The full scope of the inquiry is not clear yet, but it seems likely that the company’s practices involving search bias will be part of the probe.  The Financial Post article elaborated on the practices that are likely to be under review:

“For many businesses, ranking high in Google’s search engine is vital to success, since appearing higher increases a site’s chances of being visited by a user, which improves traffic and revenue potential.

“While Google has maintained that its search query algorithms are neutral, some businesses contend that Google prioritizes its own services — such as Google Maps or restaurant reviews — over  those of its competitors.”

The European Commission previously identified these practices as possible abuses of dominance last year, saying that “Google displays links to its own vertical search services differently than it does for links to competitors” and that “this may result in preferential treatment compared to those of competing services, which may be hurt as a consequence.” EC Vice President Joaquín Almunia expressed his concern about Google’s search manipulation to the Financial Times in January, saying, “My conviction is [Google] are diverting traffic.”

As the European Commission itself said in late April 2013, Google’s abuses create “potential harm to consumers in terms of reduced choice, quality and innovation.”

Canada’s investigation indicates that the concern and scrutiny over the company’s search and other practices are unlikely to slow down or be resolved any time soon.

Google proposal to label where it promotes its own products above generic search results and offer links to “three rival specialised search services close to its own services, in a place that is clearly visible to users.” The Commission explained its concern about Google’s search bias in a Q&A memo the Commission released along with Google’s proposal:

“In particular, the Commission is concerned that the way in which Google currently presents its web search results limits the ability of European users to find their way to specialised search services competing with Google which contain information relevant to their query. Many such services might be potentially very innovative and Google’s practices could therefore be limiting European consumers’ opportunities to benefit from such innovative services. At the same time, it is for users to decide whether they wish to visit these sites based on their merits.”

Thomas Vinje, EU counsel to FairSearch said the following about Google’s proposal (click for full statement):

Here’s one example from Google’s proposed commitments of how it would “change” the preferential display of Google’s own products, a key concern identified by the European Commission in its investigation.

“FairSearch applauds the Commission for laying out a clear and compelling case that Google is abusing its dominant position by giving its own products preferential treatment in search results. This is an important conclusion that must lead to meaningful remedies…

“We have always said that the best remedy for consumers and innovation would be to require Google to apply the same policy to search results for its own products as it does to all others.”

Other outside experts said Google’s proposal offers little to change the preferential treatment for its own products highlighted as a concern by the Commission. Search Engine Land contributing editor Greg Sterling observed:

“While the three competitive links are likely to drive some traffic to Google alternatives, from a user experience standpoint this is not the radical change I was imagining. In addition there’s apparently no requirement or constraint around where Google can put universal search results on the page. In other words, it can still show products, maps, flight search and so on, where it likes.”

In a separate piece, Sterling comes close to endorsing FairSearch’s call for Google to apply the same policy in ranking and displaying its products as it does all other sites in natural search results:

“One suggestion made by a third party was that Google’s ‘verticals’ be subject to the same algorithm as its content-publisher competitors. While that would negatively impact Google’s vision of its user experience (and would have profound implications for Google Now and mobile search results) that’s a better approach than the ‘top three box’ currently being proposed.”

Meanwhile, Danny Sullivan, editor of Search Engine Land, tweeted a picture of how Google already displays information from rivals on stock ticker queries.

Mockup of how Google may show links to rivals under EU settlement. Oh, wait, it already does this twitter.com/dannysullivan/…

— Danny Sullivan (@dannysullivan) April 25, 2013

Other commentators picked up on the same point, expressing disappointment in Google’s proposal. John Simpson of Consumer Watchdog’s Inside Google wrote:

“The bad news is that instead of requiring Google to change its algorithm and treat all services the same, the deal will apparently allow Google to continue favoring its own services in search results so long as it labels them as its own … Another problem with the deal is that it doesn’t seem to do anything to rectify the damage to the market that Google has already wreaked.”

