First Annual Conference Competition and Regulation Contemporary and Comparative Issues

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1 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

2 Google and competition law To Exist means to be listed by a search engine

3 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 )

4 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

5 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

6 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

7 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

8 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

9 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

10 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

11 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?

12 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

13 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

14 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

15 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

16 The other side: protecting privacy Thesis: Internet puts an end to the right of informational selfdetermination 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)

17 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

18 Thank you for your attention!