It is illegal for a dominant company such as Google to use its dominance in one market in order to provide its own product an anti-competitive advantage in a separate market, the European Commission has recently decided.
Such conduct constitutes an abuse of a dominant position and hence is in breach of competition law.
It is not illegal for a company to enjoy dominance in a particular market. However, a company which is dominant in one market can easily use its market power to cement or further expand its dominance, or leverage it into separate markets.
Dominant companies therefore have a special responsibility not to abuse their strong market position in order to hinder competition in the market they dominate or in any other market.
The facts of this case which was investigated by the European Commission were briefly as follows. It is a well-known fact that Google’s flagship product is the Google search engine.
In 2004, Google entered the separate market for comparison shopping with a product called Froogle.
Essentially, this product allowed consumers to compare products and prices online and find deals from retailers of all types.
Over the years, Google renamed its comparison shopping service twice, first to Google Product Search in 2008 and then Google Shopping in 2013.
Froogle was not the first in this market but there are a number of established competitors.
When Froogle did not perform well, Google decided to give its own product a significantly better treatment than its rivals. In search results, it systematically gave prominent placement only to its own product and demoted rival comparison shopping services, by giving them a lower ranking in generic search results.
In practice, this meant that when a person looked for a product online and typed the product into the Google search engine, Google’s comparison shopping results were displayed, in a rich format, at the top of the search results, or sometimes in a reserved space on the right-hand side.
A company which is dominant in one market can easily use its market power to cement or further expand its dominance, or leverage it into separate markets
These were placed above the results that Google’s generic search algorithms considered most relevant. Google’s comparison shopping service was not subjected to Google’s generic search algorithms as rival comparison shopping services were.
In particular, Google’s comparison shopping service was not subjected to demotions which lower a search entry’s rank in Google’s search results.
On the other hand, even the most highly ranked rival comparison shopping service appeared on average only on page four of Google’s search results and others appeared even further down.
In the course of its investigation, the Commission concluded that Google is dominant in general internet search markets in all 31 countries of the European Economic Area.
It was proven that the Google search engine holds very high market shares of over 90 per cent in most European countries.
The Commission also observed that there are high barriers to entry in the market: the more consumers use a search engine, the more attractive it becomes to advertisers.
The profit generated can in turn be used to attract even more consumers. Similarly, the more data a search engine gathers from consumers, the better equipped it is to improve its results.
The Commission also concluded that Google had abused of this dominance and seriously harmed competition in comparison shopping markets.
In arriving at its decision, the Commission did not object to the design of Google’s generic search algorithms or to demotions as such. Neither did it object to the way that Google displays or organises its search results pages. However, the Commission did object to the fact that Google leveraged its market dominance in general internet search into a separate market, namely, comparison shopping.
Google abused its market dominance as a search engine to promote its own comparison shopping service in search result, while demoting those of rivals.
The Commission concluded that the abusive conduct of Google had a significant impact on competition in comparison shopping markets.
This is because surveys and studies demonstrate that consumers generally click far more on search results at or near the top of the first search results page than on results lower down the first page, or on subsequent pages.
Since rival comparison shopping services were demoted, Google’s behaviour meant that consumers very rarely could see rival comparison shopping services in Google’s search results.
As a result, competitors were much less likely to be clicked on.
The Commission found evidence of sudden drops in clicks on certain rival websites of more than 90 per cent, after Google applied demotions.
The Commission imposed a fine of €2.42 billion for such anti-competitive conduct on the part of Google.
It also ordered Google to stop its illegal conduct within 90 days of its decision and to ensure equal treatment for its rivals.
The decision of the European Commission sends out a clear message. All companies targeting European markets must compete on the merits and on a level playing field.
European consumers must at no time be deprived of genuine choice and innovation because of the unlawful tactics of those companies which dominate the market.
Mariosa Vella Cardona is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law.
mariosa@vellacardona.com