BEUC The European Consumer Orgainisation echoed that view in a statement:

“Labelling results will do little or indeed nothing to prevent Google from manipulating search results and discriminating against competing services. It may even shepherd consumers towards clicking on Google services now highlighted in a frame. Labelling should not be the sole solution…

“The proposal to display links to three rival specialised services raises the natural question of who decides the promotional criteria. If that is Google, it leaves too much discretion in their lap while most importantly, not solving the problem of non-discriminatory choices for consumers.”

Shivaun Raff, co-founder of the UK vertical search company Foundem, a FairSearch member and one of the original complainants to the EC in spring 2010, told The Guardian:

“The only foolproof way to tackle abusive practices is to end them. Ultimately, the only way to end Google’s search manipulation practices and restore a level-playing field is to ensure that Google holds all services, including its own, to exactly the same standards, using exactly the same crawling, indexing, ranking, display, and penalty algorithms.”

In a piece entitled, “Google’s Entirely Trivial Settlement With The European Commission,” Forbes contributor Tim Worstall wrote:

“These terms are essentially trivial: amounting to little more than an admonition to play nice with the other boys and girls in the sand pit … So the great question becomes well, why have we had so much gnashing of teeth and a’wailing to end up with such a damp squib of a result?”

Ed Barton, an analyst at Strategy Analytics, told Bloomberg:

 “I don’t think this is a particularly significant gesture … It doesn’t impose any changes on Google’s core search algorithm, which is the most important aspect, just the presentation of the results.”

FairSearch plans to study the proposal in detail and offer an empirical analysis based on actual tests on the effectiveness of Google’s proposals. Early indications from other observers are that it’s not yet clear that Google’s proposal will bring meaningful changes to Google’s abuse of dominance.

Thomas Vinje, counsel and spokesman for FairSearch Europe, issued the following statement:

“FairSearch applauds the Commission for laying out a clear and compelling case that Google is abusing its dominant position by giving its own products preferential treatment in search results. This is an important conclusion that must lead to meaningful remedies.

We have always said that the best remedy for consumers and innovation would be to require Google to apply the same policy to search results for its own products as it does to all others.

However, Google’s proposed commitments appear to fall short of ending the preferential treatment at the heart of the Commission’s case based on formal complaints from 17 companies. Google’s own screen shots in its proposal (see p. 30) show it seeks approval to continue preferential treatment for its own products.

We will study the proposal in detail and offer an empirical analysis based on actual tests.”

The most important remedy to Google’s abuse of dominance is to require the search monopoly, which controls 94 percent of the market in Europe, to subject its own products and services to the same policy it uses to rank and display all other Websites.

Since it has taken a year to extract a final proposal from Google, FairSearch believes the ‘market test’ should last three months to ensure that interested parties have enough time to carefully provide the European Commission with their expertise on the effectiveness of Google’s proposal. As we have said, we will comment on Google’s proposed remedies after the Commission shares them.

European Commission Vice President Joaquin Almunia has set a high bar that any proposal from Google must meet to pre-empt formal proceedings against the company, including:

1. Will it end Google’s diversion of traffic away from other sites through preferential treatment for Google’s own properties?
2. Will it swiftly restore consumers’ access to a truly competitive marketplace for search and related online services?
3. Will an independent third party be able to verify that Google is not circumventing its own proposed commitments?

The members of FairSearch plan to study the effects of Google’s proposal, and call on Google to release any test results it has provided the Commission to show how its proposal will fix the abuses of dominance the Commission’s own investigation revealed.

Applying a real ‘market test’ to Google’s proposal is an important step to ensuring that the Commission’s long history of leadership in international antitrust enforcement continues for many years to come.

FairSearch.org is an international coalition of 17 online search and technology businesses united to promote economic growth, innovation and choice across the Internet ecosystem by fostering and defending competition in online and mobile search. We believe in enforcement of existing laws to prevent anticompetitive behavior that harms consumers.

