GOOGLE’S RESPONSE TO NEWS CORPORATION: A CHECK OF THE FACTS

On September 17, News Corporation CEO Robert Thomson issued an open letter to EU Commission Vice-President Joaquin Almunia in support of the Commission’s long-running antitrust investigation of Google. In doing so, News Corp. added its voice to the growing chorus of European publishers, consumer organisations, Internet companies and many others who believe Google is abusing its market power to stifle competition and seize a growing share of Europe’s online markets and private consumer data.

Several days later, Google’s Rachel Whetstone issued a blog post responding to the letter. Those who were hoping the company would finally acknowledge consumer and industry concerns over its actions will have been disappointed. Instead, Google’s response is filled with mischaracterizations and evasions, and a tone reflecting the defiance and arrogance that have become unfortunate hallmarks of Google’s interactions with its customers, public officials, and consumers. The response also makes clear that Google rejects the premise of the EU Commission’s antitrust case against it—which may explain why all three of its proposals to settle the case have proven to be entirely ineffective.  

Google Claim #1: “[C]ompetition is just one click away online, and barriers to switching are very, very low.” . . . “Within search, Google faces a lot of competition: including Amazon . . .”

In response to Mr. Thomson’s concerns about Google’s growing dominance, Google once again trots out its favorite rebuttal, that “competition is just one click away.” While Google regularly relies on this quip to argue that competition in search is thriving, no competition authority worth her salt would ever use this as a test of market power—and with good reason. Imagine if a single powerful company somehow came to control each of the millions of web sites across the entire world—except for one. Most people would see this as a nightmare scenario, one utterly devoid of consumer freedom and choice. Under Google’s “one click away” standard, however, this would be a happy situation characterized by robust competition, since users could still navigate to the sole competing web site with “just one click.”

Fortunately, competition enforcers have far more accurate tests for measuring market power. And when they apply these tests to Google, they regularly find that general search is a relevant market and that Google is dominant in that market and related markets. Since Google seems unable to remember these cases (or perhaps finds it convenient to exercise its own, Google-y version of a “right to be forgotten”), several of these cases are listed here:

  • European Commission. In his May 2012 statement on the Commission’s investigation of Google, Vice-President Almunia clearly articulated the Commission’s determination that Google holds a dominant position, stating that the Commission’s “investigation has led us to identify four concerns where Google business practices may be considered as abuses of dominance.”

Likewise, in its decision on the Google—Motorola Mobility acquisition, the Commission found that “Google already has a very high market share in mobile internet search.”  In footnote 102 of that decision, it stated: “In this context, it should, however, be noted that based on a number of estimates, Google already has a market share of above 90% in mobile search engines.

  • U.S. Department of Justice.  In explaining its decision to challenge Google’s proposed tie-up with Yahoo! (which led Google to abandon the deal), the U.S. Department of Justice stated: “The Department’s investigation revealed that Internet search advertising and Internet search syndication are each relevant antitrust markets and that Google is by far the largest provider of such services, with shares of more than 70 percent in both markets.”

The Department of Justice confirmed this position in its 2010 decision not to block the Microsoft-Yahoo! paid search advertising agreement, finding that Google is “the firm that now dominates” the markets for Internet search and search advertising.

  • U.S. Federal Trade Commission.  Although the FTC ultimately decided not to block Google’s acquisition of DoubleClick, it nonetheless concluded that “Google, through its AdWords business, is the dominant provider of sponsored search advertising.”

 

  • French Competition Authority.  In an extensive 2010 advisory opinion, France’s competition authority, the Autorité de la Concurrence, concluded that “[s]everal factors point to Google having a dominant position in the search-based ad market” and that “Google appears to be in a position at the very least to exercise market power through the contracts it concludes with its advertisers.”

It is disappointing yet telling that even today, after all of these findings, Google continues to claim that it is just a small fish in a large pond and that competition in search is thriving. Google’s defiance on this point must be cold comfort to the many victims of Google’s abuse, particularly those who still hold out hope that Google will at some point offer commitments that truly put an end to its antitrust violations.  

Google Claim #2: “Google has worked hard to help publishers succeed online.”

Google may “work hard to help publishers succeed online”—unless, that is, you happen to compete with Google. If you do, you face a world in which Google artificially places its own sites at the top of search results and demotes your site, regardless of whether consumers prefer your site or find it more relevant. And given Google’s dominance of search in Europe—with shares well above 90% in most European markets—companies suffering from Google’s search manipulation inevitably find themselves at a tremendous competitive disadvantage to Google even if their offerings are far better than Google’s.

