In June, 2017 the European Commission (EC) fined Google roughly $2.7 billion for alleged abuse of market position in vertical (shopping) search. After the decision was made, which Google is in the process of appealing, Google number of changes was implemented to provide “equal treatment” for rival Comparison Shopping Engines (CSEs) in Europe.
About a month ago, Margreth Vestager, the EC competition chief, said that Google’s efforts in shopping search were making progress and that the company would likely be able to avoid additional antitrust penalties. But, there was open letter to Vestager that stated that EU shopping comparison rivals were making the argument that things are actually getting worse for them.
The biggest change made by Google was to treat Google Shopping as a separate business unit with its own operating budget that would compete with other shopping sites to appear in Google Product Listing Ads (PLAs). It even said the business unit was going to operate at a profit. In theory, all parties would be competing on equal footing to appear in PLAs.
Based on the letter’s signatories, this equal footing doesn’t seem to be playing out as expected. Signed by the leaders of 14 CSEs, the letter states, “It has now been more than a year since Google introduced its auction-based ‘remedy’, and the harm to competition, consumers and innovation caused by Google’s illegal conduct has continued unabated.”
According to the letter, there isn’t any material difference between this new approach and the original system.
The shopping sites object to the PLA auction itself, saying it compels them to “bid away the vast majority of their profit.” These sites are dismissing Google’s participation in the auction, as an independent unit that has to achieve a profit, as “meaningless internal accounting.” It’s also being argued that since users who click on their PLAs go directly to merchant sites and not the CSEs themselves, they have no opportunity to “derive value from the process.”
In the end, it’s being argued that the auctions are harming consumers since it is “all but eradicating” a “thriving [online] comparison shopping market in Europe.”
The letter concludes that, “As long as placement is determined by auction rather than relevance, it makes little material difference whether competitors occupy none, some, or even all of the available slots. In all cases, Google is the main beneficiary of any profits derived from these entries, and consumers are the main losers.”
The group, with specifying any specific alternative aside from implying that it should be based on “relevance,” encourages the EC “to enforce its Prohibition Decision by rejecting Google’s non-compliant ‘compliance mechanism’ and demanding an effective remedy that adheres to the principle of equal treatment set out in the Decision.”