Google Rivals Cheer EU Antitrust Ruling -- But Will It Help?

By Natalia Drozdiak Features Dow Jones Newswires

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.

Continue Reading Below

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.

Continue Reading Below

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)