First Annual Conference

Competition and Regulation – Contemporary and

Comparative Issues

National Law School of India University,

Bangalore, India
April 30, 2012

ICT Markets and Regulation

Search Engines as an example

Prof. Andreas Wiebe, LL.M.

University of Göttingen Germany
Chair for Civil Law, Competition and Intellectual
Property Law, Media and ICT Law
 Google and competition law

„To Exist means to be listed by a search engine“

 Google and competition law –
Possible infringement

 Rejection of registration on a search engine index

 Exclusion or downgrading of ranking

 Admission to advertising programmes

 Extending market power to adjacent markets
(„Microsoft-Syndrom“)
 Examples

 In January 2006 the website of BMW was excluded

from the Google index pursuant to internal guidelines
following the use of Doorway-Pages by BMW

 In 2005 Google excluded the Website kinderstart.com

from its index without giving a reason; the website
contained information on child development and an
independent search engine
 Art. 102 (82) EC Treaty: abuse of dominant
position – legal requirements

 Definition of relevant market – economic test

 Dominant position – statutory presumptions

 Discrimination/Impediment – legal evaluation

 Material justification – legal evaluation

 Google and competition law –
Market Definition

 Is there a Market at all?

 Remunerated service
 Mediation of attention
 Copyright license
 Effects on third markets

 Geographical Market
 Country versions
 Search engine services – Dominant Position

 Art. 102 (82) EC: Presumption at 50%

 § 19 German Cartel Statute (GWB): Presumption at 1/3

 2007, Germany :
 Google 89%, Yahoo 3 %, MSN 1,5%
 2005, U.S.A.:
 Google 57%, Yahoo 23%, MSN 10
 Access to search engine services – Discrimination

 Exclusion from Index

 Downgrading in PageRank
-> Equal treatment in implementation of search algorithm
 Justification: Internal Quality Guidelines
 Business judgment/discretion
 Protection against certain „bad“ forms of search engine
optimization?
 Competition for quality needs leeway
 Access to search engine services – Discrimination

 Kinderstart.com:
 Claim on re-admission to index, as exclusion was not based on
objective criteria

 BMW:
 Claim on re-admission upon proof in specific case that it was
„good“ technique that was used
 Access to advertising services – Discrimination

 Keyword Advertising, AdSense

 Market definition
 Search engine advertising
 “intermediation” of advertising on third party pages
 Ad serving and management software (DoubleClick)

 Local market definition

 National markets
 Access to advertising services – Discrimination

 Dominant position
 U.S. 2005: Google 49% at Keyword Advertising
 Worldwide: AdSense 56% (2006), 80% (2011)
 Total online advertising: 34,9% (2009), 47,6% (2012)
 Discrimination
 Rejecting access to advertising programme
 Material justification
 Infringement of statutory rules
 What about cases of doubt?
 Internal Guidelines
 Wide discretion, quality function pertinent ?
 Internet Economy – is it different?

 Are Monopolies equally dangerous?

 Specific features
 Network effects
 Direct
 Indirect
 Lock-in
 Economies of scale
 “winner-takes-it-all-markets”
 Innovative competition necessary
 Dynamic competition through compatibility
 Situation on search engine market

 Quality of competing search engines is equivalent

 Reasons for using Google
 Image of good quality
 Economies of scale due to high investment in R&D
 Winner-takes-it-all
 Easy shift to competitors viable and likely

 But: Due to high investments considerable barriers to

market entry
 Conclusions for cartel law

 Reduce and avoid new market barriers

 Support standardisation and compatibility – limit ip
 Limit leveraging
 tying as “leverage” (Microsoft case)
 Search engines
 No tying, but:
 Expansion into contents market, e.g., buying YouTube
 Priority ranking of own content services
 Does quality/reputation competition work against it?
 Market entry barriers may warrant scrutiny
Beyond efficiency: Public task of securing information access?

“Knowledge is Power”
 Fundamental right: freedom of information and
communication
 Securing information access
 information provision on pure private basis is critical
 “Gatekeeper”-Function
 Refuge to public broadcasting regulation?
 Need for “public” search engines?
 Active information policy
 The other side: protecting privacy

Thesis: Internet puts an end to the right of informational self-

determination

“Whoever wants to do something that others shouldn´t know about, can forget
about it” (Erich Schmidt, CEO of Google 2009)
The world will be a better place if we all show openly who we are and
present ourselves to our friends the same way
Moral rigorism by radical transparency – in an open and transparent world
people would have to bear the consequences of their behaviour and will
be more responsible and tolerant (Mark Zuckerberg, CEO of Facebook)
 Resume for regulation

 Information markets display market failures

 Retreat from regulation is inappropriate

 Cartel law is needed in the internet economy as well

 Market dynamics may warrant more liberal approach
 Regulatory objectives extend beyond economic efficiency

 New instruments have to seek a balance between incentives for

producing information, access to information and protecting privacy
interests
Thank you for your attention!

Andreas.Wiebe@jura.uni-goettingen.de