EU regulator moves forward with inquiry into Google online shopping promotions

The competition authority has issued the search giant with a statement of objections and claims the company has acted in breach of EU competition rules. It claimed Google promotes its Google Shopping service "more prominently" in its search index than rival services and that this may "artificially divert traffic from rival comparison shopping services and hinder their ability to compete on the market". However, Google has defended its business and said it will fight the Commission's preliminary conclusions in the case.

The Commission said it is concerned that consumers are not presented with "the most relevant results in response to queries" and that innovation in the market is being stifled by the alleged practice. It has called on Google to "treat its own comparison shopping service and those of rivals in the same way" to address its concerns.

Google said consumers benefit from "more choice than ever before" when using search services online and that there is "thriving competition" in the form of other search providers, including in the online shopping market where the Commission's concerns are focused.

"If you look at shopping … it’s clear that there’s a ton of competition (including from Amazon and eBay, two of the biggest shopping sites in the world) and Google’s shopping results have not the harmed the competition," Amit Singhal, senior vice president of Google's search business, said. "Any economist would say that you typically do not see a ton of innovation, new entrants or investment in sectors where competition is stagnating -- or dominated by one player. Yet that is exactly what’s happening in our world." 

"Zalando, the German shopping site, went public in 2014 in one of Europe’s biggest-ever tech IPOs. Companies like Facebook, Pinterest and Amazon have been investing in their own search services and search engines like Quixey, DuckDuckGo and Qwant have attracted new funding. We’re seeing innovation in voice search and the rise of search assistants -- with even more to come. It’s why we respectfully but strongly disagree with the need to issue a statement of objections and look forward to making our case over the weeks ahead," Singhal said.

The European Commission is responsible for investigating competition-restricting agreements and abuse of dominant market position under the Treaty on the Functioning of the European Union (TFEU). Google now has 10 weeks to respond to the Commission's statement of objections. The Commission will then consider the arguments put to it before reaching a final decision in the case.

The Commission also announced that it has opened a separate investigation to assess whether Google has unfairly restricted competition in the mobile market.

It said it will investigate whether Google has "illegally hindered the development and market access of rival mobile applications or services by requiring or incentivising smartphone and tablet manufacturers to exclusively pre-install Google’s own applications or services". It will also look into whether Google has prevented companies developing and marketing "modified and potentially competing versions" of its Android operating system, and whether it has tied its own applications and services to mobile devices featuring Android, in breach of competition rules.

Google said the voluntary agreements it has put in place with smartphone and tablet manufacturers have benefited those businesses as well as consumers.

Hiroshi Lockheimer, vice president of engineering with Google's Android division, said: "Our app distribution agreements make sure that people get a great 'out of the box' experience with useful apps right there on the home screen (how many of us could get through our day without maps or email?). This also helps manufacturers of Android devices compete with Apple, Microsoft and other mobile ecosystems that come preloaded with similar baseline apps." 

"And remember that these distribution agreements are not exclusive, and Android manufacturers install their own apps and apps from other companies as well. And in comparison to Apple – the world’s most profitable (mobile) phone company – there are far fewer Google apps pre-installed on Android phones than Apple apps on iOS devices... It's not just Google that has benefited from Android's success. The Android model has let manufacturers compete on their unique innovations. Developers can reach huge audiences and build strong businesses. And consumers now have unprecedented choice at ever-lower prices."