The EU Strategy behind its Three Google Antitrust Cases

With the EU’s new advertising antitrust charges against Google, the EU has now issued three Google abuse-of-dominance Statement of Objections covering search, mobile, and advertising, that actually span seven separately defined antitrust markets in the EU.

So what does this strategically-critical new EU-Google advertising Statement of Objections — that builds upon the other two statements of objection – finally tell us about the EU’s overall Google antitrust strategy?

Prosecution Strategy: The recent combination of: 1) the EU issuing a third EU Statement of Objections (SO) alleging Google has abused its dominance in “search advertising intermediation,” (on top of its 2015 search/shopping SO and its 2016 Android OS/App-store SO), and 2) its reinforcement of its original core search-comparison-shopping case with a new tighter market definition and more evidence/data, further proves the EU’s intent, resolve, and strategy to fully prosecute Google’s monopolies, and not negotiate a settlement.

Some supporting context is important here.

For ~21 months this current European Commission consistently has shown a long-term-focused, prosecutorial approach to Google antitrust enforcement. It has been realistic, disciplined, methodical, and effective, and has made steady progress towards successfully delivering a broad, effective and lasting outcome for the EU’s long term goal of a Digital Single Market.

That is in stark contrast to the epic failure of the previous EC’s 2010-2014 politically-expedient, short-term, negotiate-at-all-cost, Google approach. Remember, all three of the proposed Almunia-Google-shopping settlements would have: blocked any further EU-Google antitrust investigations for five years until 2019; not ruled Google dominant in any market, despite known >90% market shares; and not required any admission of any wrongdoing by Google.

Simply, the EU learned the hard way that negotiating with Google is a one-way street.

Digital Single Market Strategy: The new SO is clearly strategic in stating that “Google’s flagship product is general Internet search,” and that search advertising is a “commercially important market.”

It is implicit that the EU understands the EU digital single market is stillborn if long term, European competitors face: a dominant search engine and a dominant mobile operating system with >90% market shares and that heavily favor Google products and services over competitors; and a search advertising service with ~80% market share that also favors Google advertising services over competitors.

Consistent Case Theory Strategy: The EU-Google antitrust prosecution strategy is consistently focused on broadly confronting Google’s abuses of dominance wherever it confidently can prove both market dominance and an abuse that competitively forecloses actual and potential competition.

There is a clear common thread of alleged monopolistic foreclosure of competition in all three SOs.

The search SO states: “Google has abused its dominant position by systematically favouring its own comparison shopping service in its general search results.”

The Android SO and Fact Sheet state: Google has “abused its dominant position by imposing restrictions on Android device manufacturers and mobile network operators” … “…to protect and strengthen Google’s dominant position in general internet search, and adversely affect competition in the market for mobile browsers.”

The advertising SO states: Google has abused “its dominant position in online search advertising…” via “restrictions that the company has placed on the ability of certain third party websites to display search advertisements from Google’s competitors.”

EU’s Apparent “Rebar” Legal Strategy: The media’s ongoing EU-Google “battle” storytelling metaphor in framing this third Google antitrust case as a third-front in the antitrust “battle” may mischaracterize the real dynamic at work.

The reality here is the EU knows it ultimately must construct the most impregnable Google antitrust case possible, because Google is the most politically-powerful, PR-savvy, and tenacious antitrust litigant the EU has ever faced, and because the fate of the EU Digital Single Market literally depends upon the outcome of these cases.

In the big picture, ensuring these cases withstand appeal is vastly more important than getting them done most quickly.

To understand a “rebar” strategy one must understand what “rebar” is. Rebar are steel rods with ridges that are set in soft concrete to reinforce and make the finished “set” concrete structure dramatically stronger than without the steel reinforcements. For structures like tall buildings or bridges, that hold up under enormous pressure, the rebar is placed throughout the concrete in multiple directions to maximally reinforce the concrete structure to withstand maximal pressure from any potential direction.

