On Wednesday, the European Commission officially charged Google with competition violations. This decision was the result of a five-year investigation into the complaints of several Internet companies who were unhappy with the way the search engine displays their sites in the search results. The officials’s mobile Android system also attracted the attention of officials: they plan to find out if the company is conspiring with smartphone manufacturers to preinstall certain applications in them. If Google is found guilty, it faces the largest penalty in the history of antitrust litigation of 10% of turnover, or $ 6.4 billion. Life around figured out how the corporation could harm its competitors.
The first to complain about Google’s actions was the Foundem advisory service. Spouses Adam and Shivon Ruff from the English Bergshire founded it in 2005. The site allowed to find more favorable prices for goods on the Internet. Soon the couple noticed that if Yahoo and Bing perceived their service normally, then Google constantly excluded it from the search results. After three years of futile trials in 2010, Raff complained to the European Commission. In his opinion, the reason for the low places in the search results was a competing service from Google, which also helped to choose the most inexpensive product in online stores. Its potential buyers could see at the top of the page in a special promoblock.
Representatives of Google justified the unsuccessful delivery by the lack of original content from Foundem. “But the lack of original content is inherent in all search services, including Google,” Raff retorted. He called his fight with Google the battle of David and Goliath. At the same time, since 2011, Shivon Raff has worked as a freelance adviser to Icomp, a lobbying firm for Microsoft. But entrepreneurs insisted that they act solely in their own interests.
Lawsuits against Google were unsuccessful, and the European Commission’s antitrust investigation was slow but moving forward. Following Foundem, famous market players began to complain about the search engine: in particular, Expedia, TripAdvisor and Yelp. All of them said that links to their services are in the display much lower than similar Google products.
Everything for people
On Wednesday, after nearly five years of preliminary investigation, European authorities finally indicted the corporation. “I’m concerned that the company is providing an unfair advantage to its own service for comparing goods and prices in violation of the EU antitrust rules,” said Margret Vestager, European competition commissioner.
Now, Google will have the opportunity to provide arguments in its favor in the proceedings. And the company already has them. In an internal correspondence, Google explains to employees that the company's actions were aimed at caring for users: “We can give a direct answer to a huge number of questions, allowing people to save time, this applies to the weather, the address of the nearest pharmacy, plane tickets and finding the cheapest camera” . At the same time, the company does not infringe on competitors: they are located "in just one click." In support of these words, the vice president of the corporation Amit Singal gives statistics on the growth in popularity of booking sites and online stores. Expedia, Orbitz, Priceline and Travelocity account for 95% of the US online booking market, he says. In recent years, the popularity of these sites has only grown, and many users found them through Google, because it provides complete information about all companies. In addition, Singal notes, more and more people use specialized resources when they need to buy or book something. “More and more people are using Facebook, Pinterest and Twitter to find recommendations on where to eat, which movie to watch and how to decorate the house,” he writes. In addition, now applications for smartphones are developing more and more actively: now seven out of eight minutes of using the mobile Internet are spent on applications, Singal notes. For example, 40% of users access the Yelp service from a mobile.
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Android under suspicion
But Yelp is still worried about Google’s behavior. On April 21, the corporation should update the mobile search engine algorithm. She promises that he will take into account how sites are adapted for viewing on smartphones. It seems to be a good innovation, but no one still knows how this algorithm will work. Given that when updating the search engine for computers, the positioning of Yelp has deteriorated, experts fear that it will suffer now.
The European Commission has already begun to investigate another case against Google, related to the operating system for Android smartphones. Initially, it was opposed to the closed "apple" iOS, since almost any smartphone manufacturer could use it. But among the conditions of cooperation was the preinstallation of a number of applications. This practice has already become a cause of dissatisfaction with Yandex: in February, he complained to the FAS that smartphone developers are associated with Google with exclusive contracts and therefore cannot install its services. FAS should make its decision by the end of the year. Russian antitrust monitors want to establish cooperation with their European colleagues in order to understand this matter together.
The European Commission is going to sort out not only whether Google did not preinstall its services on smartphones, but also whether it forbade manufacturers to modify Android for themselves (an open-source system allows this). These cosmetic changes, the so-called forks, may be direct competitors to the operating system.
In response, Android Vice President Hiroshi Lockerheimer wrote that users have a huge selection of applications in the Google Play store, and developers can create applications for different operating systems. “Thanks to Android, developers can win a huge audience and build a strong business. We look forward to discussing this with the European Commission,” he wrote.
Sources: Bloomberg, Googleblog (1, 2), WSJ, RBC, European Commission posts and others
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