Four Reasons Fairsearch Is Wrong

The coalition of companies that for years has unsuccessfully been pressing antitrust complaints against Google for search “abuse” — FairSearch.org — insists Google must be restrained for fear the Mountain View company will steer search users to its commercial products, like flight bookings. The group’s most recent publicity event, held at the ABA’s Antitrust Section annual spring meeting last week, repeated those same claims. FairSearch ventured as well into new ground, attacking what it terms Google’s unreasonably restrictive Android licensing practices.

There are four straightforward reasons FairSearch is wrong.

1.  Predictions of Foreclosure Have Proven Totally Baseless.

When Google purchased travel software maker ITA in 2011, FairSearch maintained that Google would exploit its control over the ITA tools that power other online travel agencies, along with many of the airlines’ own sites, to usher competing search services off the stage, then jack up ad rates for travel queries and favor flights from particular airlines. Three years later, nothing like that has happened. In fact, Google Flight Search is not among the top 100 or even the top 200 travel listing sites. Rather, it’s in 244th place, behind Hipmunk, with just .04% of travel queries. Real-world experience, in other words, reveals that the predicted competitive risks on which FairSearch bases its advocacy are both hypothetical and fanciful.

2.  Government Processes Do Not Prove Competitive Harm.

Much of the FairSearch event focused on criticism of European Union competition commissioner Joaquín Almunia’s third and most recent proposed settlement with Google, under which specialized search rivals would be allowed via auction to insert relevant product listings displayed prominently alongside Google’s own sponsored search results. Although that deal has correctly been described as “one of the harshest penalties in the world and significantly more far-reaching relative to recent major settlements with other companies,” Gary Reback contends it is a political sell-out. Reback insists that Google was “forced to publish its proposal,” which would otherwise have been secret, and that the European Commission is allowing “no opportunity for comments.”

There have already been an unprecedented two rounds of public review of the Google commitments. But even if “transparency” were in fact lacking, that critique has nothing to do with the strength or appropriateness of the search changes Almunia negotiated. And having chosen the EU as their forum after the U.S. Federal Trade Commission declined to take action against Google’s search practices in 2013, it is ironic, and a touch absurd, for FairSearch members to complain that the Commission’s processes are still not transparent enough. Competition investigations in the EU have always been confidential — its Google investigation has thus been wrapped in much of the same secrecy typical of an EU approach to competition regulation.

According to the Financial Times, “EU officials are baffled by the allegation that they are trying to gag the (very vocal) complainants.” Yet in all events, how the Commission runs its process is obviously irrelevant to the competition merits. And those merits are squarely addressed by the settlement. The EC’s principal competition concern was that Google gave undue preference to its own vertical services with the introduction of Universal Search. Therefore, inserting links to rivals in that same “preferential,” prominently outlined space above organic search results provides obvious parity between Google’s shopping services, for instance, and consumer electronics listings by rivals such as the UK’s Foundem. The second concern was that Universal Search might deceive users into thinking results are something other than promotion of Google’s commercial services because the lack of a clear distinction between a promoted link and normal search results “left some consumers less able to make an informed choice.” Hence, as addressed in detail before, a label remedy is precisely the right solution to what is, at heart, a contention of misleading trade practices.

By focusing on governmental procedure, FairSearch underscores the vacuity of its substantive competition complaints. Their objective is not to enhance or restore market competition, but instead to use antitrust as a weapon to hamstring a successful rival. As David Balto observes:

At this point it seems like some of the actors are losing track of the melody — the goal of the investigation is to help consumers, not to drag the investigation on forever in order to hurt Google or to handicap Google’s ability to compete to the extent competitors can grab market share without actually innovating.

European Commission’s Investigation of Google Can’t Become a Song That Never Ends | David Balto.

3.  Search Traffic and Click-Throughs Are Not Proper Antitrust Remedies.

FairSearch contends the Google settlement is inefficacious, citing eye tracking and click-through studies of Google’s proposals with 1.6 million users in four EU countries. As it describes, that so-called market test (and another from December) “found that Google’s proposals were ‘worse than we expected,’ with ‘95% of traffic going to Google’s own online shopping products,’ leaving rivals to ‘fight over paying for the remaining 5% of user traffic.'”