The FairSearch.org coalition’s members are: adMarketplace; Allegro Group; Buscapé Company; Expedia Inc., and its brands Expedia.com and Hotwire; TheFind; Foundem; the Travel Technology Association; KAYAK, and its brand SideStep; Level…com; Microsoft; Nokia; Oracle; ShopCity.com; TripAdvisor; and Twenga.

Additionally, the newly installed chairwoman said that while Google’s manipulation of search results to favor its own products harmed competitors, it is ultimately pro-competitive.

On Tuesday, FTC Chairwoman Edith Ramirez testified before the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights on recent antitrust cases. Sen. Mike Lee, the Ranking Republican of the subcommittee, pressed Ramirez on the findings of the FTC regarding Google’s manipulation of search results. One exchange was particularly interesting, yet puzzling:

Lee: “Chairwoman Ramirez, the commission found evidence that Google biases its search results against websites that compete with Google’s secondary offerings, but ultimately concluded that because the display of its own content would plausibly be viewed as an overall improvement of Google’s search product, the conduct was not anti-competitive. Can you help me understand what standard the commission used in reaching this conclusion, because obviously circumstances of innovation don’t automatically overcome or override evidence of competitive harm?”

Ramirez: “Senator, in my view the pertinent standard that governs product improvements is the standard that was applied by the D.C. Circuit in the Microsoft case. I want to clarify that what we found was the design changes were, in fact, pro-competitive changes designed to improve the overall search experience for the user. And that pro-competitive justification was supported by ample evidence, even though it also had the impact of negatively impacting rivals.”

So apparently Google’s evidence of adding YouTube videos and other Google services at the top of search results is competitive even though it, in many cases, that leads to less relevant results and fewer choices for consumers. This anti-competitive practice also allows Google to fuel its online advertising juggernaut, by diverting more traffic to its properties, which enables the company to sell more ads. And what about those small Internet entrepreneurs, such Tim Carter of AsktheBuilder.com or John Pike of GlobalSecurity.org, both of whom saw traffic to their sites fall by half after Google made these so-called pro-competitive changes?

Competition is propelled by more competitors, both small and large, fighting for consumers. Having one company, Google, controlling 78% of all U.S. Internet searches and diverting all that traffic to its properties, and away from competitors, is simply not pro-competitive.

The hollowness of the FTC’s decision in the Google case, which editorial writers at The New York Times and Bloomberg eloquently wrote about at the time of the decision, seems to not be lost on Lee who asked William Baer, head of the Department of Justice’s antitrust division, how future evidence against Google would be handled. According to a Bloomberg report of the antitrust hearing, Baer hasn’t ruled out a new probe of Google if new allegations arise.

At Tuesday’s hearing, Ramirez also responded to a series of Lee questions on the FTC’s acceptance of Google’s voluntary agreements. At the time of the settlement, the voluntary agreement did not receive a majority of the commissioners’ support, Politico Pro reported, and then-commissioner J. Thomas Rosch vocally opposed that arrangement because it established bad precedent. Politico reported:

“But new FTC Chairwoman Edith Ramirez reiterated her position that the voluntary strategy wasn’t the proper procedure — and said the Google case wouldn’t change commission practices going forward. ‘That matter should not be considered precedent. When there is a majority of commissioners who find that there’s been a violation, any remedy should be embodied in a formal consent order. That’s what happened before the Google matter and that’s what’s going to continue to happen following the Google matter.’”

Ramirez added that Google made the voluntary commitments and she expects the company to fulfill them. If not, she added, the commission will look to take “appropriate action.”

We certainly hope so. And if history is an indicator, Google’s history of evading and not cooperating with investigations and legal rulings worldwide might mean the FTC or the DOJ will have to take more enforceable actions against Google’s abuse of dominance sooner rather than later.

