As Europe dangles $6bn fine, Google says it's getting slaughtered in shopping

Google says it's getting beaten by Amazon in shopping search, but whether this matters to the EU remains to be seen.
Written by Liam Tung, Contributing Writer

In its first reply to Europe's new antitrust accusations, Google has released data that it says show there is fierce competition in the shopping comparison market - where it's getting slaughtered by Amazon and eBay.

Google has come out swinging against today's accusations by the EC that it abused its dominance in search to bolster its own shopping comparison service at the expense of tiny rivals. According to the EC, Google breached antitrust law, and could now face a fine of up to $6bn - 10 percent of its annual turnover.

Amit Singhal, SVP of Google Search, said the company "respectfully but strongly" disagreed with the EU's need to lay formal charges against it.

EC commissioner for competition Margrethe Vestager today outlined the EC's statement of objections, in which it accuses Google of "systematically favouring its own comparison shopping product in its general search results page".

In a memo to staff, Google has said it has a "very strong case" against the accusations, which Singhal fleshed out in a subsequent blog post entitled 'searching for harm'.

As Singhal illustrates with several graphs sourced using its own data on shopping site traffic in Germany, France, and the UK, both eBay and Amazon are miles ahead of Google Shopping, which is battling it out with dozens of smaller, mostly local providers.

From this Singhal concludes: "It's clear that there's a ton of competition - including from Amazon and eBay, two of the biggest shopping sites in the world - and Google's shopping results have not the harmed the competition."

Whether this argument flies with the EC remains to be seen. As the EC already acknowledged today, there is competition in the shopping market, which it is treating as separate to the general search market - the latter being the one Google is accused of abusing its dominance in.

It also noted that in Google's first attempt at shopping with Froogle, it didn't use its general search to favour its shopping product over rivals, but that had changed by the time the service became Google Shopping; and the practice delivered it higher rates of growth.

So while the practice might not have done much to counter Amazon and eBay, it did nonetheless have a detrimental effect on rival comparison shopping sites and thus had a negative impact on consumers and innovation.

Google has also released its first response to the EC's new Android probe, which will focus on whether Google struck deals with Android OEMs that forced or gave the incentives to exclusively pre-install Google's apps. It will also investigate whether Google prevented OEMs from developing forked versions of Android; and whether Google blocked rivals by bundling certain Google apps on Android.

Hiroshi Lockheimer, Google's VP of engineering for Android, briefly details two types of agreements Google has with OEMs but said they are voluntary and that Android can be used without Google services.

The first type regards the "non-fragmentation clauses" that Google reportedly began tightening up in 2011, causing some concern Android wasn't as open as it seemed.

Lockheimer says the "anti-fragmentation" agreements, which limit the how much OEMs customise Android, are to "ensure apps work across all sorts of different Android devices".

Meanwhile its app distribution agreements "make sure that people get a great 'out of the box' experience with useful apps right there on the home screen", he said, such as maps and email.

"This also helps manufacturers of Android devices compete with Apple, Microsoft and other mobile ecosystems that come preloaded with similar baseline apps. And remember that these distribution agreements are not exclusive, and Android manufacturers install their own apps and apps from other companies as well. And in comparison to Apple - the world's most profitable (mobile) phone company - there are far fewer Google apps pre-installed on Android phones than Apple apps on iOS devices," said Lockheimer.

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