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Consumer Groups Reject Proposed Google Antitrust Settlement With European Commission

2:49 pm in Uncategorized by Consumer Watchdog

GoogleopolyConsumer groups on both sides of the Atlantic have objected to Google’s proposed European antitrust settlement, which relies heavily on labeling Google’s own services and on showing links to rivals in its search results, Consumer Watchdog said today.

“Consumer welfare is the ultimate test of any antitrust settlement. Google’s proposed Commitments fail to meet this standard,” wrote John M. Simpson, director of the U.S.- based public interest group’s Privacy Project in comments filed with the European Commission’s Directorate-General for Competition. “Labeling does nothing but obscure the results of Google’s anticompetitive abuses. It does not resolve the fundamental issue of search manipulation.”

Simpson continued:

Google has developed a substantial conflict of interest. It no longer has an incentive to steer users to other sites, but rather to its own services. It is becoming even more effective at this and has a greater incentive to engage in manipulation now that it is merging data collected across all its services. The only way to deal with this conflict is to remove it. There needs to be a separation of Google’s different services and assets. At a minimum any remedy must insist that Google use an objective, nondiscriminatory mechanism to rank and display all search results – including links to Google products.

BEUC, The European Consumer Organization stressed the importance of search neutrality in its comments to DG-Comp:

It is important that Google is obliged to use an objective, non-discriminatory mechanism to rank and display all search results, including any links to Google products. We therefore call upon the European Commission to ensure that the non-discrimination principle is the starting point of the remedies.

Read Consumer Watchdog’s comments here (.pdf).

Read BEUC’s Comments here (.pdf).

After more than a year’s antitrust investigation by the European Commission, Google offered changes in its practices that it hopes will answer the Commission’s concern that Google is unlawfully favoring its own services in its search results. Other concerns expressed by the Commission are that Google appropriated content from other websites without permission, forced publishers to obtain most online ad services from Google and hindered advertisers’ ability to transfer campaigns across platforms.

The Commission has been “market testing” – taking comments from competitors and the public – on Google’s proposed deal for the last month. This week the Commission extended the deadline for comments until June 27 and Competition Commissioner Joaquin Almunia said it is likely Google will be asked to do more.

Consumer Watchdog said there are “fundamental flaws” in Google’s proposed Commitments and noted the proposed remedy is based on two principles. First is labeling – Google must identify its own results that it is favoring. Second is the idea of presenting links to rival services.

“Neither of these proposed solutions gets to the heart of the problem. They will not restore a competitive search marketplace that will serve the interests of consumers. Google’s conduct has severely damaged competition, leaving consumers with less choice and facing higher prices,” wrote Simpson. “The Commission must insist on remedies that as much as possible restore the market position of Google’s rivals – one possibility could be requiring the preferencing for some period of time the search result listings of rivals over Google Shopping or Google Places.”

Consumer Watchdog continued:

Ultimately the solution must be based on the non-discrimination principle. Because Google is the gateway to the Internet for so many people, it has an obligation to honor the concept of search neutrality. Google must hold all services – especially its own – to exactly the same standards, using the same web crawling, indexing, ranking, display and penalty algorithms. A demand for this even-handed treatment of all services including Google’s in the display of search results has a precedent in the regulation of Computerized Reservation Systems, which were prevented from favoring the parent air carrier on the system.

Allowing Google to continue promoting its own services and demoting those of rivals, but requiring Google to label its own services does nothing but enshrine the uncompetitive status quo. In fact the results manipulation would continue and labeling could well have the undesired outcome of making Google’s services even more prominent and attractive to consumers. Consumers would have a far less effective choice of other services because these services would be less visible. The Commission must insist on true objectivity and search neutrality in Google’s results.

BEUC’s comments written by Augusta Maciuleviciute, Senior Legal Officer and Konstantinos Rossoglou, Senior Legal Officer, warned that Google’s proposal to offer links to rival services does nothing to stop Google from squeezing out competitors:

On the contrary, Google will now be able to profit not only from the traffic it diverts from competitors, but also from the new possibilities to charge them for the inclusion among the rival links. By requiring Google rivals to pay a price for their links, Google will be granted the right to monetize its anticompetitive behavior. It will have the incentive to provide links to the rivals who pay the most and not those who provide the best or most relevant results according to consumers’ search queries.

