World Watch: The Google Antitrust Case in Europe
You can’t have been in the music business for very long without getting the idea that it’s a round world. We have been an international business almost from the time there was a concept of international trade and cultural exchange. It’s a two way street–there is a well-trodden path from the US abroad and from there and back, especially Canada, the UK, Europe, Japan, South Korea, Australia and New Zealand, even Texas.
The U.S. government supports American innovators in the artist community through a variety of international treaties and enforcement mechanisms, the U.S. Copyright Office and of course the U.S. Patent and Trademark Office (despite some rather unknowledgeable and gratuitous swipes at USPTO senior staff that verged on unintelligible by a member of the music bar who unfortunately was left in the same room as a megaphone. That person should have been thanking the staff and not mistaking the fact that the USPTO has long had significant and important input into copyright policy in the U.S.).
From time to time, I will be posting about international issues of importance to U.S. artists that come up. The first is the prosecution of Google by the European Commission for abuse of monopoly power. This case is important to U.S. artists for a couple of reasons.
1. It is the first time Google has had a serious confrontation with a government that it has not been able to control through vast sums spent on lobbying both directly and of the astroturf variety–see “Mission Creepy“, Public Citizen’s indispensable and exhaustive guide through Google’s labyrinthine network of academics (starting with the Poker Prof himself, Lester Lawrence Lessig III), NGOs (EFF and Public Knowledge), front groups and outright lobbyists.
2. IMPALA has filed a complaint against YouTube (owned by Google) with the European Commission. IMPALA is the trade group representing independent labels in Europe and has a significant degree of experience in fighting anticompetitive moves by a variety of corporations.
3. IMPALA has to a degree adopted the cause of Zoë Keating as an example of the treatment of independent artists by YouTube–and when you read the EC complaint, you will no doubt immediately see the parallels between the complainants in the EC case and the case against YouTube that is yet to be brought.
4. Senator Mike Lee is investigating corruption charges against the Federal Trade Commission that inexplicably failed to prosecute Google in the U.S. despite the recommendation by senior FTC staff that a prosecution be brought. Given the proximity to Google’s many fixers of Washington insider Beth Wilkinson, the outside lawyer who was mysteriously brought in to oversee the FTC’s investigation of Google rather than have that role fulfilled by FTC staff, Senator Lee no doubt has many things to investigate.
Here is the press release from the EC on the prosecution:
Commission sends Statement of Objections to Google on comparison shopping service; opens separate formal investigation on Android
Brussels, 15 April 2015
The European Commission has sent a Statement of Objections to Google alleging the company has abused its dominant position in the markets for general internet search services in the European Economic Area (EEA) by systematically favouring its own comparison shopping product in its general search results pages. The Commission’s preliminary view is that such conduct infringes EU antitrust rules because it stifles competition and harms consumers. Sending a Statement of Objections does not prejudge the outcome of the investigation.
The Commission has also formally opened a separate antitrust investigation into Google’s conduct as regards the mobile operating system Android. The investigation will focus on whether Google has entered into anti-competitive agreements or abused a possible dominant position in the field of operating systems, applications and services for smart mobile devices.
EU Commissioner in charge of competition policy Margrethe Vestager said: “The Commission’s objective is to apply EU antitrust rules to ensure that companies operating in Europe, wherever they may be based, do not artificially deny European consumers as wide a choice as possible or stifle innovation”.
“In the case of Google I am concerned that the company has given an unfair advantage to its own comparison shopping service, in breach of EU antitrust rules. Google now has the opportunity to convince the Commission to the contrary. However, if the investigation confirmed our concerns, Google would have to face the legal consequences and change the way it does business in Europe.”
“I have also launched a formal antitrust investigation of Google’s conduct concerning mobile operating systems, apps and services. Smartphones, tablets and similar devices play an increasing role in many people’s daily lives and I want to make sure the markets in this area can flourish without anticompetitive constraints imposed by any company.”
