EU Commission fines Google €2.42 billion…

… and, good or bad, there might be more to come!

I have been studying this case since at least 2012 when I was nominated as General Secretary of the French National Digital Council. We even invited them to explain their point of view in front of the Council.

It’s an important landmark decision as it’s the first time that :

• the Commission recognizes the existence of a search engine market in the EU,
• the first time they find an internet company as dominant throughout the European Economic Area (EEA), i.e. in all 31 EEA countries.

It’s officially the end of the bad faith argument stating that you can own more than 90% of market shares in a market and still not be considered as being in a dominant position because people have difficulties to identify the market you’re in.

So, the Commission concludes that Google has abused this market dominance by giving its own comparison shopping service an illegal advantage. It gave prominent placement in its search results only to its own comparison shopping service, whilst demoting rival services. It stifled competition on the merits in comparison shopping markets.

From the beginning, Google tried to minimize the situation. They first tried to explain that controlling both the search engine and a price comparison service was in fact beneficial to their competitors. Then, they came up with the idea to change the design of their result page in order to improve the visibility of their competitor. And they made countless other proposals.

To be clear, in the view of the Commission:

• Google has systematically given prominent placement to its own comparison shopping service, and
• Google has demoted rival comparison shopping services in its search results
• As a result, Google’s comparison shopping service is much more visible to consumers in Google’s search results, whilst rival comparison shopping services are much less visible.

As the Commissionner explained:

“Google has come up with many innovative products and services that have made a difference to our lives. That’s a good thing. But Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals. Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.
What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.”

There seems to be a special price attached to the position of being the main search engine in a country or in a group of countries. This idea was already in germ in the 2014 CJEU decision that created a newly designed “right to be forgotten” for EU citizens when their personal data was indexed by an “ubiquitous” search engine. It also translated into the French Digital Republic Law with the creation of the concept of “platforms” as a legal entity somewhere between content editors and technical intermediaries.

Putting online giants in front of their responsibilities and asking them to play fair with their competitors and customers is a trend that’s here to stay. But, given their important role in modern society, it’s only logical and should be approved rather than condemned.

As Peter Thiel used to say, “Competition is for losers”. But as I explained a few days ago when I said that we must fight the balkanization of apps and services, isn’t it in the interest of the public to have internet corporations lose a little bit? “When there is not price, you’re the product” ; “there is no cloud, it’s only someone’s else server”, etc. At some point, it’s only fair that there is a bit of retribution there.

This decision will bring memories of the Microsoft antitrust case of 2004. The amount of the fine is now way bigger — it was only €497 million then, but it’s still nowhere near the €13 billion fine from the EU to Apple in 2016.

It says a lot that these fines and decisions have to be taken in Europe and not in the US. As of today, the EU is the main market for US digital product and services. It’s also the only place where there is some sort of antitrust regulations, and where net neutrality is officially supported.

Is it acceptable to have US companies fighting for market shares in the EU while they managed to completely close their own market to their EU competitors?

With great power come great responsibilities…

This decision might be big. It took years to come. It did not succeed in protecting the price comparison market. It did not succeed in protecting EU startups.

To be clear, the impact has been evaluated by the Commission.

Since the beginning of each abuse, Google’s comparison shopping service has increased its traffic:

• 45-fold in the United Kingdom,
• 35-fold in Germany,
• 19-fold in France,
• 29-fold in the Netherlands,
• 17-fold in Spain and
• 14-fold in Italy.

And, following the demotions applied by Google, traffic to rival comparison shopping services on the other hand dropped significantly. The Commission found specific evidence of sudden drops of traffic to certain rival websites:

• 85% in the United Kingdom,
• up to 92% in Germany and
• 80% in France.

Some competitors have adapted and managed to recover some traffic but never in full.

And it’s only the tip of the Iceberg. What about messenging, images, maps, storage, emails and the whole lot of products and services that are being controlled from above by Internet giants? And what is the meaning of this decision for iOS and Android? Will search engines and other algorithms users be allowed to bring any changes to their algorithms whenever they want — just picture the former “panda” algorithm change from Google in the light of the current decision.

New rules are coming.

The French Telecom Regulator already begun to investigate the translation of Net Neutrality to devices.

The EU Privacy Regulators will have new rules to play with the advent of the GRDP on May 2018, and the creation of the power to pronounce a fine up to 4% of the annual worldwide turnover of an enterprise.

In other words, the regulation of the Digital Industry is already in the making.

There is not theory behind it. But it exists. It puts up together a little bit of antitrust regulations, some privacy regulations, a pince of consumer protection legislation, etc. Many independent organisations as the Digital New Deal Foundation have been prominently active on this, but they’re quite alone.

The problem is that it could rapidly become inconsistent and dangerous. There will be litigation and uncertainty for all — europeans and others. As an example, the current decision makes Google liable to face civil actions for damages that can be brought before the courts of the Member States by any person or business affected by its anti-competitive behaviour. The new EU Antitrust Damages Directive makes it easier for victims of anti-competitive practices to obtain damages.

And the Commission announced that they already have more issues to address, with the preliminary conclusion that Google has abused a dominant position in two other cases, which are still being investigated. These concern:

• the Android operating system, where the Commission is concerned that Google has stifled choice and innovation in a range of mobile apps and services by pursuing an overall strategy on mobile devices to protect and expand its dominant position in general internet search; and
• AdSense, where the Commission is concerned that Google has reduced choice by preventing third-party websites from sourcing search ads from Google’s competitors.

In other words, more fines and litigation are coming. How much? When? For who? We don’t know.

Today’s Decision is a precedent which establishes the framework for the assessment of the legality of this type of conduct.

At the same time, it does not replace a strategic policy on digital issues.

This might be the time to come up with a plan. It’s a good thing to be able to impose fine on foreign companies. It’s another one to have a living digital ecosystem of EU companies, with a roadmap for the digital industry and the will to assert the digital sovereignty of the EU and its member states.

Update: Google published its own comment of the decision on its blog