Chillin'Competition

It has been reported by Reuters that Microsoft and other companies are behind a new complaint against Google before the European Commission. Microsoft has denied having lodged any formal complaint. Regardless of whether Microsoft is involved or not, the news raises some thoughts:

Timing:

Once again, this complaint seems to have been strategically timed. Rumor had it that the European Commission would be adopting a preliminary position on the ongoing investigation by mid-March. No matter the merits of the complaint, whoever is behind it deserves credit for outstanding timing; they know how to play the game.

It reminds me of a well-known scene of my favorite movie saga, when in The Godfather III (yes, my taste for movies is absolutely mainstream) Al Pacino screams “Just when I thought I was out, they pull me back in!” (doesn’t he look a bit like Sarkozy in the pic above?) (it also brings to mind the “Yet another on-time flight from Ryanair” pre-recorded phrase that follows that “sweet” melody that you get when you land..).

In our previous posts on this pending case we have always highlighted the good timing of complainants (see here). Also, last April Nicolas wrote here that the “chief, and maybe sole merit [of Microsoft`s complaint] is to throw some mud at Google in the press, at a moment when (i) Google has been reported to be close to a settlement with the Commission; and (ii) Google has suffered a major setback last week, when its settlement with US publishers and authors was annulled by a NY judge” (this opinion by Nicolas was also reported in the press).This time, the complaint not only comes a few days before the Commission is expected either to drop the case or send an Statement of Objections. It also comes a few days after Microsoft lodged another complaint against Motorola (only a week after the Commission and the DOJ gave green light to its acquisition by Google). Per Hellstrom and his unit must be swamped with so many complaints being brought in relation to IT markets.

Substance:

The new complaint apparently focuses on a new function recently introduced by Google (“Search, Plus Your World”) that integrates information (photos, news and comments) from Google’s social network (Google+) within Google’s search results. Those opposing the new function apparently claim that it constitutes anticompetitive tying on the part of Google. This would be intended to reinforce allegations that Google uses its search engine to promote its own services.

According to the Commission’s initial Press Release, the alleged conduct subject to investigation is “unfavourable treatment of [other search service providers’] services in Google’s unpaid and sponsored search results coupled with an alleged preferential placement of Google’s own services” . Following the initiation of the investigation by the Commission there have been various attempts at enlarging its scope.

In the past both Nicolas and myself have been very critical with the allegations against Google (we have no direct/indirect involvement whatsoever in the case and only comment on info that is in the public domain, so we may lack relevant information). For our previous comments on this case, see here, here, here and here; see also here for a guest post by Pablo Ibañez Colomo on this same issue. We understand that the Commission had no choice but to investigate it thoroughly, given that an eventual rejection of the complaints would with all certainty be challenged in Court. Nonetheless, we are concerned that a case against Google would imply either a significant lowering of standards of intervention or the acceptance of the theory of “Karate Competition Law“.

I’m not aware of any evidence pointing out to the fact that Google does or doesn’t discriminate, but let’s move away from the facts, let’s leave aside important issues such as the question of whether Google is dominant and the ease of switching to competing services, and let’s focus on a matter of legal principle: can we require absolute neutrality from a company, even if it is dominant?

The mere term “discrimination” carries extremely negative connotations (if you look at is as “differentiation” it sort of looks a bit more acceptable). It also implies some sense of inherent unfairness. Nonetheless, there is a significant difference between what is unfair and what is questionable under the antitrust rules. Many things in life are unfair, but I can’t complain saying that they’re illegal; or can I?

As we have both written in previous posts, discrimination does only run afoul of the antitrust rules provided that it gives rise to foreclosure (i.e. elimination of competition) (as with most antitrust debates, the best way to find a solution is often to go back to basics). Foreclosure is is the usual standard of intervention and we see no compelling reason for abandoning it in this particular case. Let’s apply this criterion to the reported new complaint: is the fact that information from Google+ will appear in the results enough to eliminate competition from, let’s say, Facebook? It seems like a very long shot.

Given the above, and in light of the limited information at our disposal, we tend not to see any grounds for intervention.

Some suggested readings:

I spent a few hours of the weekend in the train from Brussels to Luxembourg (I would have gone by car, but I never told you that my car got burn by skinheads who felt like burning a trash can right next to my parked car..). The train takes ages, but it allows for some good reading time. The subject of this trip’s readings (aside from an incredibly good novel in Spanish) was precisely search neutrality.The three pieces I read are highly recommendable:

– If Search Neutrality is the Answer; What is the Question? (by G. Manne and J. Wright);

– “Non-Discrimination in Communications and IT Regulation: Understanding the Rise of a Transformative Principle” (forthcoming; can’t say who the author is because the paper is currently undergoing a blind-peer review).

– Search Neutrality as an Antitrust Principle (by D. Crane).