Microsoft and other rivals cry foul against the internet-search giant

Searching questions

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IT WAS only a matter of time before Google, the technology titan of the internet age, found itself in antitrust trouble. On February 24th it emerged, through a post on one of Google's official blogs, that the European Commission has launched a preliminary investigation into the firm's online search and advertising businesses—the first antitrust inquiry Google has faced in Brussels, other than in merger cases.

IT WAS only a matter of time before Google, the technology titan of the internet age, found itself in antitrust trouble. On February 24th it emerged, through a <a href="http://googlepolicyeurope.blogspot.com/2010/02/committed-to-competing-fairly.html">post</a> on one of Google's official blogs, that the European Commission has launched a preliminary investigation into the firm's online search and advertising businesses—the first antitrust inquiry Google has faced in Brussels, other than in merger cases.

Three complaints triggered the investigation. Foundem, a British price-comparison service, and ejustice.fr, a French legal search-engine, say that Google has unfairly pushed them down the list of its search results. Ciao!, a European online-shopping site, has complained that Google dictates minimum bid levels in the auctions for advertising slots which appear next to its search results.

Three complaints triggered the investigation. <a href="http://www.foundem.co.uk/">Foundem</a>, a British price-comparison service, and <a href="http://www.ejustice.fr/">ejustice.fr</a>, a French legal search-engine, say that Google has unfairly pushed them down the list of its search results. <a href="http://www.ciao.de/">Ciao!</a>, a European online-shopping site, has complained that Google dictates minimum bid levels in the auctions for advertising slots which appear next to its search results.

But the main force agitating against Google is Microsoft, its archrival. It owns Ciao! and in recent months it has also ramped up its efforts to rally Google's rivals and other companies whose business has been disrupted by the online giant. In Brussels, for instance, it is bankrolling an industry group called ICOMP, which has lobbied the commission to look into these cases and counts Foundem among its members. 

But the main force agitating against Google is Microsoft, its archrival. It owns Ciao! and in recent months it has also ramped up its efforts to rally Google's rivals and other companies whose business has been disrupted by the online giant. In Brussels, for instance, it is bankrolling an industry group called <a href="http://www.i-comp.org/">ICOMP</a>, which has lobbied the commission to look into these cases and counts Foundem among its members.

Whatever their merits, the cases mark the two areas where Google is most vulnerable when it comes to antitrust. For one, it dominates the market for online search in America, and even more so in Europe, where it has a market share of about 80%. The firm is now as essential a component of the market's infrastructure as the physical network itself, critics say. This is why regulators are keen to ensure “search neutrality”. Adam Raff, a co-founder of Foundem, defines as this as “the principle that search engines should have no editorial policies other than that their results be comprehensive, impartial and based solely on relevance.”

Ciao!'s complaint targets Google's dominant position in search advertising. The firm accounts for more than 90% of this market in Europe—which makes it a problem that its advertising system is essentially a “black box”, critics say. It is not clear why certain advertisers have to pay a minimum bid, how advertisements are ranked or how it comes up with the amounts it pays websites when they run advertisements managed by the firm. Without more information, “advertisers and policymakers have no way of verifying whether the dominant firm has exercised its power responsibly,” ICOMP wrote in a recent paper.

Ciao!'s complaint targets Google's dominant position in search advertising. The firm accounts for more than 90% of this market in Europe—which makes it a problem that its advertising system is essentially a “black box”, critics say. It is not clear why certain advertisers have to pay a minimum bid, how advertisements are ranked or how it comes up with the amounts it pays websites when they run advertisements managed by the firm. Without more information, “advertisers and policymakers have no way of verifying whether the dominant firm has exercised its power responsibly,” ICOMP wrote in a <a href="http://www.i-comp.org/~icomppsb/email/OpennessInternet.pdf">recent paper</a>.

Google admits that its offerings are not perfect, but argues that in the case of search this is because of technical challenges, not abuse of power. Online search is a very hard computer-science problem to crack, writes Julia Holtz, one of Google's lawyers, in the blog post that made the commission's investigation public. “Imagine having to rank the 272m possible results for a popular query like the iPod on a 14 by 12 screen computer screen in just a few milliseconds,” she explains. As for the lack of openness about how its advertising system works, Google argues that advertisers can always choose another provider of such services (although in practice its big market share gives them little choice).

The preliminary investigation does not mean that the commission will definitely go after Google. In fact, only a small percentage of investigations result in adverse rulings. It is certain, however, that a lot of ink will be spilled over Google's dominance and potential abuses. In America, similar cases are already pending. Last year TradeComet, a website operator, filed an antitrust complaint against Google there, accusing it of having unfairly raised advertising rates. And the Federal Trade Commission is looking into Google's takeover of AdMob, a mobile-advertising firm.

There is more to come, since Microsoft and Google's other rivals have a clear incentive to push these issues. Launching antitrust complaints has become something of a competitive weapon in the technology business. Firms often aim to restrain their rivals by tying them up in lawsuits or forcing them to make concessions to appease regulators. Even if Google never ends up in the dock, Microsoft and its allies may still nudge it to change the way it does business, to their advantage. Getting Google to open up its advertising platform, in particular, is likely to make it less profitable and leave more money on the table for its rivals.

There is more to come, since Microsoft and Google's other rivals have a clear incentive to push these issues. Launching antitrust complaints has become <a href="http://www.economist.com/business-finance/displaystory.cfm?story_id=15127168">something of a competitive weapon</a> in the technology business. Firms often aim to restrain their rivals by tying them up in lawsuits or forcing them to make concessions to appease regulators. Even if Google never ends up in the dock, Microsoft and its allies may still nudge it to change the way it does business, to their advantage. Getting Google to open up its advertising platform, in particular, is likely to make it less profitable and leave more money on the table for its rivals.

It is not just on antitrust that Google is facing rising complaints. Last week it hastily had to revamp Google Buzz, a new social-networking service created to rival Facebook, after users claimed that it had breached their privacy by revealing their e-mail contacts. On the same day as it disclosed the European antitrust investigation, the company also said an Italian court had convicted three of its officials over a clip posted on Google Video of a disabled child being bullied. The employees insisted that they had nothing to do with the video being uploaded and that it was removed quickly once complaints were made about it—not good enough, the prosecution argued. 

Back in the halcyon days, not long ago, when Google was widely admired as among the planet's coolest and most progressive companies, it might have been given the benefit of the doubt in all these cases, by the public at least. But as happened with Microsoft itself some years ago, Google seems now to have reached the stage where it is so dominant that its every move arouses suspicion. 

Google and antitrust

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Searching questions

Microsoft and other rivals cry foul against the internet-search giant

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