Google accused of 'failing to comply' with EU competition authority's Google Shopping ruling
Google's own 'heads we win; tails you lose' remedy criticised for favouring only Google
Google is failing to comply with the European Union competition authority's ruling over its Google Shopping service.
That's according to rival shopping comparison services across Europe that claim that the auction solution introduced by Google earlier this year favours Google, regardless of the outcome of the auctions. Google, however, has flatly denied the claims.
In an open letter to European Union competition commissioner Margrethe Vestager, Pricerunner, Idealo and other shopping comparison websites claim that Google's remedy is, effectively a ‘heads we win; tails you lose' proposition.
By auctioning the coveted advertising slots and including itself in the auctions, Google can legitimately claim to have outbid rivals for the slots. If it is outbid, then it benefits financially anyway.
Google's remedy is, effectively a ‘heads we win; tails you lose' proposition
First, they say, rivals are compelled to bid away their slender profit margins bidding for advertising slots on Google Shopping that cost Google nothing - merely transferring sums from one part of Google to another.
Second, it's 20 per cent limit on profit margin is meaningless, they write, because even if they win they are effectively transferring their profit margins to Google, limiting their ability to invest and better compete - hence, Google wins either way and gets to financially cripple rivals that take part as well.
"The harsh reality is that a pay-for-placement auction is fundamentally incompatible with the concept of comparison shopping (or, indeed, any other form of vertical search).
Google Shopping's bids cost it nothing - its bids are just meaningless internal accounting
"As a result, few rivals have chosen to participate in Google's CSS [comparison shopping service] auction and, when they have, genuine CSSs that employ a consumer-friendly paid-inclusion model have struggled to outbid services like Google Shopping that, since 2013, employ a consumer-unfriendly pay-for-placement model," they write.
In July 2018, the founders of suspended price comparison website Foundem, who claim they were effectively driven out of business by anti-competitive practices pursued by Google, said that Google's auction-based remedy was nothing of the sort.
"Whereas rivals are compelled to bid away their incentive and ability to innovate and grow, Google Shopping's bids cost it nothing - its bids are just meaningless internal accounting, paid from one Google pocket into another, they wrote.
As a result, there has been little practical change in terms of Google's website promotion of shopping comparison services - Google Shopping still wins. According to Adam and Shivaun Raff, rivals' visibility has doubled, from just three per cent to six per cent of clicks.
Google's auction-based ‘remedy' is such an unattractive, low-margin proposition, few rivals have chosen to participate
They also accused Google of adopting business practices that amounted to bid manipulation.
"In March 2018, Google started to trial a Comparison Shopping Service (CSS) Partner Programme, which offered rivals a 20-30% rebate on their Google auction costs. Presumably, the expectation was that this time-limited offer would, at least temporarily, allow many more rivals to win the auctions and thereby create the illusion of a functioning ‘remedy'.
"Moreover, because Google's auction-based ‘remedy' is such an unattractive, low-margin proposition, few rivals have chosen to participate (and many of those that have, did so primarily to gather data on how non-compliant the ‘remedy' is)."
As a result, it refocused its incentives on merchants instead, they claim, to make it look as if its remedy was working.
Google wins either way and gets to financially cripple rivals that take part as well
It's not the first time that Google has deployed the auction remedy in response to EU anti-trust complaints, they add.
"Google deployed a strikingly similar strategy under [Competition] Commissioner Almunia, who ended up wasting two years pursuing greater visibility for rivals in a similar auction, before finally realising that it was the auction itself that was the problem."
The Google Shopping judgement in June 2017 cost Google a €2.4 billion fine.
However, in a missive to Computing today, Google denied the claims: "We've complied with the European Commission's order. We allow all comparison shopping services to compete equally to show product ads from merchants on Google's Search results page.
"To help drive awareness amongst merchants who are unfamiliar with these new opportunities, we're currently offering incentives for them to work with comparison shopping services. One year on, both services that existed before the remedy and services that are new to comparison shopping are participating successfully."