Vestager’s Google strategy faces its first big court test

Europe’s antitrust campaign against Google faces its first big public test in the EU courts.

The U.S. tech giant is appealing the 2017 decision by antitrust chief Margrethe Vestager to fine it €2.42 billion for abusing its dominance as a search engine to favor its own comparison shopping service over rivals.

From February 12-14, lawyers from both camps and 10 intervening parties — nine in support of the Commission and one on the side of Google — will cross swords over the legality of Vestager’s decision at the EU General Court in Luxembourg.

The tensions are high, and the parties are already sparring over how much speaking time each will get.

If the case goes Vestager’s way, it will strengthen her hand to take a tougher approach not only toward Google’s other specialized search services, including flights or restaurants, but also on similar ventures by other tech giants, such as Facebook’s Marketplace or Apple Music.

It could also give her more power to revive competition in comparison shopping, although that will mainly depend on a parallel procedure in which she assesses the “remedies” Google implemented in response to her decision.

“If I knew then what I know now, I would have been bolder,” Vestager said in December when asked how she would deal with the company if she were given a time machine.

A win for Vestager could also pave the way for damages cases as Google’s crushed rivals will seek compensation.

Conversely, the EU has a big problem if the judges in Luxembourg, who serve as the only check to the unrivaled powers of the EU’s antitrust czar, decide that she had been too bold. A victory for Google would be a major setback in Vestager’s Brussels reign, potentially driving her to make more use of her new powers to initiate legislation, rather than focus on antitrust cases.

The possibility of defeat didn’t stop Vestager from picking new fights with the Mountain View, California-based behemoth, though. In 2018, she fined Google another €4.34 billion over its Android operating system and in 2019 another €1.49 billion over online search advertising. Google appealed both cases. In early December, she opened a new front by closing in on its (and Facebook’s) data-gathering practices.

The charges

In 2008, Google started including a strip of pictures of products with prices on top of its general search results, with links redirecting users to its Google Shopping site (previously named “Froogle” and “Google Product Search”), which until then had failed to meet expectations.

The Commission decision cited a Google executive saying in 2007: “Froogle simply doesn’t work.”

As a result of the 2008 changes, Google’s own comparison shopping service was not only prominently featured at the top of the search results, but the modified algorithm also had the effect of demoting rivals. According to the EU, this occurred when Google was dominant in general search and therefore had a special responsibility not to undermine competition in neighboring services.

At that stage, the markets believed in the potential of Google’s rivals in comparison shopping. In 2004, Yahoo acquired Kelkoo for €475 million, in 2005 eBay bought Shopping.com for $634 million and Microsoft paid $486 million for Ciao in 2008.

But in 2020, these companies are practically worthless and Google makes billions with its service.

“This case is not only of great significance to the sites that were harmed by Google’s conduct, but also to the consumers who were left without the benefits of their innovation,” said Thomas Vinje, a lawyer who will be acting for Foundem, a rival site run by the British couple Shivaun and Adam Raff, who were the first in 2010 to file a formal antitrust complaint against Google.

The case could be a catalyst for Google’s rivals to claim damages in front of civil courts across Europe. If the courts in Luxembourg confirm the Commission decision, that will serve as unquestionable proof of Google’s wrongdoing. It is then up to the parties to prove any damages they suffered as a consequence.

The defense

Google will tell the judges it had the right to optimize the user experience of its shopping service and that the drop in rankings of the other sites was an unintended consequence of the change of its algorithm, people familiar with its defense said.

In its pleas and arguments published ahead of the hearing, the company said the Commission “misstated the facts,” and insisted that “Google launched grouped product results to improve quality, not to drive traffic to a Google comparison shopping service.”

Google’s lawyers are likely to attack the Commission on its evidence gathering, rather than letting the case revolve around the big principle.

In Google’s view, the Commission’s proof was cherry-picked around a subset of shopping sites whose traffic went down, disregarding sites for which that didn’t happen.

Google may attempt to requalify the case, saying the Commission viewed Google Search as an “essential facility” — a bottleneck for which users have no other option. Under competition law, such companies, for example ports, have a duty to provide others access to their infrastructure at a reasonable price.

Google in its arguments said the Commission “demands that Google supply aggregators with access to its product improvements, without meeting the requisite legal conditions.”

An executive from a rival comparison-shopping company feared for the outcome if the debate did shift to whether Brussels was regarding Google as an essential facility.

“If Google can convince the court that this is [an essential facility] case, then we believe the Commission will lose,” the executive said.

The impact

The Shopping case is a cornerstone case that could trigger a wider cascade of competition and court proceedings in Brussels and abroad.

It will offer a sign of how judges view Vestager’s strategy to curtail how internet platforms conquer a range of industries moving online.

The Danish commissioner in 2015 chose to take the Google Shopping case forward, ahead of a host of other complaints against the search engine, from hotel and flight booking services to publishers of news and images.

The theory of platforms leveraging their dominance in a core activity to conquer other services also underpins Vestager’s (preliminary) investigations into Amazon, Apple and Facebook.

A nod from the judges at the hearing could embolden her in that approach.

“The hearing may give an indication of what matters to the court, which could really motivate the Commission to take on these other cases,” said Thomas Höppner, a lawyer who will represent three complainants (including comparison shopping site Visual Meta, a subsidiary of POLITICO Europe’s co-owner Axel Springer).

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The remedies

Arguably more important than the fine was Vestager’s 2017 order on Google to give rival shopping services equal treatment — without many further specifications.

Google devised an auction mechanism in which rivals could bid to appear in its prominently featured shopping boxes. But many sites remain unhappy.

“The remedy is not fit for purpose and doesn’t solve Google’s abuse. It’s pretty much rubbish compared to where we were — and should have been — if not for the abuse,” Kelkoo CEO Richard Stables said.

After over two years of monitoring Google’s proposed remedy, Vestager seems to be increasingly sympathetic to the complainants. “We still do not see much traffic for rival competitors when it comes to shopping comparison,” she told the Lisbon Web Summit in November.

Even if Vestager’s original decision is confirmed in Luxembourg, the effectiveness of her policies — how her decisions can really bring back competition — are more related to the outcome of the remedies process.

Several rival lawyers said that any signs of court support could embolden Vestager to issue a non-compliance fine that could again run in the billions — or to fire new cases at Google in services such as local search or jobs.

If the court procedures or the remedy process fail to produce the results she hoped for, Vestager could under her new powers initiate legislation to ban platforms from favoring their own services.

Mark Scott contributed reporting.

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