Speakers included Matt Reilly, U.S. counsel for FairSearch, and the former Assistant Director of the FTC Bureau of Competition (click for video of Matt’s remarks, also embedded below); Gary Reback, an attorney who represented several Silicon Valley firms in the FTC’s investigation (click for video of Gary’s remarks, or find embedded below); Seth Bloom, former General Counsel of the Senate Antitrust Subcommittee (click for video of Seth’s remarks, which are embedded below); and Jenni Lukander, Head of Competition & Antitrust law, Nokia, a FairSearch member (click for video of Jenni’s remarks, which are embedded below).

Panelists offered their views on the FTC’s decision in January 2013 to close its antitrust investigation of Google’s business without taking action on the core question of Google’s search bias. They also reviewed expectations that U.S. and EU antitrust authorities are likely to continue examining Google’s desktop search advertising business, and emerging questions about Google’s mobile practices, for many years to come.

Matt Reilly, FairSearch’s U.S. counsel and former assistant director of the FTC Bureau of Competition

Reilly moderated the session and opened with an overview of the Google case. Reilly expressed optimism that the European Commission and other U.S. antitrust enforcers will step in to end Google’s search bias so that consumers, not Google, will be empowered to pick winners and losers in the online marketplace:

“This is an area that, again, we think is critically important for choice [and] innovation going forward; to making sure there’s a level playing [field] so no firm can dictate who the winners and losers are,” Reilly said. “It’s really important and antitrust agencies around the world have a unique opportunity to do something. We expect the battle to continue and hopefully it’s the second inning of a nine inning game and we expect to score some runs in the later innings.”

Gary Reback, attorney who represented Silicon Valley firms in the FTC’s investigation

Gary Reback discussed concerns that the FTC relied too much on Google’s own presentation of the effects of its search bias on consumers, and not enough on analyzing whether the changes made it harder for other innovators to reach consumers in the marketplace. He said the FTC’s analysis appeared to focus too much on standards from the Tyco case, and not enough on standards from the Microsoft case. He also expressed concerns about reports that the European Commission will accept a Google proposal to label its own search bias instead of forcing Google to stop favoring its own properties in results, outside of algorithmic (or ‘natural’) results.

Reback presented several slides of side-by-side comparisons of Google’s results that promoted its own products through search bias, with the same results without Google’s self-promotion, and said new research his firm has conducted showed that when you give consumers real choice, they will make a better, more informed decision about the results they select.

“If you give consumers choice, they will execute the choice. But if you just tell them something is bad and there’s no other choice then that’s not going to make any difference,” Reback said. “It’s like [approaching] someone in line at McDonald’s and you tell them to eat healthy. They’re not going to get out of line and go to a grocery store. Now if McDonald’s has healthy food, well that’s a big difference.”

Seth Bloom, the former general counsel of the Senate Antitrust Subcommittee

Bloom said the Senate panel looked hard at the impact of Google’s practices on future innovators when it held a hearing on “The Power of Google” in September 2011.

“Our concern, when we did this investigation on the Antitrust Subcommittee, when I was there, was to think about the next Yelp and to think about the new companies,” he said. “We sort of don’t know what we lose by having companies that find it very difficult to make it to the top of search rankings. But I think that’s something that one has to be cognizant of and I didn’t see a lot of that, or frankly any of that, in the FTC’s public statements.”

Bloom also noted that the new FairSearch complaint on mobile is very interesting, because the FTC did not review Google’s conduct in mobile. He said it’s very possible that the Justice Department’s antitrust division under Bill Baer’s leadership would take up questions about Google’s anti-competitive conduct in mobile and other aspects of its business during his tenure.

Jenni Lukander, head of competition and antitrust law at Nokia Corp.

Meanwhile, Jenni Lukander, head of competition and antitrust law at Nokia Corp., walked the audience through the rationale behind Google’s predatory distribution of Android:

“If you make a multi-billion investment, such as Google has done with the Android operating system, why would you just give it away? Would you do that just to enable open competition? From a company [perspective] it doesn’t seem rational. I believe there must be more. So what is the more?” Lukander asked. “The key is to understand with Google’s Android strategy is the more [smartphone market share Google amasses], it gets [more] control over the choices of other companies and ultimately the control of consumers.”