Comparison shopping products allow consumers to search for products on online shopping websites and compare prices between different vendors. The preliminary conclusion of the Commission’s investigation opened in November 2010 is that Google gives systematic favourable treatment to its comparison shopping product (currently called ‘Google Shopping’) in its general search results pages, e.g. by showing Google Shopping more prominently on the screen. It may therefore artificially divert traffic from rival comparison shopping services and hinder their ability to compete on the market. The Commission is concerned that users do not necessarily see the most relevant results in response to queries – this is to the detriment of consumers, and stifles innovation. The Commission’s preliminary view is that to remedy such conduct, Google should treat its own comparison shopping service and those of rivals in the same way. Google now has the opportunity to respond to the Commission’s allegations within ten weeks and to then seek a formal hearing. The Commission considers that overall, previous commitment proposals from Google were insufficient to address its competition concerns.
Further details of the Commission’s Statement of Objections on comparison shopping can be found here.
Since 2005, Google has led development of the Android mobile operating system. Android is an open-source system, meaning that it can be freely used and developed by anyone. The majority of smartphone and tablet manufacturers use the Android operating system in combination with a range of Google’s proprietary applications and services. These manufacturers enter into agreements with Google to obtain the right to install Google’s applications on their Android devices. The Commission’s in-depth investigation will focus on whether Google has breached EU antitrust rules by hindering the development and market access of rival mobile operating systems, applications and services to the detriment of consumers and developers of innovative services and products.
Further details of the Commission’s formal investigation of Google in relation to the Android mobile operating system can be found here.
The Commission continues its ongoing formal investigation under EU antitrust rules of other aspects of Google’s behaviour in the EEA, including the favourable treatment by Google in its general search results of other specialised search services, and concerns with regard to copying of rivals’ web content (known as ‘scraping’), advertising exclusivity and undue restrictions on advertisers.
So you can see that this is actually two different antitrust actions–one is a “Statement of Objections” which is an actual prosecution of Google and the other is an announcement that the Commission has launched a new “formal antitrust investigation of Google’s conduct concerning mobile operating systems, apps and services.”
The timing of this prosecution and new investigation suggests that the Commission has an appetite for getting to the bottom of Google’s anticompetitive behavior in a serious way. This is particularly important since the U.S. clearly has no appetite for the same, and Senator Lee will hopefully find out why that is.
What it should say to artists is that the Commission has yet to take up IMPALA’s case. My hunch is that the Commission will look at the IMPALA complaint through a different lens now that the Commission is taking a serious look at Google.
It’s also important to realize that the head of the Commission’s competition authority changed at the end of last year. Google spent years slow walking the investigation through Mr. Almunia, the last competition chief. Mr. Almunia allowed Google to present an unprecedented three settlement proposals in what was apparently an attempt to run out the clock on Mr. Almunia’s term.
Unfortunately for Google, none of those proposals were acceptable to Mr. Almunia and he waived goodbye to his new friend Eric Schmidt with no points on the board for Google.
Here’s a tip that any high school football coach can tell you: If you’re going to run out the clock, be damn sure you win the game.
As we now know through the disclosures by the Wall Street Journal under Freedom of Information Act requests, both Ebay and Amazon had secretly complained to the Federal Trade Commission about Google, which makes the issues involved far more expansive than originally thought.
What happens now from an artist perspective?
–Many more big actors like Ebay and Amazon may come into the EC action as complainants.
–Other countries may decide to come forward now that the EC has shown the way and disclosed the seriousness of Google’s misbehavior.
–States in the United States may take a closer look at whether they have actions they can bring under state competition or unfair trade practices laws.
–IMPALA may receive a very fair hearing.
–Someone may join the EC case as a complainer based on Google abusing its monopoly power in favor of YouTube. Ever seen a video on an artist site listed in Google search results that wasn’t on YouTube?
Remember, the U.S. Senate Antitrust Subcommittee that Senator Lee now chairs previously investigated Google for almost the exact same reasons as Google is now being prosecuted by the Europeans. In fact, Senator Lee himself led a vigorous cross examination of Eric Schmidt on this very subject.
I have to believe Senator Lee feels entirely vindicated by the EC’s action. In fact, he may feel so vindicated that he holds a public hearing on the corruption questions swirling around Google and the FTC.
And that will be a good thing for artists. We’re a long way from YouTube treating artists with the respect that they deserve and we’re a long way from the government no longer being enamored by the crony capitalists like Google and their special interest lobby.
But it’s a step in the right direction and it shows why it’s a good idea for artists to keep an eye on what happens in other countries.