Internal Google Memo Responds To EU Antitrust Objections

@panzer / @alex / 4:33 pm PDT • April 14, 2015

Following reports about the European Union preparing to file formal charges against Google in its ongoing antitrust investigation, Google General Counsel Kent Walker has issued an internal memo to all employees. TechCrunch obtained the memo and it is reproduced in its entirety below.

In the letter, the counsel also notes that the EU is likely to open an investigation into its mobile operating system, Android, as well.

In the document, Google presents the case that there is a robust amount of competition in the areas that the commission is concerned with. It includes a variety of charts and graphs to support its rebuttals.

“An [Statement of Objections] is not a final finding. It’s a document in which the Commission staff sets out its preliminary arguments so that the company in question can respond,” says Walker. “Expect some of the criticism to be tough. But remember, it’s also an opportunity for Google to tell our side of the story.

“We have a very strong case, with especially good arguments when it comes to better services for users and increased competition,” Walker continues. And he says that Google has a ‘very strong case’ on Android, as well.

News Corp., publisher of the Wall Street Journal, filed a formal complaint with the EU Commission in regards to Google’s business practices this week. After a WSJ piece painted a picture of Google as wielding “undue political influence,” Google responded with a GIF-laden blog post detailing the interactions of its staff with Washington.

The Wall Street Journal and the Financial Times were among the first to report this week that the EU would bring antitrust charges against Google. EU antitrust head Margrethe Vestager and European Commission President Jean-Claude Juncker made a decision on filing charges on Tuesday, according to a WSJ source.

Google has faced antitrust investigation from the US Federal Trade Commission in the past, which found that Google did not violate American antitrust law. A european investigation into the competitive nature of its search services began in 2010, and it settled a case with European competition regulators in early 2014.

Last month, the WSJ published every other page of a 2012 FTC report that was sent to the publication accidentally, detailing its antitrust investigations. The report noted that the FTC found that it was a ‘close call’ whether Google violated antitrust regulations with its search product — but that it decided it had not. The document indicated that at least some inside the FTC felt that Google had acted in an anticompetitive manner.

Google declined to comment on the contents of the memo.

Google Argument

In the memo, Google argues that its search products have strong traditional competition, as well as new forms of competition. Google name-checks the usual search suspects including Bing and Yahoo, but also cites new services like Siri and Cortana that contain search-like capabilities.

Google also cites online shopping services as a form of competition. The point has merit — many now use Amazon as a product search engine in place of Google for searches that they might have sent before.

[related articles]

However, the strength of that argument is at least tempered in part because Google retain tectonic market share in extant search markets where it could exert undue influence. Merely indicating that mobile matters, and that some search categories are siloed inside of the products of other competitors doesn’t lessen the fact that Google has the capability to act in an anticompetitve manner in other areas.

Certainly that is a less charitable explanation, but it’s worth wearing a mantle of neutraliy until we read the EU’s notes.

Google is correct to point out that its products are no longer such the primal portal for all searches. This becomes even more true as Bing worms its way into the platforms other corporations and as the micro silos of apps subsume the mobile web. But there are points on the scale that still carry weight — and it’s likely that they’ll need to make convincing arguments there in order to parry the objections.

The memo:

Googlers —

As the Financial Times has just reported, the European Commission will tomorrow issue a Statement of Objections (SO) regarding the display and ranking of certain search results, in particular shopping. This is obviously very disappointing news, especially for the search team that has worked so hard to create a great experience for our users over the last 16 years.

First, a few facts about the SO process. An SO is not a final finding. It’s a document in which the Commission staff sets out its preliminary arguments so that the company in question can respond. Expect some of the criticism to be tough. But remember, it’s also an opportunity for Google to tell our side of the story. The back-and-forth over an SO can take some time (even a year or two), and in a number of cases has resulted in the Commission modifying their claims or settling the case. If the two sides cannot settle their differences, the Commission issues an infringement decision, which can be appealed in court.

We have a very strong case, with especially good arguments when it comes to better services for users and increased competition:

Better services for users: Google Search has improved tremendously since the days of ten blue links. We can now answer many queries directly, saving users huge amounts of time and effort–whether it’s the weather, directions to the local pharmacy, flights, or where to get the cheapest camera.

Increased competition:

The competition is just one click away — and it’s growing. People can use Bing, Yahoo, Quora, DuckDuckGo, and a new wave of search assistants like Apple’s Siri and Microsoft’s Cortana, as well as more specialized services like Amazon, Idealo, Le Guide, Expedia, or eBay. In addition, users increasingly turn to social networks like Facebook and Twitter to find news and suggestions — where to eat or which movies to watch.

Mobile is changing everything — with the explosion of apps taking people directly to the information they want. Today 7 out of every 8 minutes on mobile devices is spent within apps. Yelp, for example, has said that over 40% of its traffic comes direct from its mobile app.

Competition online is thriving — despite what many of the complainants in this case allege. Indeed if you look at shopping, it’s clear that there’s a ton of competition (including from Amazon and eBay) that has not been harmed by Google’s own shopping service. Just look at the following graphs compiled using comScore data:

Shopping Sites in Germany (unique visitors, ‘000s)

Shopping Sites in France (unique visitors, ‘000s)

Shopping Sites in the UK (unique visitors, ‘000s)

It is the same story with travel–another very competitive vertical:

Travel sites in Germany

Source: ComScore MMX and Google data (for Google), desktop traffic, unique visitors (‘000s)

We believe that the Commission will also open a formal investigation into Android tomorrow. This is just the start of a process and does not mean the EC will necessarily take action (for example they opened and closed an inquiry into iTunes a few years ago). We have a very strong case on Android as well:

Android has lowered prices and increased choice for consumers (there are over 18,000 different devices available today);

It’s an open-source operating system that can be used free-of-charge by anyone;

We paid out over $7 billion in revenue over the past year to developers and content publishers;

Consumers decide which apps they use and download on Android devices. Apps that compete directly with Google such as Facebook, Amazon, Microsoft Office, and Expedia are easily available to Android users; and

Many of these apps come pre-loaded onto Android devices. Google apps, like Search, Maps, Gmail, and Google Play, are also available out of the box on many handsets. The recent Samsung S6 is a great example of this — there are pre-installed Facebook, Microsoft, and Google apps.

All told, consumers have a lot of choice — and they are exercising it. And many, many other companies have very successful mobile businesses — including Apple, the most valuable (mobile) company in the world.

Finally, we know the upcoming announcements will be distracting. But you can help in two ways. First, by not commenting on pending legal issues, internally or externally. And second, by focusing on what you all do best … building great products that serve our users and customers.

— Kent

Image: Getty

Internal Google Memo Responds To EU Antitrust Objections

Latest Stories

TikTok faces a ban in the US, Tesla profits drop and healthcare data leaks

Will a TikTok ban impact creator economy startups? Not really, founders say

Investors won’t give you the real reason they are passing on your startup

Deal Dive: Givebutter is turning a profit making tech for nonprofits

The ‘valley of death’ for climate lies between early-stage funding and scaling up

A wrestling match over who should control robotaxis is playing out in California