Consumer Watchdog said another obvious failure of the proposed settlement is the limited number of Google domains to which the Commitments would apply. The proposal only covers European Economic Area domains such as www.google.at, www.google.be, www.google.cz, etc. Consumer Watchdog noted that the home page of each of these EEA Google search domains has a clear link to www.google.com. “Many Europeans click on this link and use www.google.com for their searches, yet the proposed Commitments do not apply to this important part of Google’s business,” wrote Simpson.

Google May Face More Fines for Privacy Violations in Europe

3:32 pm in Uncategorized by Consumer Watchdog

Serial privacy violator Google may face fines in the millions of dollars in Europe as six countries Tuesday opened formal investigations into how Google combined its privacy and data policies last year without bothering to seek users’ consent.

The actions by France, Britain, Germany, the Netherlands, Italy and Spain came as Google refused to make changes in privacy policies requested by a group of European data protection authorities.

For the Internet giant, such fines are rapidly becoming a cost of doing business — and a rather trivial one at that. As the Associated Press pointed out, the French privacy watchdog CNIL can fine a company a maximum of 300,000 euros ($385,000). Based on a projected revenue of $61 billion this year, it earns 300,000 euros in about three minutes. The Brits could impose a fine of up to 500,000 pounds ($750,000).

Maybe with this constant drip, drip of privacy violations Google executives will come to their senses and realize the company runs the risk of losing users’ trust with a seriously negative impact on business.  For now that doesn’t seem to be the case.  “Our privacy policy respects European law and allows us to create simpler, more effective services,” said Google spokesman Al Verney after the investigations were announced.

In other words Google knows what’s right and it’s whatever the company decides to do. After all, their motto is “Don’t be evil,” so how could anything they do be wrong?

Let’s review what’s happened.  A year ago Google announced that it would combine data and privacy policies across its many services.  Google said this would make the user experience simpler and more intuitive.  Google didn’t  point out that it would make the data gathered about users more valuable and fatten its bottom line.  Those digital dossiers it compiles about us is how we are sold to Google’s advertisers.  Remember you’re Google’s product, not it’s customer.

Noting that Google didn’t ask permission before combing users’ information, Europe’s Data Commissioners launched a joint investigation, led by France.  In October they said the new policy is a “high risk” to privacy, but didn’t declare it illegal. They gave Google until February to make changes.  Responding with its usual arrogant manner, Google refused.

John Simpson

“Regulators in six states have begun the process of looking at penalties, and each must now act based on national law,” Isabelle Falque-Pierrotin, CNIL’s president, told Bloomberg News. “We have put in place a countdown for Google now. Promises to change will no longer be enough.”

Technically the six data authorities could block Google from operating in their respective countries, but I doubt that will happen.  I fear this is the most likely outcome: Simply put, Google is arrogant.  They have become a serial privacy violator and see the relatively minuscule fines they have faced as a mere cost of doing business. They violate your privacy, say it was a mistake, claim they care about privacy, occasionally pay a token fine and carry on with business as usual until the next violation when they cycle begins anew.

Maybe the Europeans can break the cycle, but I’m not optimistic

John M. Simpson is director of Consumer Watchdog’s Privacy Project. Follow Consumer Watchdog online on Facebook and Twitter.

Continuing Anti-Trust Action Against Google in Europe

2:16 pm in Uncategorized by Consumer Watchdog

European CommissionEleven Internet Companies are pressing European antitrust regulators to take strong action against Google so that the Internet giant’s smaller rivals aren’t hurt. And what happens across the pond in this case could have an impact on possible antitrust action in the United States.

The companies, organized by the British shopping comparison website Foundem, sent a letter Thursday to European competition commissioner, Joaquin Almunia saying that they “are becoming increasingly concerned that effective and future-proof remedies might not emerge through settlement discussions alone.” They want a formal complaint to be filed. That has a way of focusing settlement talks.

The EU opened its antitrust probe of Google more than two years ago. The regulators have been negotiating a possible settlement with Google and in January the company proposed steps it would be willing to take to respond the regulators’ concerns.

Supposedly Almunia and his staff are evaluating the settlement proposals. If they think they go far enough they would be made public and “market tested” before the settlement was finalized. The companies doubt Google will offer a serious remedy without a formal complaint. They wrote:

“We will respectfully withhold judgement on Google’s proposed commitments until we have seen them, but Google’s past behavior suggests that it is unlikely to volunteer effective, future-proof remedies without being formally charged with infringement. Given this, and the fact that Google has exploited every delay to further entrench, extend, and escalate its anti-competitive activities, we urge the Commission to issue the Statement of Objections.”

