EU's Google shopping case serves as 'precedent' for future cases

27 June 2017. By Matthew Newman, Mari Eccles and Lewis Crofts.

Google's troubles are certain to continue after the European Commission today established that the tech company is dominant in Internet search.

This finding could potentially bolster rival complaints in other specialized searches for restaurant reviews, images and flights.

Margrethe Vestager, the commission's antitrust chief, said today's decision set a "precedent" for potential cases against Google in other "vertical" search services. The regulator will evaluate Google's behavior in relation to the "specific characteristics" and facts of each market.

After seven years of investigating, the regulator today announced that it was hitting the tech giant with a record fine worth 2.42 billion euros ($2.7 billion) for abusing its market clout to squeeze out rival services in online shopping.

But the ruling will concern the company because it may have further ramifications for Google, providing a legal framework for the commission's other ongoing probes into the Mountain View, California-based company.

Although these investigations focus on different services provided by Google, such as images or reviews of restaurants and stores, the commission now has a clear legal definition on which it can rely.

The commissioner herself said today that proving Google is dominant is the "starting point" for the regulator's analysis in other areas.

Leveraging

At the heart of the commission's legal analysis in the shopping case, is a well-established legal concept known as "leveraging."

In leveraging cases, the commission may find that a dominant company abuses its market power if it uses the strength of its dominant product or service to gain an advantage is a separate market.

In today's decision, the commission found that Google leveraged its dominance in general Internet search to muscle into the adjacent specialized market for product shopping search and price comparisons.

In other words, Google's success in comparison search wasn't based on the merits of its service. Rather, it boosted traffic to its service by artificially promoting it and demoting its rivals. The commission said it analyzed "huge" quantities of data — 1.7 billion search queries — to reach its conclusion.

It found that traffic was significantly boosted when Google's service was featured prominently in search results.

Future cases

The problem for Google is that the other antitrust complaints are based on similar behavior seen in the shopping case.

Google is accused of favoring its own restaurant and store review service at the expense of rivals, such as Yelp. In the travel market, Google is faulted for putting its own flight service above any of the other rival services such as Expedia. Similar accusations are made for its mapping service.

These cases will take on more prominence now that the shopping case has been concluded. Of course, Google will very likely contest the decision at the EU courts in Luxembourg, so the commission could see its theory under judicial scrutiny while it applies it to new probes.

In any case, the commission's first priority is to wrap up investigations into accusations that Google illegally ties its services — such as its search, maps and its app store — when mobile phone makers using the Android operating system configure handsets.

Another case focuses on whether Google abuses its market power in search advertising by restricting websites — online retailers, telecom operators and newspapers — from using other search services in their search boxes.

The commission's investigations in these cases are advanced, so it's likely that there will be decisions in Android and search advertising cases before any vertical cases leave the door.

Damages

And Google's woes won't be just in Brussels.

The EU decision will provide a basis for companies to sue the tech company for damages in national courts. In London, a court is already reviewing cases brought by product-search engines Foundem and Kelkoo, which have been on hold pending the conclusion of the EU case.

And search services in other sectors may wish to argue that today's decision should convince judges that similar abuses are happening more broadly.

Obviously, Google's inevitable appeal to the EU courts will string out private litigation even further, but it may allow judges to advance the cases and order disclosure of sensitive documents.

Google will have to write a big check after today's decision.

But the bigger concern for Google, whose parent company Alphabet has about $600 billion in market value, is that it will have to be mindful of today's conclusions when it rolls out new products and services in Europe for years.

	Eliot Gao