Pixel Envy

Written by Nick Heer.

Oversimplifying the E.U. Google Antitrust Case

A bit of follow-up from yesterday’s announcement by the European Union that they are fining Alphabet €2.4 billion for abusing its dominance in search. Ben Thompson:

The implications of saying this is monopolistic behavior goes to the very heart of Google’s business model: should Google not be allowed to sell advertising against search results for fear that it is ruining competition? Take travel sites: why shouldn’t Priceline sue Google for featuring ads for hotel booking sites above its own results? Why should Google be able to make any money at all?

This is the aspect of the European Commission’s decision that I have the biggest problem with. I agree that Google has a monopoly in search, but as the Commission itself notes that is not a crime; the reality of this ruling, though, is that making any money off that monopoly apparently is. And, by extension, those that blindly support this decision are agreeing that products that succeed by being better for users ought not be able to make money.

I think Thompson’s discomfort with the E.U.’s decision comes from an earnest place, but he drastically oversimplifies the rationale for their punishment. He lays it out beautifully: more people use Google because it’s simply better, and it isn’t like users can’t choose a different search engine — they just don’t.

But when Thompson says

Google has a monopoly in search, but as the Commission itself notes that is not a crime; the reality of this ruling, though, is that making any money off that monopoly apparently is

that isn’t what the Commission is saying at all, and it’s a total oversimplification of what they actually concluded.

Rather, per their press release:

Google has systematically given prominent placement to its own comparison shopping service: Google’s comparison shopping results are displayed, in a rich format, at the top of the search results, or sometimes in a reserved space on the right-hand side. They are placed above the results that Google’s generic search algorithms consider most relevant.

[…]

On the other hand, rival comparison shopping services are subject to Google’s generic search algorithms, including demotions (which lower a search entry’s rank in Google’s search results). Comparison shopping services in the EEA are prone to be demoted by at least two different algorithms, which were first applied in 2004 and 2011, respectively.

The Commission did not find either of these things objectionable on their own; they found them objectionable together, in combination with Google‘s dominance in web search. Even though Google Product Search is a glorified ad unit, it has many of the features of a product comparison website. Contra Thompson, though, my interpretation is that it doesn’t make searching for products better for users primarily because it’s an ad unit — and Google decided to bury the rankings of competing product search sites, where users might find far better deals from companies that don’t advertise with Google.

The Commission’s decision seems very nuanced, and that is potentially a problem when similar cases will be decided in the future. But that nuance might also be relieving to those who, like Thompson, worry that this case may have effects that reach far beyond the Commission’s intentions. In the future, similar cases ought to need Google’s combination of dominance in general web indexing and advertising, their encroachment into different but related markets, and their ability to reduce the discoverability of competitors.