The simple problem with this objection is that it is misplaced in the context of market competition. Indeed iComp, another group challenging Google before the EU Commission, unabashedly — and incorrectly — says that “the question whether the remedies proposed by Google will be effective turns on how many consumers will actually look at and click on the rival links.”

Hogwash! Antitrust remedies are not designed to deliver traffic or sales to competitors. FairSearch’s U.S. counsel implicitly agreed, noting that remedies should be “about startups and established companies wanting a level playing field and to compete openly, fairly and on the merits — not about seeking an advantage for free or top placement in search results.” As Almunia himself has emphasized, the changes mandated by the EU settlement “provide users with real choice between competing services presented in a comparable way; it is then up to them to choose the best alternative.”

By basing its attack of the settlement on click-through rates, FairSearch thus violates the basic, indisputable tenet of market economies that the response to innovation by one company should be more innovation by others, not competitors calling in lawyers and lobbyists. As Danny Sullivan of SearchEngineLand notes, there is an unseemly kind of “entitlement mentality” among the FairSearch members.

4.  Android Licensing Is Different.

The biggest shocker in last week’s event was a claim by Nokia that Google’s licensing practices for its Android mobile operating system (OS) are stifling “platform competition” in the wireless space. This is baffling coming from a company which had its own, formerly-dominant mobile OS that decisively lost the battle for consumer preference. Symbian’s fall from market leadership (once commanding a nearly 70% share, the Nokia operating system remained the top-selling smartphone OS worldwide until late 2010) is “a tale about which books can (and should) be written.” Nokia and other mobile OS competitors also largely do not offer Android devices — the new Nokia X is based on a mashup of both the Android and Microsoft frameworks, including their own app store. So regardless of whether limitations of the Google Play app store in fact hinder smartphone original equipment manufacturers (OEMs), those practices cannot by definition adversely impact competing mobile platform providers such as Nokia.

Nokia’s Jenni Lukander contends that Google’s restrictive use of anti-fragmentation agreements to control OEMs, citing the case of Google supposedly preventing Acer from releasing a smartphone using the Alibaba Aliyun OS, violates EU competition law. That claim is impossible to reconcile with both its own Nokia X and with Amazon’s popular Kindle Fire, which run proprietary variants of Android. As ZDNet explains, Amazon “has effectively positioned its Kindle Fires to be totally removed from the Android system as far as buyers are concerned.” Nokia’s ephemeral tying allusions thus contradict its own launch of a smartphone that uses a proprietary OS but still works with most Android apps, demonstrating that competing phones can run  Android software without also using Google services or Google Play. And the claim does not at all address the reality that absent a closed ecosystem such as Apple’s iOS, to which FairSearch would undoubtedly object as well if adopted by Google, interoperability among different versions of Android plainly requires some common specifications so that apps work on the widest array of Android devices.

Nokia’s Android-app strategy embraces the global nature of the Android ecosystem. While U.S. users are accustomed to getting Android apps through the Google Play store, that’s not the case in many other parts of the world, where consumers use third-party app stores to get Android apps and often “sideload” Android apps directly from app developers.

How Developers And Consumers Can Get Android Apps On the Nokia X | ReadWrite.

Most importantly, of course, Android licensing is totally unrelated to Internet search. Whether other pending EU complaints against Android have merit or not is immaterial to the proposed search settlement, in the least because no one can legitimately claim Google is forcing or tying Google’s search product to the open source Android platform. By targeting Android with its opening speaker, FairSearch thus illuminated that its antitrust objective is to handicap a rival, despite the undeniable fact that as a lead complainant and rival OS supplier, Nokia is by definition almost entirely unaffected by any Android practices Google adopts.

At DisCo we’ve been discussing the FTC and EU investigations of Google’s search practices for more than two years. The latest FairSearch contentions represent a transparent attempt to forestall resolution of the European process, moving the goalposts in light of the failure of their dire competitive predictions. It is time for Commissioner Almunia and the EU to close up shop, settle and move on.

Originally prepared for and reposted with permission of the Disruptive Competition Project.