France Says Google May Have Misused Its Search Advantage

From the New York Times (Dec 14th, 2010)

By ERIC PFANNER PARIS

THE French Competition Authority said Tuesday that Google might have abused its dominant position in the market for Internet search advertising, but proposed “targeted responses,” rather than new regulations, as a remedy.

The authority issued its findings after a government-commissioned analysis of the search advertising business, in which Google is estimated to hold a 90 percent share in France.

Complaints from Internet companies that say Google uses that strength unfairly have prompted a formal antitrust investigation by the European Commission in Brussels.

The French regulators said they had “identified possible exclusionary conduct intended to discourage, delay or eliminate competitors through procedures that do not consist of merit-based competition.”

They added that they had also found “possible operational abuses, whereby the search engine apparently imposes exorbitant conditions on its partners or customers, treats them in a discriminatory manner or refuses to guarantee a minimum degree of transparency in the contractual relations that it establishes with them.”

But the authority said existing competition laws already provided ways to curb any abuses by Google, citing a recent settlement between Google and a company called Navx, whose mapping technology supplies drivers with the location of radar speed traps on French roads.

In that case, the authority ordered Google to let Navx buy Google ads after the search engine had barred Navx from advertising.

While the French study has no direct bearing on the Europe’s investigation, Amelia Torres, a spokeswoman for Europe’s competition commissioner, Joaquín Almunia, said she welcomed the analysis.

“The French findings did not constitute an antitrust investigation,” Ms. Torres said, “and there is no overlap with the commission.”

The French authority said it considered Google’s position in search advertising to be “dominant,” reiterating a declaration it had made previously in relation to the Navx case. It cited not only Google’s market share but also factors like its power over the pricing of ads.

“In and of itself, this dominant position is not reprehensible: it results from a great deal of innovation, supported by significant and continuous investments,” the authority said.

Only the abusive exercise of such market power should be penalized, the authority said.
In the complaints in Europe, several Internet companies say Google manipulates its search engine to downgrade their Web sites, causing them to lose visitors and ad revenue, while elevating its own services instead.

Google has denied those allegations, and on Tuesday it disputed the notion that it exercised dominance, saying the authority should have taken a broader look at the online advertising business.

Google’s strength in search ads should be considered in the context of its smaller share of other formats, like online display and classified advertising, the company says. “If the price of search ads rises, advertisers can and do switch to other formats, both online and offline,” the company said in a statement. “That’s the sign of a competitive and dynamic industry.”

While the French authority recommended against additional regulations to ensure competition in search advertising, it said new rules might be needed to ensure that Google properly remunerated Web sites when it sold ads for them under its AdSense program.

Some French Web publishers have complained of a lack of transparency in AdSense, where revenue is shared by Google and the Web site where an ad appears.

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