These concerns are at the heart of the Commission’s case against Google, specifically with regard to vertical search engines. As Commissioner Almunia has explained, “Google displays links to its own vertical search services differently than it does for links to competitors. We are concerned that this may result in preferential treatment compared to those of competing services, which may be hurt as a consequence.” Far from “helping publishers succeed online,” the evidence suggests that Google routinely uses its market power in search to punish and retaliate against publishers that have the temerity to compete with any of Google’s many different offerings and services.

As Google increasingly expands the reach of its empire to include new sectors and markets (flights, job listings, mortgage offers, banking services, etc.), a growing number of companies across Europe are rightfully concerned that they might be the next victims of Google’s monopoly abuse. Rather than address these legitimate concerns, Google’s response to Mr. Thomson ignores them entirely. Here again, one cannot help but wonder if Google has become so powerful that it feels it can simply ignore the concerns of competition enforcers—and even its own customers.  

Google Claim #3: Google does “more than almost any other company” to fight online piracy: “In 2013, we removed 222 million web pages for Google Search due to copyright infringement . . . . And we downgrade websites that regularly violate copyright in our search rankings.”

First, it’s hard to imagine any company, having been caught facilitating access to stolen property more than 220 million times in a single year, viewing that as something to be proud of rather than deeply concerned about. No business that actually had to compete for business could ever operate in this way.

The reality is that, despite the huge numbers of take-downs and other figures that Google likes to cite, these remain only a drop in the ocean of infringing content that can be found through Google search results and on Google properties such as YouTube. And contrary to Google’s claim that they are a leader in fighting piracy, the facts show otherwise. According to a recent study by Millward Brown Digital and sponsored by the Motion Picture Association of America, Google was responsible for a whopping 82% of U.S. search queries that directed users to infringing online video content – a far higher percentage than Google’s share of the U.S. search market.

Google’s claim that it demotes infringing websites also should not be taken at face value. Internet analyst Andrew Keene examined this claim closely in a recent ICOMP-sponsored white paper and found the following (citations in the original):

“Three months after Google announced this new signal in its algorithm, Richard Mollet, CEO of the UK Publishers Association, told the Guardian that ‘we are yet to see evidence for a significant reduction in their presence in search results.’ Mollet’s views were echoed by Kieron Sharp, of the UK’s Federation Against Copyright Theft, who stated, ‘Google claims to have taken steps to make infringing websites and the pirated content they promote less accessible, yet is seems that its search engine is still promoting these sites which are often making money from advertising or other payment mechanisms.’

“These findings were confirmed by the RIAA’s Six Months Later – A Report Card on Google’s Demotion of Pirate Sites, published in February 2013. ‘Google’s search rankings for sites for which Google has received large numbers of instances of infringement do not appear to have been demoted by Google’s demotion signal in any meaningful way,’ the RIAA report concluded. 98% of Google searches for music conducted by the report, for example, resulted in the appearance on the first page of search results of an infringing site with more than 10,000 removal requests. The American publication Billboard came to the same conclusion as the RIAA, finding in February 2013 that legal digital music stores like Amazon were actually more deeply ‘buried’ beneath illegal sites than they were in November 2012.

“Another part of the RIAA report examined the number of instances that an offending site with more than 100,000 removal requests appeared in the top 5 search results. Rather than seeing an improvement in the takedowns of these theft-based sites, the RIAA found these sites actually showing up in the top 5 search results more often than before the August 2012 algorithm changes.

“The ineffectiveness of Google’s algorithm change was reiterated recently by RIAA Executive Director Cary Sherman in testimony before U.S. lawmakers. Sherman testified that RIAA’s members ‘have seen no difference whatsoever’ from Google’s algorithm change. As an example, he noted that the RIAA has sent over 1.25 million takedown notices to Google with respect to a single website, mp3skull.com, but that the site still appears on the first page of Google search results in response to a search for the term ‘mp3.’”

Google claims to be one of the most innovative companies in the world. If it truly wants to do “more than almost any other company” to fight copyright theft—and convince the public that these claims are more than just a PR stunt—it needs to show concrete, meaningful results. To date, Google has been unwilling to do so.

Google Claim #4: “Google is also an industry leader in combating child sexual abuse imagery online.”

