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Google Opens Up Search Ad Buys To Rivals With Little Hope Of Improvements

by Bill

Until now, Google has reserved spots on particular search times for itself, but now it has promised to open up bidding on those terms to rivals at the top of product search results in Europe. Google announced the change in response to a June ruling by the European Commission, which found in part that Google had systemically abused its dominance in search to gain competitive advantages. This is one of the three cases pending against Google in Europe that may lead to sweeping Antitrust regulatory action in the EU and beyond if Google fails to impress regulators with its remediation actions.

The June ruling by the commission ordered Google to pay €2.42 billion ($2.8 billion dollars) in fines, but analysts agree that one time expense is nothing compared to the longer term threat to their business model if regulators persist. For example, Paul Gallant, an analyst with Cowen, is quotes saying that Google is likely concerned that the order could also be applied to other verticals including travel and local search.

To strengthen its legal footing with EU regulators, Google also said Wednesday that Google Shopping (which is the core of the case) will start operating as a standalone unit in Europe, bidding against all companies for featured spots to help level the playing field, but experts and insiders are saying that change is far from being enough of a move to actually open up real competition.

As Maurice Stucke, a law professor and the cofounder of the Konkurrenz Group, explained, “Imagine if a company became a monopoly by burning down all the warehouses and factories of its rivals. If regulators instruct the company to stop burning things down, the monopoly will say, ‘Fine I can live with that. I promise not to burn down any more factories.” Yet clearly, that’s not a solution to the problem that persists.

It will be interesting to see which way these cases are resolved, with the balance of millions of search terms and billions or trillions of dollars at stake.

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