'Colossus' Google condemned rivals to dark depths of search results, EU tells court

12 February 2020 7:49pm
Google online shopping

12 February 2020. By Lewis Crofts.

Google is "overwhelmingly dominant" and its algorithms "consigned rival services to the darkness that lies beyond Page 2" of its search results, the European Commission told EU judges today.

The search engine countered that displaying shopping results on its website was a quest for product improvement, and that the commission had wrongly ordered it to carry rivals' links.

Google was at the EU General Court to contest a 2.42 billion-euro fine imposed in 2017 ($2.6 billion today). The commission found that the search giant had favored its own online shopping service when displaying purchase options in a "Shopping Unit" at the top of a search page.

That was the first of a trio of big antitrust fines imposed on Google by EU competition chief Margrethe Vestager. The company has also lodged appeals of the other two fines: one for its Android operating system and one for online advertising.

This week's hearing will therefore set the scene for a lengthy series of court battles between the US tech giant and the EU regulator. Its outcome could also influence ongoing and future investigations: the commission received a new complaint against Google by the holiday-booking industry just this week.

— Self-favoring? —

At the start of a three-day hearing this morning, Google argued that the EU case wrongly rests on a finding that the company is "favoring" its own shopping service to the detriment of others.

"The European Commission's claim of favoring is just a different way of saying Google had a duty to supply rivals," Thomas Graf, for the US tech giant, said in opening pleadings. "But the decision doesn't establish that the legal conditions for such a duty existed."

EU officials were undoing 30 years of law on this point, Graf said, and the approach meant Google would have shelved innovative product developments — and that can't be good for consumers.

James Killick, supporting Google for the Computer and Communications Industry Association, said the notion of self-favoring was "vague" and "not coherent," and this was leading to legal uncertainty. The CCIA is an industry organization representing hardware makers, telecom companies and tech companies including Google.

Killick pointed judges to the wider impact of the case on companies' incentive to improve their services and integrate the ads that fund online businesses.

Nicholas Khan, for the commission, argued that Google was the "front page of the Internet," a "colossus" with "immense power" to direct users' attention.

He said there was "nothing esoteric" in the way the commission had constructed the case, and Google was wilfully choosing not to engage with the core of the EU's case: namely, favoritism.

Rather, the company seemed to have "applied some ranking algorithm to the decision and decided that some parts of it aren't relevant," choosing instead its "preferred legal test" — one of which isn't in the decision.

— Demotion —

Another strand of this morning's pleadings centered on whether Google had unfairly demoted results from rival online shopping providers.

Meredith Pickford, for Google, said "demotion algorithms" were important to "maintain high quality" results. He said they lead to a better service for users, weeding out sites that are less useful or relevant.

Khan countered that that demotion "mostly consigned rival services to the darkness that lies beyond Page 2, where less than 5 percent of users ever venture."

He said that Google's first entry into the price-comparison market — through a product called Froogle — had failed. But Google had "appropriated" the ideas of others establishing such services and then sought to give its own product a leg-up into that sector.

"After a fruitless experience with Froogle, it left nothing to chance," giving preference to its own results, Khan said.

Foundem, the first website to complain about Google, supported the commission, arguing that the search engine wasn't improving its search results, nor was it displaying more relevant search results. It said that Google hadn't justified why demotion penalties were applied to others but not to its own shopping service.

Graf, for Google, fielded a question from Lauri Madise, the judge leading the court's questioning, about how the search engine processed "relevance" in general and specialist search results.

Google argued it was wrong to assume that all product searches presented a Shopping Unit. This only happened in 25 percent of cases. Graf explained that the search engine had scoring criteria that assessed relevance by looking at the "topicality" of a query and the "quality" of the websites.

— Essential facility —

After the opening submissions, the hearing focused first on the legal framework for analyzing Google's illegal conduct.

This sees the commission argue that Google used a "combination" of promotion and demotion tactics to exploit its powerful search engine to favor its own results.

Google, meanwhile, says the legal standard should be akin to an "essential facility," where the commission has implied that the Shopping Unit is the only way that rivals can appear.

Pickford, for Google, said the case "reduces to a 'refusal to supply' case" and sought to peel back layers of the EU decision to reveal it as such. He said the commission didn't meet the legal burden to prove that case. Claims of "leveraging," or a "combination" of abuses, or giving "more favorable treatment" were attempts to "side-step" the legal duty, Pickford said.

"It is not enough to say that the conduct amounted to favoring. Reserving an asset to oneself, even for a dominant company, is not illegal," he said.

Google's lawyer argued that if the commission were to win this case, it would rewrite the law on whether a service should be considered "indispensable" for rivals to compete.

Graf, also for Google, said showing more relevant results was not favoring: "This is what a search service does."

"The European Commission cannot simply invent an abuse in violation of fundamental legal principles," Graf said. "The decision cannot stand because it fails to establish that Google's conduct deviated from competition on the merits."

Assimakis Komninos, supporting Google for the CCIA, said judges should protect the "coherence of the [legal] system," and that accepting the commission's case could remove one of the "cornerstones" of the law on essential facilities. That would create the risk of a "collapse," he said.

The hearing continues this afternoon.