This is an odd claim for Ms. Whetstone to make, since nowhere does Robert Thomson’s letter even suggest that Google is guilty of spreading online child sexual abuse imagery. Since she raised it, however, it is only fair to note that Google in fact has a quite tarnished record when it comes to making illicit and highly offensive content easily available to users, including children.

For instance, Digital Citizens Alliance, a non-profit consumer organisation, revealed in three separate reports that Google and YouTube are leading channels for access to illegal narcotics, human trafficking, prostitution, fake passports, and other illegal and illicit content. These and other reports find that Google, through YouTube and its online advertising services, has “effectively become advertising partners” with hundreds or even thousands of criminals and other illicit actors.

A separate investigative report by Consumer Watchdog found that “Google+ appears to be a destination for hundreds of suspected pedophiles to share highly sexual and exploitive images of children, often bordering on outright child pornography” and “is being used by suspected pedophiles to engage in sexually suggestive/sexually explicit online conversations, texts, and even videos with minors.” The report concluded that “Google+ users have been complaining about pedophile communities and sexual predators on the social networking site since its launch. But other than users shutting down such Communities and banning users by reporting specific instances of violations to Google’s User Content and Conduct Policy, Google has done little else to address the issue.”

Although it is unclear whether Ms. Whetstone knows about these problems, Google executives certainly do. As Digital Citizens Alliance reported:

“Google continues to treat this as a PR problem, not an issue of Internet safety. When faced with criticism, it removes controversial videos while boasting of how many it takes down a year. But Google has thus far refused to make the kind of systemic changes to YouTube and the YouTube Partner Program that would address the problem for good. “Ultimately, that means that like weeds, videos are pulled, simply to return. . . No doubt, that shortly after the publication of this report Google will once again pull these weeds. And it’s just as certain that once the attention slips away, these objectionable videos will resurface. There must be a better way.”  

Google Claim #5: “Android in an open-source operating system that can be used free-of-charge by anyone.” . . . “In this [mobile] world, Google Search is an app alongside many others.”

In a posting rife with half-truths, these claims are perhaps the most churlish of all. First, while there is indeed an open-source version of the Android code base, Google prohibits anyone who uses it from actually calling it Android.™ To use the Android name, and to be able to install Google Play and other higher-value software, Google forces device manufacturers to comply with an exceedingly restrictive set of conditions set out in a range of documents, including something called the Mobile Application Distribution Agreement and to submit their devices for review under something called the Android Compatibility Program, which gives Google nearly unlimited power to block a device from the market unless the manufacturer complies with each of Google’s demands.

These various contractual requirements, testing mandates, and other restrictions have a single common purpose: to force every company in the world to configure their Android™ devices in the way that most benefits Google—even if this prevents them from installing apps that better respond to consumer or market demand. While Google tries to keep many of these restrictions secret—presumably so that it can continue to tell the fiction that Android is open—these restrictions in fact are widely known among device manufacturers and are increasingly well documented.

For instance, Professor Benjamin Edelman of Harvard Business School, in a report entitled Secret Ties in Google’s “Open” Android, documents many ways in which Google forces device manufacturers to install Google applications and services as defaults and in prominent positions on Android devices and forbids them from replacing these with any rival application or service—even if the competing product is better or what customers want. Equally well known is that Google punishes and retaliates against companies that dare to include competing apps or services in place of Google’s.

Might Ms. Whetstone’s comments in fact herald a new era of true openness for Android™? Unlikely. In fact, that opposite is happening: Google reportedly is “turning the screws” even tighter on Android device manufacturers than ever before. According to a September 2014 report by leading tech journalist Amir Efrati, entitled Google’s Confidential Android Contracts Show Rising Requirements:

“Confidential documents viewed by The Information show Google has been adding requirements for dozens of manufacturers like Samsung Electronics, Huawei Technologies and HTC that want to build devices powered by Android. Among the new requirements for many partners: increasing the number of Google apps that must be pre-installed on the device to as many as 20, placing more Google apps on the home screen or in a prominent icon folder and making Google Search more prominent.”

One ray of hope is that the European Commission has reportedly opened an informal investigation of whether these and other restrictions might violate EU competition law. Perhaps the Commission’s definition of “open” will be more consistent with open competition than Google’s.

Google Claim #6: “We only show YouTube results [high in Google search results] when they’re relevant to a search query.”

Ms. Whetstone makes this comment in disagreeing with Mr. Thomson’s claim that Google routinely displays YouTube results at the top of Google search results, even if YouTube isn’t the original or only source of the content. Really? Perhaps someone should tell the team over at Google search.