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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.

Europe’s Antitrust Chief Talks Tough On Google

1:07 pm in Uncategorized by Consumer Watchdog

European Union

Google may have only received a tap on the wrist from the Federal Trade Commission when the agency closed the U.S. antitrust investigation without taking action against the Internet giant for skewing search results to favor its services, but it’s looking increasingly likely that Google will face strong action on the other side of the Atlantic.

The Financial Times reports that Google will have to change the way it presents search results or face antitrust charges for “diverting traffic.” Competition Commissioner Joaquin Almunia told the newspaper:

“We are still investigating, but my conviction is [Google] are diverting traffic. They are monetizing this kind of business, the strong position they have in the general search market and this is not only a dominant position, I think – I fear – there is an abuse of this dominant position.”

Almunia has told Google that it must make changes to address European concerns or that it will face a formal statement of objections. Late last year he warned that Google would have to offer remedies this month.

I think you can take Almunia’s strong statements Thursday to The Financial Times as a sign that the European Commission is serious. While he says he’d prefer a settlement, European law gives the antitrust enforcer a huge stick. After filing a formal statement of objections, the Commission can impose a fine amounting to 10 percent of Google’s revenue or about $4 billion. That’s almost as effective to getting executives attention as sending them to the slammer. Unlike the FTC, the European Commission doesn’t have to make its case in Court. It can simply impose the fine.

As The Financial Times headline read on one story about the situation, “EU Antitrust Chief Holds All the Aces.” Almunia hinted that the antitrust settlement may play out differently in Europe because the law is different. It’s also true that the Internet giant’s dominance in search is even greater in Europe at 90 percent of the market than the 70 percent share it commands in the United States.

And there is still a strong possibility of meaningful action in the United States. Texas Attorney General Greg Abbott is actively pursing a case. His staff has appropriately worked to obtain key Google documents that Google tried to claim were privileged and did not need to be turned over in response to Civil Investigative Demands. From all appearances the FTC staff was nowhere near as diligent in its investigation.

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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’s Settlement With Google Fails To End Key Abuse

3:22 pm in Uncategorized by Consumer Watchdog

FTC-Google

Department of Justice, State Attorneys General Must Press To End Search Bias

The Federal Trade Commission’s settlement with Google fails to end its most anticompetitive practice, Consumer Watchdog said today and the public interest group called on the Department of Justice and state attorneys general to press forward to end the Internet giant’s monopolistic behavior in search results.

“Google clearly skews search results to favor its own products and services while portraying the results as unbiased. That undermines competition and hurts consumers,” said John M. Simpson, director of the group’s Privacy Project. “The FTC rolled over for Google. They’ve accepted Google executives’ promises that they will change two practices without even requiring a consent agreement, but Google has a track record of broken promises. Don’t forget, this fall the FTC fined Google $22.5 million for violating its most recent consent agreement. Why would the FTC take Google at its word?”

The new Assistant Attorney General for the Department of Justice Antitrust Division, William J. Baer, should make Google’s abuse of search a top priority, Consumer Watchdog said.

The FTC’s settlement does require a consent agreement regarding so-called Standards Essential Patents held by Google’s Motorola subsidiary. Google is now required to license these patents to any company on “fair, reasonable and non-discriminatory” terms – known as FRAND terms.

“This will help ensure competition in the manufacture of smartphones and tablets,” said Simpson, “but that was never the heart of the issue. Biased search and Google’s favoring its own properties do real consumer harm. Google is the gateway to the Internet for most people. When Google rigs the game, we all suffer. They need to be stopped.”

Consumer Watchdog expressed concern that FTC Chairman Jon Leibowitz, who is expected to step down from the commission soon, may have rushed to finish the investigation so it could be concluded under his chairmanship.

The nonpartisan, nonprofit public interest group noted that Google’s monopolistic business practices are under investigation by a number of state attorneys general including Texas, California, New York and Ohio. European Union competition officials are also investigating Google.

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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