Google EU antitrust spat riddled with holes

August 28, 2015

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The European Commission will probably need to keep searching if it is to succeed in its aim to break up Google. The search giant’s robust response on Aug. 27 to Brussels’ antitrust charges implies the rapsheet is riddled with holes. It also ratchets up a complex theoretical battle over what constitutes a monopoly.

It is possible to quibble with Google’s rejection of the EC’s claim that the search engine favours its own shopping service over those of rivals in results. Google points out that Amazon and eBay are competitors and merit similar scrutiny. But their métier is really letting consumers compare products, not prices. By contrast, Google stands accused of promoting its own price-comparison services within the European Union.

Online marketplaces are protean and there are grey areas. The internet’s shifting dynamics provide support for Google’s assertion that it is not a utility. That is a vital point under competition law: a utility is legally obliged to provide the businesses dependent on it with the same services. That uncertainty will probably require the commission to deliver a stronger standard of proof in this case if it is to defeat Google decisively.

Nor are end-customers likely to have suffered much, even if the EC can prove that Google has engaged in anticompetitive practices. UK customers, for instance, saved 2.9 percent using Google Shopping as opposed to top-ranked retailers in its search results, found a study by pro-EU think tank Centre for European Reform. Besides, the transaction costs of switching to an alternative search portal like Microsoft’s Bing or Yahoo Search are zero.

Google’s dominance may have hurt consumers in other ways. The popularity of its search engine in Europe – greater than for any other region – means that companies feel compelled to bid aggressively to secure a top billing. That has pushed the prices of its online auctions, conducted daily for industries such as travel, to exorbitant highs. That makes it less likely that customers will access bespoke products or services from companies that may be superior, but have less marketing firepower.

It is also possible that Google could in future abuse its position by using its treasure trove of data to enter new markets. In this case, though, the onus is now on the European Commission to deliver results.

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Forgive me for not keeping abreast of the search engine industry. However, aren’t Google’s customers their advertisers, not their users? Isn’t the point of anti-trust law to ensure that the product is provided at a price that equals marginal cost? So isn’t the only relevant issue whether Google is charging their advertisers the marginal cost of advertisements?

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