Panelists also took questions from reporters from Mlex and PaRR who were attending the event.

As the panel discussion showed, the antitrust questions around Google’s business are far from settled, and are likely to continue to remain a focus of antitrust authorities around the world for a long time to come.

FairSearch to EU: Google’s Android A ‘Trojan Horse’ to Dominate Mobile Markets

Files Complaint to European Commission On Google’s Anti-Competitive Mobile Strategy

BRUSSELS – April 9, 2013 – FairSearch.org has filed a complaint with the European Commission laying out Google’s anti-competitive strategy to dominate the mobile marketplace and cement its control over consumer Internet data for online advertising as usage shifts to mobile.

Google’s Android is the dominant smartphone operating system, running in 70% of units shipped at the end of 2012, according to Strategy Analytics. Google also dominates mobile search advertising with 96% of the market, according to eMarketer. The complaint says Google uses deceptive conduct to lockout competition in mobile.

“Google is using its Android mobile operating system as a ‘Trojan Horse’ to deceive partners, monopolize the mobile marketplace, and control consumer data,” said Thomas Vinje, Brussels-based counsel to the FairSearch coalition. “We are asking the Commission to move quickly and decisively to protect competition and innovation in this critical market. Failure to act will only embolden Google to repeat its desktop abuses of dominance as consumers increasingly turn to a mobile platform dominated by Google’s Android operating system.”

FairSearch is an international coalition of 17 specialized search and technology companies whose members include Expedia, Microsoft, Nokia, Oracle, and TripAdvisor.

Google achieved its dominance in the smartphone operating system market by giving Android to device-makers for ‘free.’ But in reality, Android phone makers who want to include must-have Google apps such as Maps, YouTube or Play are required to pre-load an entire suite of Google mobile services and to give them prominent default placement on the phone, the complaint says. This disadvantages other providers, and puts Google’s Android in control of consumer data on a majority of smartphones shipped today.

Google’s predatory distribution of Android at below-cost makes it difficult for other providers of operating systems to recoup investments in competing with Google’s dominant mobile platform, the complaint says.

The FairSearch complaint comes at a crucial time in the Internet’s development, with users increasingly shifting their use from desktop to mobile platforms. Mobile Internet usage is expected to overtake desktop usage as soon as 2014, according to MindCommerce.

The European Commission is already considering how to remedy concerns that Google may be abusing its dominance in desktop search advertising, in particular Google’s search bias that favors its own services in search results.

Meanwhile, in April, six European data protection authorities began coordinating efforts to force Google to comply with EU privacy laws they say Google violated by consolidating its privacy policies. Google paid a record fine to the U.S. Federal Trade Commission in August 2012 to settle charges it gave misleading privacy promises to Safari Internet browser users.

“European consumers deserve a rigorous investigation of Google’s mobile practices, and real protections against further abuses by Google,” said Vinje. “Given Google’s track record of ignoring the law, mobile Internet users should be very concerned.”

According to stories in The Washington Post and PBS, Epstein’s hypothetical Kadoodle search engine found candidates fared far better when favorable links were promoted and unfavorable ones were demoted. Epstein’s core finding was that a dominant search engine, which is Google, could sway a close election. He told the Post:

“They have a tool far more powerful than an endorsement or a donation to affect the outcome,” Epstein said. “You have a tool for shaping government. . . . It’s a huge effect that’s basically undetectable.”

To PBS he added, “We’ve discovered that search engine rankings can be manipulated in ways that dramatically change voter preferences.”

For some time, FairSearch has been pointing out the very real perils of Google’s search manipulation practices, which harm Internet entrepreneurs every day. In January, the Federal Trade Commission took a pass on Google’s anti-competitive search bias practice though then FTC Chairman Jon Leibowitz pointed out that “some evidence suggested that Google was trying to eliminate competition” in its search practices.

