Google probe: Is now the time to regulate mobile search?

The European Commission has reportedly told Google that any settlement of its antitrust case must involve changes to its mobile services. But both parties in these negotiations have to tread very carefully indeed.
Written by David Meyer, Contributor

According to a report in the reputable Financial Times, antitrust regulators in the EU have added an extra condition to any settlement of the Google anti-competition case: that the web giant apply any settlement deal to mobile services as well as those on the desktop.

Google search
The European Commission has reportedly told Google that any settlement of its antitrust case must involve changes to its mobile services. Image credit: Annette Shaff/Shutterstock.com

The move must come as an unwelcome jolt to Google, which is desperately trying to stave off formal charges — the point at which such things move into 'big fine' territory. While competition commissioner Joaquín Almunia has repeatedly said he would prefer to avoid taking that step, his reported request for non-confidential versions of the evidence already submitted by Google suggests he is drawing up charges.

This represents a critical moment for both regulators and the tech industry, largely because the industry is in the process of going mobile. Competition authorities have to look at the current situation and weigh up whether it is appropriate or too early to regulate a space that is hugely in flux.

Desktop vs mobile

Before looking further into this, let's remind ourselves of what Google stands accused of in this probe. According to complainants led by Microsoft, Google blocked its advertising partners from also using rival platforms, made it difficult for those advertisers to port their campaigns to other platforms, copied content from competing search engines and downgraded those search engines in its own Google Search results.

We don't know the precise nature of the settlement Google and the Commission are trying to thrash out, but we can fairly assume that it involves not doing any of the things Google has been accused of.

It's up to the Commission to establish whether or not Google actually does those things on the desktop (if charges are being drawn up, that would suggest there's evidence to support this), but also whether it does them on smartphones and tablet. But here's the tricky bit: if Google does unfairly hobble its rivals on mobile, would it be right for regulators to stop it from doing so?

First, let's look at Google's market position. According to StatCounter, Google has 92 percent of the desktop search market and 97 percent of the mobile search market. There is no question that, on both platforms, Google has what competition regulators call 'significant market power'. The very point of antitrust regulation is to stop companies that are in such a dominant position from abusing their dominance.

But even then, there is an argument for saying the regulators may want to lay off the mobile angle.

If we look back less than two years to the US FCC's net neutrality regulations, we can see a prime example of mobile being treated differently from the fixed space — the rules stated that fixed networks had to avoid discrimination between different content, but mobile networks were under no such limitation. This followed a suggestion that had been made by Google and Verizon, and it basically held that wireless networks should not be heavily regulated yet because their industry is too young.

Guessing the future

However, there is reason to believe that the European Commission thinks differently. This week it emerged that EU regulators are now on Microsoft's case over its refusal to allow any browser but IE onto its Windows RT platform. That's a weird one, because it's Windows — a notoriously dominant platform on the desktop — but it's also mobile, because Windows RT is designed for ARM-based tablets.

Until we see which way Windows 8 goes in the tablet space, it is very difficult to see it as dominant. Surface and other Windows 8 tablets would have to outsell a lot of iPads and Android tablets to get to that position — which could happen, if people think Windows first and device type second, but right now it's a speculation game.

Similarly, it could be argued that mobile search is not a done deal.

Maybe, in a fit of pique at its main mobile rival, Apple decides to take on Bing or Yahoo as its default search engine, rather than Google Search. Maybe Facebook makes a serious search play — after all, browsers and apps are still battling it out for smartphone and tablet users' attention. Android is still only neck-and-neck with iOS (about 25 percent each) when it comes to the installed mobile OS market. If such catastrophes hit it, Google may be unable to stop a very swift erosion of its market position.

So this is the dilemma faced by the EU's competition authorities, and by Google. The regulators have to judge whether today's clear-cut market dominance will hold if they do not deal with it now, and Google has to judge how hard it wants to plead industry infancy, given the massive fine that could await it on the other side if it fails.

Both parties need to tread carefully. What happens now could affect the whole mobile industry.

Editorial standards