Google (again) and advertising on the web. Comment on the European Commission Decision of 20th March 2019

Icon-Symbol-Reload-Repeat-Refresh-Instagram-1882329

 by Pedro Madeira Froufe, Editor

Much of the creation of wealth through the digital economy (individualized advertising, anticipation of reactions from consumers to new products, etc.) depends on the knowledge of our tastes and ways of life, knowledge of our profiles and even the knowledge of how our brain reacts to advertising messages (that’s what “neuromarketing” is about) [1]. And of course, the scale counts! There is a kind of return of “economies of scale” in the field of advertising services. That is, there is a large / global business communication that is simultaneously individualized, as, as a result of the knowledge and algorithmic use of personal data of each of us, can adapt and address each group (increasingly small) of consumers, with messages tendentially personalized.
Individualized advertising, enhanced by the use of algorithms, is one of the activities that has grown the most and has created the propulsion of wealth (directly and indirectly) in the digital era.

It is in this context that we should place the last “Google decision” of the European Commission, dated March 20, 2019, regarding the use of the Google / AdSense for Search platform to raise and broker advertising associated with online surveys. The Commission has, in effect, decided to impose a financial penalty on Google and Alphabet Inc. (the parent company of Google LLC, formerly Google Inc.) amounting to EUR 1,490,000 for abuse of a dominant position (infringement of Article 102 of the TFEU).

It is important to briefly describe the relevant and motivating factuality of the decision under consideration in the European Commission press release of 20 March 2019[2].

“Websites such as newspaper websites, blogs or travel sites aggregators often have a search function embedded. When a user searches using this search function, the website delivers both search results and search adverts, which appear alongside the search result. Through AdSense for Search, Google provides these search adverts to owners of “publisher” websites. Google is an intermediary, like an advertising broker, between advertisers and website owners that want to profit from the space around their search results pages. Therefore, AdSense for Search works as an online search advertising intermediation platform. Google was by far the strongest player in online search advertising intermediation in the European Economic Area (EEA), with a market share above 70% from 2006 to 2016. In 2016 Google also held market shares generally above 90% in the national markets for general search and above 75% in most of the national markets for online search advertising, where it is present with its flagship product, the Google search engine, which provides search results to consumers. It is not possible for competitors in online search advertising such as Microsoft and Yahoo to sell advertising space in Google’s own search engine results pages. Therefore, third-party websites represent an important entry point for these other suppliers of online search advertising intermediation services to grow their business and try to compete with Google”.

Initially (2006), Google began to include exclusivity clauses in the contracts it entered into with the promoters / publishers of websites that conducted such online searches, and as a result of that contractual practice, it was impossible for such publishers to place ads on competitors from Google. An exclusivity was contractually enforced regarding the placement of ads that favoured Google’s activity (in that relevant market).

Then, as of March 2009, “Google gradually began replacing the exclusivity clauses with so-called “Premium Placement” clauses. These required publishers to reserve the most profitable space on their search results pages for Google’s adverts and request a minimum number of Google adverts. As a result, Google’s competitors were prevented from placing their search adverts in the most visible and clicked on parts of the websites’ search results pages”.

And since 2009 Google has also included “clauses requiring publishers to seek written approval from Google before making changes to the way in which any rival adverts were displayed. This meant that Google could control how attractive, and therefore clicked on, competing search adverts could be”.

According to the European Commission, during that decade (2006 to 2016), Google began by contractually imposing an exclusive supply obligation that prevented its direct competitors in the advertising and brokering market from placing ads on the results pages of the most commercially attractive websites. Subsequently – and after having achieved a solidification of its position in the respective market – Google has introduced a strategy called ‘relaxed exclusivity’, designed to reserve the highest and most immediately visible positions on the websites for its own advertisements, while controlling , the activity (the ads) of its competitors.

This factual and behavioural framework from Google gave rise to the Commission’s decision which, in conclusion, found that “Google’s conduct harmed competition and consumers, and stifled innovation. Google’s rivals were unable to grow and offer alternative online search advertising intermediation services to those of Google. As a result, owners of websites had limited options for monetizing space on these websites and were forced to rely almost solely on Google”.

Furthermore, for the Commission, Google has not demonstrated that such conduct – the abovementioned exclusive contractual clauses, which were implemented – were necessary and proportionate to any objective of efficiency gains which could justify them.

As a result of this case – and, above all, of the position which the Court will eventually take, following the action brought by Google against that Commission decision – many points to be examined and many indications as to how the law of the European Union intends to set up the European digital space (the Digital Single Market). In this case, the Commission followed a classic and consolidated approach to the effectiveness of European competition law – in particular, the prohibition of abuse of a dominant position. To illustrate this, one of the aspects highlighted by the Commission itself is the special responsibility of companies in a dominant position in their relevant markets.

As the Commission points out, “Market dominance is, as such, not illegal under EU antitrust rules. However, dominant companies have a special responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in separate markets”. Such doctrine of special responsibility for market dominance has been asserted and elaborated by the Court of Justice, explicitly since 1983 in the Michelin I judgment (Case 322/81, in particular paragraph 57) and firmly practiced by the Commission. It is appropriate to recall the original wording of the understanding, drawn up in European case-law, of the special responsibility of undertakings in a dominant position: “A finding that an undertaking has a dominant position is not in itself a recrimination but simply means that, irrespective of the reasons for which it has such a dominant position, the undertaking concerned has a special responsibility not to allow its conduct to impair genuine undistorted competition on the common market”.

The doctrine of the dominant undertaking’s special responsibility turns out to be a rather pro-objective understanding of abuse – a view which has been repeatedly followed by the Court of Justice and by the Commission’s practice. According to the logic of that special responsibility arising from the mere fact that an undertaking occupies a dominant position in its market, a kind of general duty of competitive conduct is imposed by means of methods or normal means of competition. Regardless of what is understood, in concrete situations, by normal means of competition, this position is, in fact, part of an eminently structuralist worldview, based on the traditional paradigm “Structure – Behaviour – Result”. It also reflects the influence of an ordoliberal conception and its postulate on the desirability of a globally balanced, pre-structured, competitive order – precisely because it is precisely the maintenance of such a structure (a competitive structure) that emerges as a legal right to protect.

Of course, one of the problems that arises in connection with this jurisprudential doctrine is precisely what, in each concrete situation, can be understood as a commercial means or behaviour conforming to the norms of normal competition,
that is to say, the densification (tendentially casuistic) of “normal methods or means of competition”, in force in its relevant market .   In this case, the discussion on this point, (and, above all, what can be understood, in casu, as the “normal means of competition”) and considering the context of the digital economy and the relevant market in question, seems to me to generate some expectation, insofar as the position that the Court adopts will also be indicative of its worldview on the application of EU competition law in the context of markets and the digital economy.

[1] MARTIM LINDSTROM, Buy-Ology. Truth and lies about why we buy, 2010.

[2] European Commission, Press Release of 20 March 2019, available on: http://europa.eu/rapid/press-release_IP-19-1770_en.htm.

 

Pictures credits: Reload… by Max Pixel.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s