Google Cites Amazon Competition in Response to EU

Google last week filed a response in a 6-year-old antitrust battle with the European Union, which has charged that its search ads unfairly promoted its own shopping service and blocked rivals.

The response addresses a supplementary statement of objections the European Commission sent to Google this summer.

The commission’s original statement of objections narrowly defined online shopping services to exclude services like Amazon, and it failed to take into account the broader dynamics of online shopping, which is “robustly competitive,” according to Google General Counsel Kent Walker.

The revision “didn’t offer a new theory, but argued that, because sites like Amazon sometimes pay price comparison aggregator sites for referred traffic, they can’t also be considered rivals,” he wrote in Google’s response.

However, Amazon “gets only a tiny fraction of its traffic from these services,” Walker pointed out.

Google’s Objections

Consumers use various means to locate merchant sites, including general search engines, specialist search services, merchant platforms, social media sites and online ads, Walker wrote.

They also use dedicated apps from merchants, which in Europe is the most common way consumers shop online, he noted.

The EC thinks online shoppers look for products on a search engine, click on a price comparison site, then visit merchant sites, Walker suggested, but recent surveys in Germany and the United States show that many online shoppers in both countries go first to Amazon.

Further, Amazon lets consumers compare product features and prices, and buy products for next-day delivery, “which makes [it] an even stronger competitor,” he pointed out.

There’s no meaningful correlation between the evolution of Google’s search services and the performance of price comparison sites, Walker maintained, noting that over the past decade a “rapidly increasing amount” of traffic flowed from Google’s search pages to Amazon, eBay and other popular sites.

The commission’s revised statement of objections suggests that Google refrain from using specialized algorithms to highlight the most relevant ads for users, and instead highlight ads from price comparison sites, but “forcing us to direct more clicks to price comparison aggregators would just subsidize sites that have become less useful for consumers,” Walker argued.

Deconstructing Google’s Position

Google’s arguments essentially split into two areas, said Mark Skilton, a professor of practice in the Warwick Business School at The University of Warwick.

One is how tactical digital businesses like price comparison sites are distinct for their services; the other is Google’s role as an intermediary for traffic to other sites.

“My view is, they’re missing one big point about market size and dominance versus consumer choice of services,” Skilton told the E-Commerce Times. “Google is not a public utility or a self-appointed one, and this problem is exacerbated by its own algorithms in search as they walk a fine line between service arbiter and service delivery.”

Even the statistical arguments about traffic volume “are not relevant, as what’s at stake is a separation of utility services and next-generation Internet of Things and 5G-type super services and super-data highways for smart cities and smart transport,” Skilton noted.

“Google is well placed for that next expansion and the EU is on the back foot here,” Skilton argued. “Splitting up Google is self destructive, and the EU has failed in its single digital market idea that, ironically, is to Google’s advantage.”

Putting the Squeeze on Google

“The point of this exercise is to extort money out of Google and fend off competition with home-grown equivalents,” said Michael Jude, a program manager at Stratecast/Frost & Sullivan.

Google “can’t win this on the merits,” he told the E-Commerce Times.

The EU’s assertion that Google has a special position that it uses to depress competitive offerings “is close to the truth,” said Jude, “but not the complete truth.”

Richard Adhikari

Richard Adhikari has written about high-tech for leading industry publications since the 1990s and wonders where it's all leading to. Will implanted RFID chips in humans be the Mark of the Beast? Will nanotech solve our coming food crisis? Does Sturgeon's Law still hold true? You can connect with Richard on Google+.

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