The Autorité de la concurrence orders interim measures against Google in neighbouring rights case

On 9 April 2020 the Autorité published its decision no. 20-MC-01 (currently available only in French, but there is a press release in English), on the requests for interim measures submitted by various unions of press publishers in France and Agence France-Presse (the “publishers”). The Autorité ordered Google (as a provisional measure and pending its decision on the merits) to enter in good faith negotiations with publishers on their remuneration for the reproduction of their copyright-protected content.

The facts

The dispute between publishers and Google arose from the implementation of Directive (EU) 2019/790 (the “Copyright Directive”) in France (with Law no. 2019-775 of 24 July 2019). France was the first Member State to transpose the Copyright Directive, which creates a new neighbouring right in favor of media publishers.

In response to the French law, Richard Gingras, Vice President of News at Google, notified publishers on 25th September 2019 via a blog post that “[w]hen the French law comes into force, we will not show preview content in France for a European news publication unless the publisher has taken steps to tell us that’s what they want.” Google made it clear it would not pay to reproduce publisher protected content.

In practice, publishers were given two choices: either grant Google a royalty-free license under the French law to reproduce their protected content (e.g., in the form of thumbnails or snippets in its SERPs) or grant no license. In the latter case Google would not display their content in its SERPs. As the Autorité notes (para. 102), the vast majority of publishers eventually authorized Google to display their protected content without any remuneration, while those that did not suffered significant traffic losses.

Importantly, the Autorité found there is a causal link between the display of protected content on Google’s SERPs and the Click-Through Rate (CTR) to such content (para. 111 et seq.). It also found there is a causal link between the CTR and the ranking of such content in Google’s algorithm. It thus concluded that the absence of protected content on Google’s SERPs exposes the publisher to a lower CTR and eventually, to a deterioration of its ranking on Google’s SERPs (para. 116). In turn, lower ranking translates to less traffic and revenue.

Legal analysis

The Autorité held that Google’s conduct was likely to constitute an exploitative abuse of Google’s dominant position in general search in breach of Article L. 420-2 of the Commercial Code and Article 102 TFEU. It examined Google’s conduct under three headings: (a) imposition of unfair trading conditions, (b) discrimination and (c) circumvention of the law. While still an interim measures decision, the legal analysis (the bulk of which concerns heading (a) above) is quite interesting.

At the heart of the Autorité’s reasoning lies the fact that Law no. 2019-775 of 24 July 2019 has as its objective to restore the balance of power existing between digital players and media operators by redefining the share of value in favor of the latter (see para. 77, but similar phrases are found across the entire decision). Against this background, it is not hard to see how the Autorité reached its (preliminary) conclusion.

Unfair trading conditions

The Autorité observed that Google had refused to enter into any negotiations with publishers over their protected content. Instead, Google terminated their pre-existing relations with an offer to maintain them but at zero price and without any possible discussions (para. 199). Google’s offer was more of a Hobson’s choice, as the alternative (no license) was non-existent. Each publisher faced a prisoner’s dilemma, knowing that if it did not grant Google a royalty-free license while other publishers did, then it would lose traffic (and revenue) to its rivals (para. 201). The situation in which Google’s conduct placed publishers could only result in zero remuneration (ibid).

The Autorité found that Google’s application of a “zero price” was unlikely to be “reasonable” within the meaning of United Brands (para. 203) and seemed contrary to the spirit of the law and the legislator’s explicit intention that the current distribution of value between digital players and publishers should be modified in favor of the latter (para. 205).

Google argued that it should not pay publishers as it drives traffic to them (this seems to be Google’s main argument for refusing to pay for protected content; see e.g., here) and in any event it does not obtain any meaningful economic benefit from the reproduction of publisher content. The Autorité dismissed these arguments as inadmissible, in that they questioned the choice made by the legislator in redefining the value sharing to the benefit of publishers (para. 207). In any event, it found that Google does obtain economic benefits when reproducing publisher content (paras. 209-216):

• Google benefits directly, through the display of ads in response to news-related queries.

