Europe v Google: Not so Froogle
The European Commission levies a huge fine onGoogle for abusing its dominance on online search.
She was born to Lutheran ministers known to be both tough and principled.
As a child, she thought it unfair that pupils were not allowed to sell fruit and milk in school andsuccessfully lobbied for change.
In her office in Brussels she keeps a statue of a raised middle finger, a gift from a trade unionwhen she was deputy prime minister of Denmark, as a reminder that there will always becritics.
It shouldn't have come as a surprise that Margrethe Vestager, the European Union'scompetition commissioner, took a tough line against Google this week.
The size of the fine the tech giant will have to pay for abusing its monopoly in online search, 2.4bn euro ($2.7bn), sets a record for European antitrust penalties.
Yet more important than the amount is that she provided a rough guide to how the EuropeanCommission plans to deal with online firms which not only dominate a market, but essentiallyare the market.
In the 2000s Microsoft got into trouble because it had expanded its Windows monopoly bybundling it with its web browser.
By comparison, Google's infraction seems minor.
In 2002 it launched a price-comparison service called Froogle, later renamed GoogleShopping.
In 2008 it changed how this service works.
According to the commission, the new version systematically favoured Google's owncomparison-shopping results by giving them prominent placement at the top of its genericsearch results and demoting links to rival offerings to pages further down in its results, whereusers hardly venture.
This would not be a problem if there were several bigsearch engines.
But Google's market share in most Europeancountries exceeds 90%.
When the firm introduced the changes, traffic torival websites, such as Britain's Foundem, plunged.
This denied other firms the chance to compete and reduced consumer choice, said MsVestager.
Google has 90 days to find a way to treat its own comparison-shopping service and those ofrivals equally.
Predictably, Google wants none of this.
It says its search service is far less dominant than it appears: consumers look up products onmany other sites, including Amazon and eBay (the commission did not count these as searchengines).
Google also notes that the changes made in 2008 benefited consumers.
“People usually prefer links that take them directly to the products they want,” Kent Walker, thefirm's general counsel, wrote in a blog post.
Here, Google appears to have a point.
Why would consumers want to click on a link which leads them to another site if they can seeproducts and prices neatly lined up above Google's search results?
The European Court of Justice, the EU's highest court, will have to weigh the merits of itsargument.
Google will appeal, and there are weaknesses in the commission's case, such as the difficultyof proving real consumer harm from the treatment of other price-comparison sites.
Yet the commission deserves credit for tackling a question, which is increasingly importantbut which American trust busting agencies have avoided: what is the responsibility ofdominant online firms, including Amazon and Facebook, when direct competitors, large andsmall, offer products and services on their platforms?
The prevailing wisdom, particularly in America, used to be that “super-platforms”, despitetheir size, do not unfairly use their market power and thrive because of their unceasinginnovation.
The competition is always just one click away, argues Herbert Hovenkamp of the University ofPennsylvania.