The European Commission has identified this practice, among others, as a potential abuse of Google’s dominance in Internet search and search advertising, and is talking with Google about its willingness to end this practice. Europe’s top antitrust regulator, Joaquín Almunia, has set his sights on fixing Google’s anti-competitive search bias. “My conviction is [Google] are diverting traffic,” he told the Financial Times in January 2013.

The most recent example of Google’s search bias is the sudden demotion or disappearance in Google search results of direct links to apps on Apple’s iOS platform (The Next Web, TechCrunch and MacRumors all recently reported on this change). The Next Web’s reporter summed it up best:

“It’s not that the search results Google is showing for these queries aren’t relevant per se, but in my experience direct iTunes links were definitely more prominent up until now, as they should be.

“What we’re getting now is a lot of links to reviews site and alternative app marketplaces such as Softonic and CNET/Download.com, YouTube videos, news items and images. Links to iTunes are often buried.”

So while Google could hypothetically steer a close election, in reality the search giant has no issue diverting search queries such as “Kindle iPad” to its own services. In other words, the threat to our political process is very real, yet theoretical, while manipulation of Google search results for anti-competitive reasons is reality that Internet companies and services live with every day.

The gulf between Google users’ perceptions and the reality is “troubling,” Epstein writes, because Google’s methodology for getting consumers to trade search for their valuable consumer data is “inherently deceitful” because the user has “no conscious awareness that he is being observed.” In fact, “he is also most likely unaware that by setting up any sort of Google account – or even just by using Google’s search engine – he is agreeing to” allow Google to keep and analyze anything he does online.

“From a business perspective, this method of collecting valuable information is brilliant. It’s a sleight of hand routine with a new twist: consumers are grateful for the experience they’re having while their pockets are being picked,” Epstein says.

So, ultimately, what is your impression of Google? Information company or “a massive advertising agency that spies on consumers”? After all, as Epstein closes out his article, “It’s all a matter of perception.”

On March 22, BEUC, a consortium of 39 national consumer organizations from thirty European countries, issued a six-page paper on the remedies that should be adopted to resolve Google’s anti-competitive practices in the European Commission investigation. The overarching principle of any remedy, the group said, revolves around the need for Google’s search results to be “even-handed.” “It must hold all services, including its own, to exactly the same standards, using exactly the same crawling, indexing, ranking, display and penalty algorithms.”

BEUC made the following recommendation:

“Google must use an objective, non-discriminatory mechanism to rank and display all search results, including any links to Google products. This has to be combined with other behavioural remedies and an effective monitoring and enforcement mechanism on the part of the European Commission.”

The consumer group also said that “Google must clearly and conspicuously label its own content or services and should be prohibited from using enhanced display formats for its own services,” referring to Google’s search bias, which promotes Google products ahead of other sites. However, BEUC said, “simply requiring Google to label its own vertical search services would not prevent the company from manipulating search results and discriminating against competing services.” This was the first of four Google practices European Commission Vice President Joaquín Almunia listed in May 2012 when he identified potential legal concerns his investigation has uncovered.

BEUC said Google should not be permitted to enter exclusive advertising contracts, and that the European Commission should consider structural remedies to eliminate Google’s conflict of interest in promoting its own sites over all others “given the substantial risk of repeated infringements due to Google’s structure and constant expansion of services and products.”

BEUC’s position is consistent with FairSearch’s recommendation on how to evaluate proposed remedies, especially in the call to end Google’s practice of manipulating search results in favour of its own products, and for taking the position that labelling Google’s bias with no other measures would not fix the harms it creates.

Google submitted its final settlement offer to the Commission in January. The Commission signaled recently that a deal with Google may not be reached until the fall.

Thomas Vinje, Brussels-based counsel to FairSearch.org, recently said: “Google has had ample opportunity to come forward with serious proposals to end its abuses. The time to act is now. FairSearch would strongly support decisive action by the Commission.”