John Simpson The letter says that Google’s manipulation of search by promoting its own services while demoting the services of competitors hurt users by “degrading the user experience and limiting consumer choice, ” and “lay waste to entire classes of competitors in every sector where Google chooses to deploy them [search manipulation tactics].”

Our 2010 study, Traffic Report: How Google is Squeezing out Competitors and Muscling Into New Markets, demonstrated how with the launch of Universal Search, Google favored its own properties and services in search results to the detriment of its competitors.

Reuters, citing sources, says that Google “had offered to label its own services in search results to differentiate them from rival services, and also to impose fewer restrictions on advertisers” as part of a settlement with the EU.

That wouldn’t be enough for the 11 companies — or me for that matter. They wrote:

“Google must be even-handed. It must hold all services, including its own, to exactly the same standards, using exactly the same crawling, indexing, ranking, display, and penalty algorithms.”

The EU investigation could have significant impact in the United States. You’ll recall that after an 18-month antitrust investigation, the Federal Trade Commission gave Google a mere tap on the wrist. However, several states led by the Texas attorney general have an open antitrust investigation of Google. If the Europeans demand and get meaningful changes in Google’s behavior, the state attorneys general will almost certainly demand the same here.

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Did The FTC Find Its Spine In Google Probe? We Need To Keep The Pressure On

1:45 am in Uncategorized by Consumer Watchdog

FTC

Last weekend news broke that the Federal Trade Commission was about to settle its two-year antitrust investigation of Google with what charitably could be termed a slight tap on the wrist. But by Tuesday night the reported holiday gift to the Internet giant was unraveling and the FTC signaled it would keep the investigation going into January.

So what’s behind the Commission’s new found spine? Is it real? Will it last?

First, let’s review what reportedly was on the table. The FTC wasn’t going to do anything meaningful about the way Google favors its own services in search. It was going to accept a non-binding note from the Internet giant essentially promising to play nice with others. Google would stop scrapping content from other sites and would make it easier to move ad campaigns from Google to other sites. There would be no binding consent agreement on the key issues. Supposedly Google would sign a consent agreement on the unrelated question of how it unfairly uses its “Standards Essential Patents” to thwart competitors.

But on the key anticompetitive issues that harm competitors and consumers Google once again would be saying, “Trust us, we’ll be nice.” Given its record of broken promises and violated consent agreements, why would anyone believe Google?

So when word of the expected settlement leaked, there was substantial pushback. Craig Timberg of The Washington Post explained it like this:

“Recent news reports detailing the terms of the tentative agreement unleashed a torrent of opposition from companies that had complained, state attorneys general who felt cut out of negotiations, interested lawmakers and consumer advocates. Many have long said that Google was manipulating search results to hobble competitors and gain advantage for its own offerings in shopping, travel services and other lucrative businesses — and in the process, limiting consumer choice.”

Consumer Watchdog has been pushing the FTC for meaningful action since the antitrust probe began. Last month we wrote a letter to the Commissioners urging them to file an antitrust suit and seek the breakup of the company and a spinoff of the Motorola Mobility subsidiary. With the reports that the FTC appeared to be caving, on Tuesday we wrote to Attorney General Eric Holder asking the Department of Justice to take over the ongoing federal antitrust probe of Google after the company’s chairman in a news interview equated it with antitrust poster child Microsoft in the 1990s.

The same day The Emperor of All Identities, an op-ed written by former FTC Commissioner Pamela Harbour Jones, appeared in The New York Times. She wrote:

But we need to look at Google’s market role — and behavior — through a different prism. Google is not just a “search engine company,” or an “online services company,” or a publisher, or an advertising platform. At its core, it’s a data collection company.
Its “market” is data by, from and about consumers — you, that is. And in that realm, its role is so dominant as to be overwhelming, and scary. Data is the engine of online markets and has become, indeed, a new asset class…
Now, the FTC. has another chance to protect consumers, promote innovation and ensure fair competition online. In making its decision, it must understand that while Google may be the runaway leader in Web search and online advertising, its most troubling dominance is in the marketplace of private consumer data. If real competition in this area can be restored, I am confident that market forces will provide the incentives necessary for companies to offer attractive services and relevant, engaging ads without violating consumer privacy.

