. It banned advertisers from porting their campaigns to rival ad platforms. It scraped content from industry-specific “vertical” search rivals without their permission. On all these counts, Google basically pledged to cut it out and stop stifling competition – though its proposals for this tightened up over time as rivals spotted loopholes.

The really sticky issue has been that of how Google promotes its own services in its search results. Here we’re talking everything from product search to location-based services such as restaurant search. This is a really big deal. Google is involved in a lot of verticals, and its ability to shove its own results to the top of the pile – let’s face it, most people never click through to Page Two – has a huge effect on the likes of TripAdvisor and Yelp, or on other product search firms.

To fix this, Google first suggested more clearly labelling and delineating links to its own services, and displaying links to three rival vertical search services “close to its own services, in a place that is clearly visible to users.” The vertical search rivals complained that the proposals were insufficient, and then-competition commissioner Joaquín Almunia told Google to try again.

So Google produced revised proposals, this time promising those rivals greater prominence with their logos next to their links. However, those rivals would need to pay for the privilege, via an auction mechanism. Essentially, Google was proposing that the settlement to a case about its anti-competitive practices should make it richer. Brandishing eye-tracking studies that showed the ostensibly improved location for rival services’ links were actually less likely to be noticed, not more, the rivals shook their heads and Google had to go back to the drawing board.

The bandwagon fills up

Google tried again, giving the rival services near-equal prominence to its own services. Almunia was keen to accept these proposals, but then he hit several problems. The first was political resistance from within the European Commission. The second was the entry into the case of consumer rights group BEUC, which said Google’s new auction mechanism would hurt consumers, by making sure they could only get to see results from deep-pocketed firms.

Screenshot from Google settlement proposal, showing auctionable positionsThen Yelp got involved, complaining that the box of top results for hotel or restaurant searches at the top of Google’s results page (for example) was based on reviews from the thoroughly useless Google+, when the consumer would be much better served by that box also using services like Yelp and TripAdvisor, which have many more reviews, as inputs.

And then the press publishers, who had long been loitering at the sidelines of the case, really got their claws into the case. Google’s early-2013 initial proposals would have already given them “a mechanism allowing them to control on a web page per web page basis the display of their content in Google News”, but in September of this year they complained that this mechanism would also affect how their services appear in Google’s standard search results. The publishers also noticed that Google’s nuanced proposals for not scraping results from rival search providers were more generous than its all-or-nothing proposals for publishers.

Almunia’s dreams of settling the case dissolved. He was forced to reject the Google proposals he wanted to approve and finish his term with no resolution. Vestager took over at the start of November and is currently holding talks with everyone involved to find the best way forward.

This is where it gets political

The case has always involved vested interests. The original complainants included not only specialist French legal search engine and British price comparison site Foundem, but also the product review site Ciao, which is owned by Microsoft. Microsoft has been the biggest behind-the-scenes player in this whole thing from day one – but as far as political influence goes, it has nothing on the publishers.

To understand the ferocity of the current anti-Google offensive, you must understand how powerful the publishers, in particular Germany’s Axel Springer, really are. Springer in particular has a huge amount of influence over the center-right German chancellor Angela Merkel, because it has played a part in ensuring her repeated re-election. Germany is the most politically powerful country in Europe. Springer, the publisher of Bild, the best-selling newspaper outside Asia, also helpfully backed Jean-Claude Juncker to become the new head of the European Commission.

Springer and its fellow German press publishers succeeded in getting a “Google tax” law passed in that country, which forces the likes of Google News to pay royalties for using snippets of news article text in search results. Publishers in Belgium and France had already forced money out of Google over this issue (through settlements rather than laws) and those in Spain have since also won a new law to achieve the same.

BildThe publishers were forced to tactically back off in Germany recently. By attempting to enforce the law against Google, they only succeeded in getting Google to delist them from Google News. Their traffic predictably plummeted and they admitted defeat – sort of. In reality, they argued that the episode demonstrated Google’s monopoly power (ignoring the fact that smaller German news aggregators had done precisely the same thing), and the whole kerfuffle only served to bolster the case that they’re now taking right to the top.

