By Natalia Drozdiak
BRUSSELS -- Google's smaller rivals see a lifeline in the
European Union's decision to fine the Alphabet Inc. company EUR2.4
billion ($2.7 billion) and order the search giant to remake its
shopping service.
Companies like British comparison-shopping website Foundem.co.uk
blame lost business on Google and cheered the EU's ruling Tuesday,
which followed more than seven years of investigations.
Foundem in 2009 lodged the first formal complaint to the EU
about Google's behavior. In December it temporarily shut down due
to plunging traffic. Other smaller sites have consolidated to
survive after losing hundreds of employees.
The EU decision said Google manipulates its search results to
favor its own services and penalize those of rivals. Competitors
including Foundem and Kelkoo.com Ltd., which rely on traffic from
Google, say the manipulation caused catastrophic web-traffic
losses.
Analysis by the EU found that Google's actions, some starting in
2004, led to what the EU said was a 45-fold traffic increase for
Google in the U.K. and a 35-fold increase in Germany, while certain
rivals saw sudden drops in traffic of 85% in the U.K. and up to 92%
in Germany.
Google promotes its comparison-shopping service in a box atop
broader search results, a practice the EU said was
self-serving.
Google disputed the EU's conclusions. Google General Counsel
Kent Walker said in a blog post Tuesday that its research shows
people prefer links that bring them directly to the products
they're looking for, instead of having to repeat searches on
another comparison-shopping website. Google has also previously
said some of the algorithm changes that may have hurt competitors
were introduced to target spam and websites with unoriginal
content.
Still, the EU gave Google 90 days to end any discriminatory
conduct and explain how it would implement the decision, or face
additional penalties of up to 5% of average daily global
revenue.
Competitors say they are confident changes to Google's behavior
will help shore up business. Google declined to comment for this
article.
"At the point where the commission's interventions restore a
level playing field, we are intending to relaunch our service,"
said Foundem Chief Executive Shivaun Raff.
Ms. Raff has previously faced criticism that she benefited
financially from the Google antitrust case. She was previously paid
as a special adviser to the anti-Google lobby group, Icomp, which
until recently had strong links to Microsoft Corp. Both Foundem and
Microsoft are no longer members of Icomp. Microsoft last year
ceased active involvement in the fight against Google in Brussels
after an agreement with the search giant to end their regulatory
disputes.
Google's Mr. Walker questioned his company's liability for
rivals' fates. While some sites have shrunk over the examined
period, "many sites...have grown in this period -- including
platforms like Amazon and eBay," he said in the blog post.
For several months after Foundem's 2009 complaint, it was alone
in alleging anticompetitive conduct by Google, Ms. Raff said.
Dozens of companies have since complained to the EU, both formally
and informally.
At a meeting in December 2014 with newly installed EU antitrust
commissioner Margrethe Vestager, Olivier Sichel, CEO of French
comparison-shopping company LeGuide Group, presented data showing a
drop of roughly 90% in visibility of unpaid search results in
France since 2011 for eight rival comparison-shopping sites.
"The company I run, LeGuide.com, may have taken wrong directions
as regards consumers' expectations, and thus be penalized by
Google, but how can you explain all our competitors suffered from
the same demotion?" Mr. Sichel said he asked Ms. Vestager at the
time. Kelkoo bought LeGuide last year.
On Tuesday, the EU said the sudden drops in traffic to the rival
websites it cited couldn't be explained by other factors. The EU
said it based its decision on documents from Google and other
market players, as well as on real-world data of Google search
results, traffic data and market surveys.
It remains unclear how Google will implement the order and
whether a redesign will return traffic -- and business -- to its
rivals.
Google could opt to scrap its shopping ads in Europe. More
likely, analysts said, Google will propose rebuilding the service.
EU regulators may require Google to retool the system to let
results from competing comparison-shopping sites be mixed with its
own and be as easy to click through as Google-hosted ads.
"How they fix that is crucial," said Kelkoo CEO Richard Stables.
The right remedies "would transform our business...I would stop
spending all my time trying to survive, cut costs and [instead] try
to innovate."
But Nicolas Petit, an antitrust professor at the University of
Liege, said consumers would lose out if Google simply dropped
image-rich search results.
Google's other search services, such as travel, maps and local
search, are also under the commission's scrutiny. Ms. Vestager said
Tuesday the shopping decision could serve as a precedent in the
other cases.
News Corp, owner of The Wall Street Journal, is an interested
third party in the shopping case, meaning it can participate in the
investigation. The company has also formally complained to the EU
about Google's handling of news articles in search results.
Other complainants say action in other search areas is urgent
too. Local search service Yelp Inc. says it has recently cut more
than 175 jobs in Europe -- almost its entire workforce there -- due
to Google's conduct.
Write to Natalia Drozdiak at natalia.drozdiak@wsj.com
(END) Dow Jones Newswires
June 28, 2017 15:58 ET (19:58 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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