European antitrust chief says Google’s auction-based shopping remedy not working
European antitrust chief Margrethe Vestager said yesterday at a conference that Google’s efforts to drive more traffic to European comparison shopping rivals have essentially failed. This is a reversal of her previous, qualified support for the changes Google made in response to a European Commission finding in 2017 that the company had “abused its market position” in shopping search.
The $2.7 billion story. That 2017 determination, which Google has appealed, came with a penalty of nearly €2.4 billion ($2.7 billion). In addition, Google was required to provide “equal treatment” to European shopping comparison competitors on the SERP. That turned out to be a remedy involving bidding for placement in Product Listing Ads (PLAs). It required Google Shopping itself to compete for placement with the comparison engines with no dedicated or reserved slots.
Google Shopping, newly operating as a as a stand-alone business unit, was also required to maintain a profit (20%) and submit to regular review by the European Commission to ensure it’s competing on equal terms.
Complaints from Google’s shopping competitors. While Vestager offered early support for the approach and was encouraged by initial results, the comparison engines vociferously complained about what they perceived to be ongoing unfairness. Among their criticisms were the following:
- There’s no material difference between the auction and the previous system, which violated EU antitrust rules
- Google’s pledge to operate profitably is “just meaningless internal accounting, paid from one Google pocket into another.”
- The auction forces comparison engines to “bid away the vast majority of their profit.”
- Because users who click on comparison engines’ PLAs go directly to merchant sites and not the comparison engines themselves, they have no opportunity to “derive value from the process.”
- Consumers are harmed because the auction-based approach is not based on relevance and “all but eradicating” a “thriving [online] comparison shopping market in Europe.”
Fourteen comparison engines that signed a November 22, 2018 letter to Vestager urged “the Commission to enforce its Prohibition Decision by rejecting Google’s non-compliant ‘compliance mechanism’ and demanding an effective remedy that adheres to the principle of equal treatment set out in the Decision.”
At least one competitor in Europe is asking the European Commission to initiate a “non-compliance case” that could bring further penalties.
Why we should care. Google may get the last laugh if the appeal is resolved in its favor. But the timing of any decision could still be far away. However, in the immediate future, Commissioner Vestager could seek further changes in the SERP to help drive meaningful traffic to shopping comparison sites.
If Google’s auction-based shopping solution is rejected that casts a shadow over another antitrust Google remedy: “search choice” for Android users. Google was planning to use an auction to determine which search sites to present to Android users as their potential default engine. The three highest bidders were to appear, along with Google. But that approach could be undermined by a determination that the PLA shopping comparison auction is fundamentally unfair.