• Google benefits indirectly, as the presence of news content attracts or retains users on its services and may encourage them to use Google Search for their other searches.

• On the other hand, publishers benefit only when traffic lands on their pages. However, in some cases Google snippets act as a substitute to the publisher’s content, to the effect that users stay on Google and do not visit the publisher’s property (para. 211). In that case, only Google benefits from the display of news content. But even when users visit publisher properties, Google benefit again as it is a major (if not the major) player in ad intermediation (and thus receives a share of the ad spend flowing to publishers).

As regards Google’s argument that there was no causal link between its alleged dominant position in general search and the imposition of unfair trading conditions on publishers, the Autorité found that Google is responsible for a very significant part of the traffic referred to publishers, and publishers cannot replace any traffic lost from Google with alternative traffic channels (paras. 222-233).

Discrimination

The Autorité held that Google’s blanket “zero price” approach applied across the board, i.e. regardless of the publisher, was likely to amount to a discrimination in breach of Article 102(c) TFEU (paras. 238-241).

Circumvention of the law

Relying on AstraZeneca, the Autorité observed that a dominant undertaking may breach Article 102 TFEU when, without formally violating a law, it defeats its purpose without objective justification (para. 242).

In the present case, it held that Google’s “zero price” approach was likely to run contrary to the spirit of the law, by elevating the possibility offered by the law of concluding royalty-free licenses to a general principle of no remuneration (para. 243).

Interestingly, the Autorité noted that in fact, Google’s conduct allowed it to obtain even more advantageous conditions than before the entry into force of the French law. The new “max snippet” tag chosen by the vast majority of publishers enabled Google to reproduce their content without any character limit – while previously Google applied (unilaterally) a limit of around 300 characters (para. 245).

Objective justification

Google raised three objective justifications:

• First, Google contended that in order to safeguard the neutrality of its search engine, it never pays to index content. The Autorité dismissed this as Agence France Press had concluded licensing agreements with Google in the past (para. 257). In addition, Google did not provide any evidence of not being able to safeguard its neutrality while remunerating publishers for reproducing their protected content (para. 259).

• Second, Google argued that its policy change was a “natural, prudent and reasonable approach” considering the new law and the need to protect itself from liability for copyright infringement. The Autorité disagreed, noting that placing publishers in a situation where the only possible balance was to give away a substantial part of their IP for free could not be considered as “prudent” (para. 260). Instead, Google could have entered into good faith negotiations with publishers (para. 262).

• Thirdly, Google drew a parallel with the Bundeskartellamt’s decision in 2015 with regards to a complaint by VG Media, which analyzed Google’s conduct after the latter refused to implement an ancillary IP right introduced in favor of publishers by German legislation in 2013. The Autorité held this analogy irrelevant, since the Bundeskartellamt’s decision was limited to its specific legal and factual context.

Concluding remarks

Is the Autorité’s decision groundbreaking? Does it turn competition law upside down as some may fear? Not really. The only remarkable in the decision is the Autorité’s willingness to give effect to a provision of the TFEU which has largely gone unnoticed by pursuing an exploitative theory of harm (note that in December 2019 the Autorité handed over a EUR 150 million fine against Google for exploiting Google Ads users through opaque terms and conditions that were applied in a non-objective and discriminatory manner).

At the heart of the Autorité’s decision lies the objective of the French law to redefine the value sharing between digital players and publishers. What Google did was to place publishers in a catch-22 situation: either grant it a royalty-free license or else lose traffic and revenue. As expected, the vast majority of publishers granted a royalty-free license to avoid being “indirectly” penalized in Google’s SERPs. To cut a long story short, Google used its dominance in general search and its role as an irreplaceable source of traffic for publishers to force them to grant a royalty-free license and thus frustrate the objective of the law. Is it that surprising that this was regarded as unfair within the meaning of Article 102(a) TFEU or as circumvention of the law?

Keep calm. The foundations of competition law are not shaking.

(Image source: Flipweb)