Germany’s commissioner, Günther Oettinger – sent to Brussels by Merkel — is now in charge of both the digital economy and copyright reform, and he seems to want to extend the “Google tax” across Europe. Oettinger doesn’t have direct influence over the Google Search case, but overall it is not hard to see how the publishers’ interests have multiple potential champions in the new Commission.

Add to that a new European Parliament that is keen to flex its muscles before the new Commission – and a resolution whose anti-Google measures were proposed by a German parliamentarian with ties to the German publishers – and here we are.

So, what should Vestager do?

As described above, a good deal of the Google Search antitrust case is easily resolved, and pretty much has been. There are only two major unresolved issues: that of how to place rivals’ results, and the recently-revived issue of scraping content from news articles. Let’s deal with the latter first.

Quite simply (yes, I can hear the hollow laughter from the lawyers from here), the Google News issue should not be part of the Google Search antitrust case. Within Germany, it is arguable that Google’s market power makes it difficult for the publishers to get what they want (which amounts to extortion, anyway) but the “Google tax law” does not apply across Europe – yet, at least.

scissorsGo back to those antitrust principles that guide the wider search case, and you’ll see that this issue has nowhere near the effect on consumers, customers nor rivals that the other issues do. This has nothing to do with keeping the market open and ensuring that competing search providers and ad platforms have a chance. It is a copyright issue.

Oettinger wants to revamp European copyright law anyway. The signs are not good that he will do so with the consumer in mind, but either way, let him deal with it. With that out of the picture, Vestager would have a much more manageable case on her hands – one that does have a real impact on how Europeans experience the digital economy, and on the web businesses that currently find it hard to flourish if they potentially rival Google.

Here, it is certainly true that forcing the separation of Google’s search business from its other interests would work. But would it be proportionate? Heck no. While the Commission has the ability to take this measure, there’s a good reason why it has never done so, to any company.

Force Google to use multiple inputs

A much more elegant solution would be to force Google to treat the inputs to its search results equally. In the U.S., this would not be an option because of free speech laws, but while Europe also has free speech, it doesn’t count nearly as many things as “speech” and other principles can more easily override that one, such as privacy.

Google’s search results are far from neutral, even though many users still probably believe that they give the most prominence to what is most relevant. As the company’s foes have shown, its algorithms manipulate those results to give more weight to input from Google’s own review platforms, for example, even if they result in demonstrably less useful results for the user. This weighting can be easily corrected, if Google is forced to do so.

The biggest reason to take this approach, though, is the future that Google is planning for itself. As I’ve repeatedly pointed out, Google is heading towards a single-answer future. It’s worthwhile to argue about what prominence means in Google’s current, list-based format — and a proper solution should be found for the short term — but that argument becomes irrelevant when services such as Google Now and Glass and Android Wear take over.

golfshot on Android WearIf you’re asking a virtual personal assistant where the nearest pizza place is, you don’t want a list read out to you. Glass and smartwatch screens don’t even have the space to display lists properly. This is not a far-off future. It is arriving now, and any settlement with Google needs to be as optimized for it as it is for the list-based scenario that still dominates today. That means regulating the inputs.

There’s also the issue of what is actually practical and useful to the user. It would be nice in theory if a competing map provider could get equal prominence in Google’s desktop search results when the user searches for an address in the URL bar, but in practice it would be a visual mess.

Google has designed its various services to work well together – yes, this has an anti-competitive element and serious privacy implications that need to be addressed separately, but it also results in a more user-friendly experience. The most sensible solution is to ensure that other data providers can plug into that experience from the supply side, and expect to be treated fairly.

Again, none of this would be necessary if Google didn’t so thoroughly dominate the European search market, but it does and will continue to do so for the foreseeable future, so something must be done to protect businesses and consumers from very real abuses. Vestager should resist the more politicized calls for Google to be hammered for the sake of it, and think about what will actually allow European web services to flourish, and what will allow the European consumer to get the best deal.

My suggestions aren’t perfect and lack a lot of detail, for sure — and they would have to be carefully implemented in a way that minimizes their inevitable knock-on effect on Google’s bottom line — but I believe they’re a darn sight more sensible than splitting the company up.