While the European Commission has often been hailed as the world’s fiercest antitrust enforcer for hanging down two major antitrust decisions against Google, i.e. the so-called Shopping and Android decisions, which were accompanied by hefty fines, the reality is that the companies harmed by Google’s behaviour are highly critical of these decisions given their lack of teeth. On 27 October 2020, five search engines competing with Google in Europe wrote an open letter to Commissioner Vestager in which they state they “are deeply dissatisfied with the so-called remedy created by Google [in the context of the Android case] to address the adverse effects of its anticompetitive conduct.” More recently, on 12 November 2020, a coalition of 135 companies and 30 trade associations offering services in verticals including travel, accommodation and jobs wrote another open letter to Commissioner Vestager to urge immediate action against Google considering that the Shopping decision “did not lead to Google changing anything meaningful.” In short, the companies that have suffered harm as a result of Google’s anticompetitive behaviour seem to have lost patience. While most of them support the Commission’s planned Digital Markets Act, they probably realise it will take several years before it is adopted and implemented, hence they ask for a solution now.
There are two main problems with the Commission’s Shopping and Android decisions.
First, large fines are ineffective when they are imposed on extremely wealthy companies. While it is clear that the fines imposed by the Commission are large (€ 2.42 billion in the Shopping case and € 4.34 billion in the Android case), the truth of the matter is that they are unlikely to deter Google considering the large amounts of cash it has in hand. In fact, the Commission seems to be enforcing a kind of “abuser pays principle,” whereby those dominant firms abusing their market power have to simply pay for that abuse. The problem with this approach is that fines may be seen by dominant firms as merely a cost of doing business, hence they do nothing to restore competition. In the grand scheme of things, paying several billion euros in fines may still be a good deal if the abusive conducts for which you are condemned allowed you to cement your market power in highly lucrative markets.
Second, the Commission has effectively subcontracted the elaboration of the remedies needed to restore competition to Google, a hardly obvious candidate for such a task. In the Shopping case, the Commission decision required Google “to bring the infringement established by this Decision effectively to an end and henceforth refrain from any measure that has the same or an equivalent object or effect” (paragraph 697), adding that “as there is more than one way in conformity with the Treaty of bringing that infringement effectively to an end, it is for Google and Alphabet to choose between those various ways” (paragraph 697). In the Android case, the decision required Google to bring its conduct consisting in tying/imposition of supplementary obligations to an end, as well as to “refrain from granting payments to OEMs and MNOs on condition that they pre-install no competing general search service on any device within an agreed portfolio” and “refrain from adopting any practice or measure having an equivalent object or effect.”
In both cases, Google proposed “pay-to-play” remedies based on auctions. In the Shopping case, the remedy involves the possibility for rival comparison shopping services to bid for placement in Product Listing Ads (PLAs). But while the Commission has found the results of this remedy “encouraging,” rival comparison shopping services disagree, pointing that according to a recent study analysing 10.5 billion clicks, less than 1 per cent of traffic through Google Shopping is currently being directed to rival comparison shopping sites. In the Android case, Google set up a recurring auction model, offering competing search engines the possibility to bid for several spots in each EU country to be a part of a preference menu. But here again, Google’s rivals are unhappy with the remedy, which they argue has been designed by Google to make money rather than comply with the Commission’s decision. In any event, the market is still largely dominated by Google and it cannot be said that the Android decision has had much of an impact on Google’s market position.
This blog post does not aim to provide a detailed assessment of the merits of the remedies offered by Google in response to the Commission decisions as this has been done elsewhere (see, for instance, here), but it is clear that 3.5 years after the adoption of the Shopping decision and almost 2.5 years after the adoption of the Android decision, these remedies do not appear to have resolved the competition concerns identified and to have restored competition. While Commissioner Vestager has often been hailed as the world’s toughest enforcer of competition rules in the digital space, she is now in a difficult situation with a growing number of companies and associations asking her to take a tougher line on Google.
One question is whether the Commission has exhausted its resources to force Google comply with its decisions. In my view, the answer is no. In the Microsoft case, the Commission did not hesitate to apply large daily penalty payments that lasted as long as it did not consider that Microsoft complied with its 2004 decision (in the end these periodic penalty payments ending up costing Microsoft over €1 billion). Even for companies with deep pockets, periodic penalty payments hurt as they are open ended (i.e., few companies can indeed sustain payments of several millions of euros a day indefinitely, hence there may be a stage where compliance must be ensured). Similarly, the Commission could open new proceedings on the grounds that its Shopping and Android decisions have not been complied with, which would expose Google to further sanctions. Thus, there are still some tools that the Commission could use to ensure compliance with its decisions. As to the complainants, given their state of exasperation, they could decide to go nuclear and start proceedings against the Commission for failure to act.
Another question is whether behavioural remedies of the type that have been offered by Google so far to comply with the Commission decisions will be able to satisfactorily restore competition in the markets concerned. I am not optimistic because these remedies do very little, if anything, to restore competition; this is not surprising since these decisions essentially obliged Google to no longer pursue its anticompetitive course of conduct going forward, while still being allowed to enjoy the benefit of the anticompetitive outcomes (in terms of reduced competition) resulting from this course of conduct. In any event, even in the presence of well-designed remedies, which would arguably aim at restoring competition, restoration of competition may be extremely hard in markets where the dominant firm enjoys significant incumbency advantages.
While structural remedies are usually seen as a last resort, we may have reached a point where they should be considered. In the context of the Shopping case, the advantage of a structural remedy is that it might not only solve the problems faced by rival comparison shopping services, but also those encountered by companies competing against other Google verticals. By focusing on comparison shopping services, the Commission may have made its investigation into Google easier, but it also placed itself in a nasty corner, in that it failed to provide a solution to the multitude of digital service providers that are also victims of Google’s self-preferencing. Thus, even a behavioural remedy that would perfectly address the needs of rival comparison shopping websites (assuming it can be found) would still likely do little to address the problems faced by these other digital service providers. As the development and implementation of a wide range of narrowly tailored vertical-specific remedies cannot be envisaged, a structural remedy is probably needed.
Some may, of course, argue that in the end the right approach may be to regulate Google and other digital gatekeepers through ex ante regulation. While we will soon know more about the scope and content of that regulation once the Commission’s proposal for a Digital Market Act is rendered public on 9 December 2020, even assuming that this legislation deals with issues such as self-preferencing, it will still take several years before it is adopted. Implementation will also remain a challenge given Google’s strategy of obfuscation. Thus, it would be odd to require Google’s rivals to wait for several additional years for a legislation – whose scope and content will remain uncertain for several years while it goes through the EU legislative pipeline – to remedy Google’s breaches of competition law.