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Google Monopoly and Anti Trust Law

The market for search engines tends to be monopolistic. The latest figures show that Google's share of the search engine marketing in the USA continues to grow at the expense of its main competitors, Yahoo and MSN. In March 2006 Google obtained a market share of 42,7 % (according to ComScore). Furthermore, some analysts are predicting continued big gains for Google in the USA: “Google could eventually reach 70 % market share!” Well, in some countries that’s not the future, but the present. In Germany, Google already has a market share of about 70-85 %!

We have seen a lot of lawsuits dealing with search engines in the last few years. Most of them involved trademark, copyright or competition law based claims. Courts had to decide whether deep linking is a copyright violation, whether links to infringing content can lead to secondary liability of the link-provider, whether the use of trademarked words as keywords for ads is permissible, etc. But so far there has been very little discussion about search engines and antitrust law. This is about to change. Earlier this year, Google has removed BMW's German web site from its index for violating Google's guidelines against trying to manipulate search results. Shortly after removing its doorway pages (Doorway pages can be used to trick search engines into sending users to web sites that are not directly related to the search terms they are searching for), Google has reincluded in its index. But the question remains: Is it possible, that under certain circumstances, search engines might be obliged to include web sites in their index? This topic has been discussed at the Search Engine Strategies in Munich 2006 and has become even more relevant with a lawsuit brought by against Google. KinderStart charges that Google without warning in March 2005 penalized the site in its search rankings, sparking a "cataclysmic" 70 percent fall in its audience—and a resulting 80 percent decline in revenue. The suit filed in a U.S. District Court in San Jose, California, accuses Google of using its monopoly position to harm competitors by downgrading search-result rankings without reason or warning.

A study by Dr. Stephan Ott, published in the German internet law journal MMR (“Multimedia und Recht”), examines the legal restrictions, search engines with dominant market power face in Germany. Although the legal analysis is only based on German antitrust law, many arguments might be valid within other legal frameworks as well.

Under the German Restraints of Competition Act (GWB), a company with dominant market power may not inappropriately obstruct or unreasonably discriminate against other companies in business dealings which are normally open to other companies. Under this rule, Google might be obliged to include a web site in its index. If one company’s web site is indexed and its competitor’s web site is excluded, there is obviously a discrimination. But to have a valid claim the discriminating search engine must have a dominant market power. With a market share above 70% in Germany, one might argue that Google meets this criteria. Google on the other hand will probably claim it has powerful competitors with Yahoo and MSN. This might be true, but fact is: Google by far is the most widely used search engine in Germany and as its competitors are not focused primarily on search technology, their respective market shares in search engine usage have steadily fallen.

Another argument Google is likely to bring up in an antitrust lawsuit is that without an exchange of benefits there is no market and thus no discrimination. This might be the key element in lawsuits of this kind. No one really doubts that search engines like Google can drive a lot of traffic to a web site. But it is also true that there is usually no contract between Google and a web site operator. Google gets no payment, there is no real legal obligation. So why should antitrust law be applicable in such a situation after all? I believe the lawsuits answers this questions. Antitrust law wants to prevent discriminatory behavior by dominant companies. Because of its market share a dominant search engine has the power to ruin businesses. If a web site is not included in Google, almost no one will find it in Germany (“To exist is to be indexed by Google”). If your business completely depends on the goodwill of another company with dominant market power, you should be protected by law in some way.

So, in my opinion, dominant search engines are obliged to index web sites under German antitrust law. If they want to exclude or punish web sites they need a reason for this discrimination. One reason can be infringing content on a web site (search engines might risk liability if they don’t remove these sites from the search results). Another reason can be a violation of the search engine’s quality guidelines. So one might argue that a web site that uses doorway pages violates Google’s rules and can be removed. But this is only true in part. Imagine Google thinking that users don’t like the color magenta, so Google changes its guidelines and starts dropping sites which use magenta. The point is: A quality guideline must be reasonable in itself to justify a discrimination under antitrust law. A dominant search engine is not at liberty to change its guidelines at will. The lawsuit also mentions a Google practice called Sandbox: All new web sites have their ratings placed in a holding tank until such time is deemed appropriate before a ranking can commence. So the Sandbox is very similar to a new web site being placed on probation, and kept lower than expected in search results. This makes it nearly impossible for new companies to compete successfully online with older companies from the start. Is this discrimination justified under the aspect of fighting search engine spam? We will see how courts decide that matter!

Let us now take a last look at the BMW doorway issue: BMW argued that they created the doorway pages, because some items on its site were created using Java and so those items weren't being detected by search engines. So it is obvious that not all doorway page techniques are misleading users. They can also be designed to give a search engine an idea of what's on the page. Because one can hardly say, that web sites that use doorway pages are always evil, a dominant search engine could be prohibited by antitrust law to remove all of them. Google might argue it has to use filters to detect doorway pages. It is impossible to check every use and decide whether it is for describing the content of the page or for manipulatory purposes. This is true, but once a web site has been removed and the web site operator sends a reinclusion request stating the reasons for the use of the doorway pages, anti trust law might be the basis for a legal claim to get indexed again.

So to conclude, if a search engine is bound by antitrust law, it is no longer free in its decision which web sites it includes in its index. It has to rank all sites according to its algorithm, but can punish them for violations of its (reasonable) guidelines.

I believe this first legal analysis of the search engine market and antitrust law to be an interesting starting point for future discussions. Do we want lawyers /judges to decide the ranking of web sites? Probably not! Do we want search engines to be neutral and anti discriminatory? I do!

Google is said to act very slowly on reinclusion requests. Well, at least if you are not a big player like BMW. Wouldn’t it be nice, to have “all web sites treated equally”, no matter how important the company behind it?

In my opinion Google has not abused its monopoly in the Search King  or in the BMW case. But I do think Google has a monopoly, that is dangerous and needs to be watched. The legal ramifications of the monopoly have to be examined more closely.




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