THE BLOG

Google Under Fire

31/07/2015 11:46 BST | Updated 30/07/2016 10:59 BST

Why the Clock is Ticking for the Internet Giant's Antitrust Case

2015 looks set to be an historical year for internet leviathan Google, and much of this is in the making leading up to August 17th. While the US corporation has recently announced profit increase in the second quarter - a whopping 11% boost to $17.7 billion compared to last year - the deadline marks the final bell for the biggest online search engine to respond to antitrust claims made by the European Commission in April this year.

Following lengthy analysis of Google's business practices, the EC has come to the conclusion that Google has used its dominance in search to effectively restrict competition in online comparison shopping, while many other areas remain under investigation. The crux of the matter arises from Google operating both the world's most frequently used search engine (reports corroborate that Google retained over 75% of US search traffic at the start of the year, with an even bigger market share reaching over 90% in Europe) and, at the same time, offering a wide range of products competing with other businesses. Far from being an unbiased organiser of the internet's information, Google stands accused of systematically inserting its own services at the top of its search results.

The EC's claims, however, are not the result of an overnight decision, with their investigation having been corroborated over the past five years - with competition commissioner Margrethe Vestager now helming the charges. Vestager's predecessor, Joaquίn Almunia, attempted to take Google to task to reach a settlement on no less than three occasions - all of which failed due to widespread opposition of many in the internet ecosystem. However, it seems that the stalemate may be ending with the investigation reaching climax within weeks now.

The EC argues that Google's business model - which combines the operation of the most widely-used search platform in the world with entrenching itself deeper in various verticals including online mapping, shopping, video and news - has led to anti-competitive business practices which have harmed competitors and consumers alike. It is this 'split personality' that has led some to argue that Google is suffering from an identity crisis - in that it is attempting to operate as a neutral search platform alongside cross-promotion of its own services.

It is systematic favouring of its own products (even when inferior to competitors) whilst demoting rivals in search results that the EC has determined to be anti-competitive. Google's power to drive users to products derived from its dominance of internet search has, it is argued, caused significant harm both to competitors and to consumers. The Statement of Objections, or SO, is therefore an indictment on Google's business model. Google now has the opportunity to respond to these findings and faces not only penalties but changes to its practices.

Google requested an extension to the deadline for response, and was granted an extra ten weeks for defence to be prepared. However, as the deadline creeps closer, Google is under considerable pressure to have prepared a reasonable opposition to the SO, particularly given the additional time that they have been granted.

Google is no stranger to legal controversy, having entered into a class action lawsuit in 2014 relating to 'choking' of internet searching - a case in which representatives Hagens Berman claim that Google suppresses its competition by unfairly preinstalling its applications on Android devices. The firm advises that the controversy is still 'open' - and the SO may see Google bowing to changes and restrictions in order to promote fairer competition. The EC has also opened an investigation into whether or not the US corporation has breached antitrust guidelines, making reference to the running of their Android operating system.

The EC's case is bolstered by significant evidence - Nineteen official complainants, plus many more organisations raising concerns and providing information, have shown enough cause to propose potential sanctions against the company. The EC proposes that the complainants have witnessed Google distorting search results to better promote their own products - that such manipulation is anti-competition - and that the case could lead to changes in online business the world over.

The implications, dependent on Google's reception, may not solely relate to business changes - the EU fined Microsoft a sizeable $731 million in 2013 after failing to offer internet browser alternatives to Internet Explorer on Windows-operating systems - and depending on how Google reacts, fines of a similar stature may be forthcoming in this case.

Google has the option to call for a hearing on the claims and can attend a public forum to face its accusers. It is likely that it could use this, as well as its considerable PR might and deep pockets, to try to appeal over the heads of EU officials and claim to be a vital engine of innovation and consumer empowerment. The hard evidence from complainants and from many other internet businesses would likely contradict these claims.

It has been stated that the EU could not only restrict business practices but may also impose sanctions heading into several billions of dollars - meaning it is likely Google will fight its corner. However, Google has not yet begun its fight, having remained tight-lipped on the issue - while many assume they are preparing for a battle in Europe that, if lost, could cause a large dent in revenue alongside legislative changes. Offering little information outright, a leaked internal memo from Google General Counsel Kent Walker suggests that the company are building a defiant case. Allegedly backed up by data later shown to be misleading or incomplete, Google's position in this memo states that competition with their products is healthy and that they have a 'strong case' against the SO. It remains to be seen if the EU Commission will be convinced by these arguments.

With August 17th looming and little other than speculation available, the world of online business and the corporations critiquing Google's practices will be holding their collective breaths as events unfold over the coming weeks.