Perhaps the FTC commissioners felt trapped in a pincer between state antitrust investigations and the probe underway by the European Commission. Texas, California, Ohio and New York have active investigations of the Internet giant. In fact Texas has sued Google to get documents it needs for the investigation. Google is stiffing the Texas AG. As Ed Wyatt and Clair Cain Miller reported in The New York Times, “State attorneys general, some of whom are undertaking their own Google investigation, were briefed on the potential agreement, and some were unhappy that they were not included in the talks and that the proposed punishment seemed light.”

Meanwhile, Politico’s Steve Friess and Elizabeth Wasserman noted that “European regulators appear headed toward a dramatically different conclusion to their antitrust probe of Google than their American counterparts — a binding agreement that could cost the search company dearly if violated. That’s one of several reasons why the expected Federal Trade Commission settlement that sources said was a done deal unraveled Tuesday.”

“At the FTC, people close to the agency said, commissioners grew irked that they were being portrayed as spineless, wrote Wyatt and Miller in The New York Times. “In a parallel investigation, European regulators were said to be wringing a more stringent agreement from Google.”

Well, maybe the commissioners are irked at being called spineless, but guess what? They were. I hope they are beginning to see the need — at a very minimum — for a binding consent decree that halts Google’s abuses. However, the best course would be to follow the FTC staff’s recommendation and file an antitrust suit. The fully developed public record that would result from a trial would ensure that effective remedies could be put in place. A negotiated settlement will inevitably invite cynicism about the results, and keep any documents obtained in the course of the investigation out of the public eye.

Meanwhile, the states attorneys general must keep their investigations open and aggressive in case the FTC falters again. We need to keep the pressure on; it would be a sad situation if we have to rely on the European Commission to solve our antitrust problems for us.
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Posted by John M. Simpson. John is a leading voice on technological privacy and stem cell research issues. His investigations this year of Google’s online privacy practices and book publishing agreements triggered intense media scrutiny and federal interest in the online giant’s business practices. His critique of patents on human embryonic stem cells has been key to expanding the ability of American scientists to conduct stem cell research. He has ensured that California’s taxpayer-funded stem cell research will lead to broadly accessible and affordable medicine and not just government-subsidized profiteering. Prior to joining Consumer Watchdog in 2005, he was executive editor of Tribune Media Services International, a syndication company. Before that, he was deputy editor of USA Today and editor of its international edition. Simpson taught journalism a Dublin City University in Ireland, and consulted for The Irish Times and The Gleaner in Jamaica. He served as president of the World Editors Forum. He holds a B.A. in philosophy from Harpur College of SUNY Binghamton and was a Gannett Fellow at the Center for Asian and Pacific Studies at the University of Hawaii. He has an M.A. in Communication Management from USC’s Annenberg School for Communication.

FTC should proceed with case against Google

2:44 pm in Uncategorized by Consumer Watchdog

 When you stare down a $220 billion corporation, it’s hard not to blink. But if the Federal Trade Commission doesn’t deliver on its ultimatum to Google that it settle its antitrust problems soon for real relief or face prosecution, then consumers will never get the open and unfettered online and mobile access to information they deserve.

While the government’s battle with Microsoft in the 1990s was about whether the dominant software company could bundle software and an Internet browser, the antitrust case against Google is about whether one company should have so much control over online information that it can steer us any where it chooses for its own profit.

This is the power to make or break businesses, control online discourse, and steer consumers to the Internet giant’s own websites and affiliated businesses, all based on tweaking an unseen algorithm and holding a network of key online and mobile gateways and properties.

Google’s 70% control of online searches and 90% control of mobile searches, along with its dominant Android mobile operating system, patents, and vast content acquisitions make it the Standard Oil of our time.

The allegations against Google are that it restrains online trade with biased search results that drive consumers to the content it owns (Google Travel, Products, YouTube, Maps, Google+, etc.) or content it chooses, as opposed to that favored organically by the public.

Restraint of trade may be different today than in 1911 when the U.S. Supreme Court ordered John Rockefeller’s Standard Oil broken into parts under the Sherman Antitrust Act. Nonetheless the antitrust principle of preventing dominant players from playing unfairly and hurting consumers by driving out legitimate competition is very real for Google’s 2012 business model.

The principle at stake in the FTC case is critical:

If you want to do business online, should you be forced to do business with Google?

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