Google rivals claim product search remains unfair
22 November 2018
Google is not complying with European demands that it make the search for products fairer, rivals say. In an open letter to the EU's competition commissioner, 14 European shopping comparison services said the measures put in place by the search giant to improve things, actually make matters worse. They urged the commission to demand a new remedy. Google said it had complied with the European Commission demands. The search giant has faced a seven-year long battle with the European Commission over its dominance in the search market. In June 2017, European competition commissioner Margrethe Vestager ruled that Google had abused its power by promoting its own shopping service at the top of search results, and demanded that it provide equal treatment to rival comparison sites in future. She issued a record fine of EUR2.42bn ($2.7bn; PS2.1bn) - the largest penalty the European Commission has ever imposed. She also demanded that Google end its anti-competitive practices within 90 days or face further costs. Google is still appealing against the fine, but has come up with a system that it says makes shopping fairer. It changed the shopping box, which is displayed at the top of search results, so that it is no longer  populated with just Google Shopping ad results, but gives space to other shopping comparison services, who can bid for advertising slots. Google also agreed to separate its comparison shopping service from the main company and to ensure that it operated at arm's length. The advertising slots it bids for would not be subsidised by revenue from its main ad business, it said. Rivals described the auction process as "neither compliant nor effective". "It has now been more than a year since Google introduced its auction-based 'remedy' and the harm to competition, consumers and innovation caused by Google's illegal conduct has continued unabated," the letter reads. The main concern is that the system forces rivals to bid away "the vast majority of their profits" while Google's own bids cost nothing. "Its bids are just meaningless internal accounting, paid from one Google pocket into another," reads the letter. "As long as placement is determined by auction rather than relevance, it makes little material difference whether competitors occupy none, some or even all of the available slots," it goes on. "In all cases, Google is the main beneficiary of any profits derived from these entries, and consumers are the main losers." Shivaun Raff, the chief executive of lead complainant Foundem, told the BBC: "People expect Google to deliver them the most relevant search results, but the truth is that Google is exploiting that trust and showing them results from advertisers who pay the highest price instead." In response to the letter, Google said: "We allow all comparison shopping services to compete equally to show product ads from merchants on Google's Search results page. "To help drive awareness amongst merchants who are unfamiliar with these new opportunities, we're currently offering incentives for them to work with comparison shopping services. One year on, both services that existed before the remedy and services that are new to comparison shopping are participating successfully." Some think that the EU action and Google's subsequent solution is a case of shutting the door after the horse has bolted. "The bigger issue here is that Google Shopping is the most successful shopping service because of what the firm did in the past, by favouring themselves," said David Foster, director of research firm Frontier Economics. "While the current remedies might seem like too little too late, any regulator gets nervous about meddling too much." The rivals also accuse Google of encouraging ad agencies to "pose" as shopping comparison sites. "Realising that it will never be possible to populate its new auction with enough genuine comparison shopping services to create even the veneer of a functioning remedy, Google has now set about populating it with fake ones instead," the letter reads. In response to recent questions from reporters on whether this was true, Ms Vestager said that her team "had noticed the practice". The European Commission can overturn the solution put in place by Google and force it to rethink it.  And for every day that Google remains in non-compliance, it can impose daily fines of up to 5% of its global revenue. "The Commission is already worrying about whether they got this right and they don't regard the matter as closed," said Mr Foster. "Ms Vestager's agenda is all about cracking down on tech giants and she wants to be seen as being tough."
Shivaun Raff, the chief executive of lead complainant Foundem, told the BBC: "People expect Google to deliver them the most relevant search results, but the truth is that Google is exploiting that trust and showing them results from advertisers who pay the highest price instead." In response to the letter, Google said: "We allow all comparison shopping services to compete equally to show product ads from merchants on Google's Search results page. "To help drive awareness amongst merchants who are unfamiliar with these new opportunities, we're currently offering incentives for them to work with comparison shopping services. One year on, both services that existed before the remedy and services that are new to comparison shopping are participating successfully." Some think that the EU action and Google's subsequent solution is a case of shutting the door after the horse has bolted. "The bigger issue here is that Google Shopping is the most successful shopping service because of what the firm did in the past, by favouring themselves," said David Foster, director of research firm Frontier Economics. "While the current remedies might seem like too little too late, any regulator gets nervous about meddling too much."
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Too late?