Like an engineer layers and intertwines rebar in different directions to maximally reinforce their structure to withstand pressure when the concrete ultimately sets, analogously, the EU-Google legal strategy apparently is layering, and re-layering its preliminary charges, market definitions and evidence of abuses in multiple directions to mutually reinforce the core foundation of its antitrust case against Google, that Google is >90% dominant in the defined market for “general Internet search services” and in fact is abusing that core dominance in multiple ways in multiple markets.

The legal “concrete” of the EU-Google antitrust case in this analogy does not “set” firm for court review, until the EU issues a final ruling in the case after hearing Google’s challenge, arguments and evidence against the EU’s final charges.

Consider that the original EU Statement of Objections in April of 2015 defined two relevant separate markets: (1) “general online search services” and (2) “comparison shopping services.” The second SO in April of 2016, slightly redefined search to be the relevant market of (1.1) “general Internet search services;” and it added two more relevant markets: (3) “licensable smart mobile operating systems” and (4) “app stores for the Android mobile operating system.” The third SO in July 2016, adds a new relevant market (5) “merchant platforms” to describe the separate market of platforms like Amazon and eBay from the original (2.1) “comparison shopping services;” it again included: (1.1) “general Internet search services;” and it added two more new defined markets (for a total of seven): (6) “online search advertising” and (7) “search advertising intermediation.”

Note that all three SOs are based upon the >90% dominance of the core central pillar of legal “rebar” “general Internet search services” and how Google leverages its dominance in search to abuse its dominance by foreclosing competition in vertical markets.

First, the comparison shopping SO establishes the competition foreclosure, abuse of dominance predicate for other “specialized search services” future cases, and cross-reinforces the Android & advertising SOs.

Second, the Android SO establishes the competition foreclosure, abuse of dominance predicate for other software, app stores and browsers, and cross-reinforces the comparison shopping and advertising SOs.

Third, the advertising SO establishes the competition foreclosure, abuse of dominance predicate for other advertising services, and cross-reinforces the comparison shopping and Android SOs.

All three SOs could cross-reinforce a potential Commissioner Vestager-signaled case to challenge Google’s anti-competitive “scraping” (copying of rivals content without authorization).

The Supplementary SO strategy: The new supplementary SO on comparison shopping, fixes a perceived, potential, structural weakness in the original SO that defined the comparison shopping market in way that Google could claim that Amazon and eBay were comparison shopping competition and in a way that Google could claim undermined that Google was dominant in search.

The new supplementary SO shows a reviewing court that: “…the Commission has examined in detail Google’s argument that comparison shopping services should not be considered in isolation, but together with the services provided by merchant platforms, such as Amazon and eBay. The Commission continues to consider that comparison shopping services and merchant platforms belong to separate markets. In any event, today’s supplementary Statement of Objections finds that even if merchant platforms are included in the market affected by Google’s practices, comparison shopping services are a significant part of that market and Google’s conduct has weakened or even marginalised competition from its closest rivals.”

Nondiscrimination Remedy Strategy: The original SO on comparison-shopping proposed a remedy: “The Commission’s preliminary view is that to remedy such conduct, Google should treat its own comparison shopping service and those of rivals in the same way.” Interestingly, the Supplementary SO did not adjust the EU’s preliminary remedy view of a nondiscrimination requirement.

Given the consistent focus and frame of each charge as foreclosing the competitive opportunity of competitors, it appears that a general nondiscrimination principle would fit as a part of any remedy in any abuse of Google dominance.

In a nutshell, the EU case has a consistent, clear, methodical legal strategy to successfully prosecute Google for multiple abuses of multiple defined market monopolies.

Looking at them as three mutually-reinforcing parts of a whole, indicates that Google ultimately faces more antitrust risk in the EU than many may currently believe.

***

Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an emergent enterprise risk consultancy for Fortune 500 companies, some of which are Google competitors. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google and also before the relevant House oversight subcommittee on Google’s privacy problems.

Comments are closed.