Expedia has accused Google of “using its extraordinary power to manipulate users and foreclose the ability of other sites to compete”. Company lawyer Tom Barnett made the accusation in a statement to a US Government Senate Sub-Committee investigating online competition. The main thrust of Barnett’s argument is that because Google is now competing directly with many of its major advertisers through products such as Google Flight Search it now has a fundamental conflict of interest – one that has the potential to hurt customers such as Expedia.
“Google has undergone a fundamental transformation in its business that has enormous consequences for competition on the Internet. Originally, Google was purely a search engine with the incentive to direct each user as quickly as possible to the websites most likely to be most relevant to the user’s query. More recently, however, Google has expanded into other products and services that include the provision of information (such Google Places, Google News, Google Finance, or YouTube) and specialized “vertical” search services that operate in a specific area (such as Google Maps, Google Product Search, or Google Flight Search).
“Google has been highly successful in many of these areas, often replacing the leading company (such as MapQuest) in an extraordinarily short period of time. This expansion has several important implications.
“First Google’s incentives have changed. Now it has an incentive to steer users to its own web pages and away from competing websites to enable it to increase its revenues. Google earns additional revenues from selling advertisements on the Google pages to which it steers users.
“By displacing competition in adjacent markets, Google reinforces its search dominance by stifling the development of nascent competitors. For example, Google benefits by displacing vertical search engines that could deprive Google of some search traffic. Because they operate in a particular vertical context such as travel, shopping and local destinations, vertical search engines can compete effectively with Google within that specific area without having to match Google’s enormous scale in general search. Travel search sites like TripAdvisor and KAYAK and the local entertainment site Yelp are examples of such vertical search sites.
“Google has (also) begun forcing the natural search results down to the bottom of the first page, and sometimes even to the second page. As a result, Google forces sites seeking to obtain visibility on the first page to spend more for Google paid search advertising, thereby increasing their costs while increasing Google’s profits.”
Barnett continued: “The key issue for antitrust enforcement is how Google has been able to expand into these search-dependent areas. If Google has relied in part on exclusionary tactics, then its expanding dominance presents serious antitrust concerns. Unfortunately for consumers, there are strong indications that Google is, in fact, foreclosing competition rather than simply competing on the merits of its own products. Several examples illustrate the concern:
“Deceptive Display – Google’s display of search results is deceptive to users and forecloses the ability of other sites to be seen. Google has long said and users have long come to expect that Google’s search results are presented in order of likely relevance to the user’s query. This is why paid search ads are separated from the natural search results and labeled as “ads.” Users are entitled to know that these “sponsored” links were not placed at the top of the results by the algorithm and that Google has an economic interest in placing the links on the page.
“Nevertheless, Google has begun inserting at or near the top of the search results page links to its own web pages. For example, a query for “milwaukee doctors,” returns nearly a full screen of links — which include multiple links to Google Places pages — that are separate from the natural search results that begin only at the bottom of the page.
“Indeed, Google has a ‘policy’ of putting links to its own products above the natural search results. As a senior Google executive acknowledged in a moment of candor:
[When] we roll[ed] out Google Finance, we did put the Google link first. . . . [T]hat has actually been our policy since then, because of Finance. So for Google Maps, again, it’s the first link.
“Notwithstanding the fact that these links are not ‘natural’ results determined by Google’s normal search algorithm and the fact that Google has an economic interest in placing links to its own pages there, Google does not disclose the nature or placement of these links to users. By placing these Google links strategically on its results page, Google can induce users to click on the links under the mistaken impression that they are natural search results that are most likely to be relevant to a query. Moreover, by inserting these Google links onto the first page, Google pushes the natural search results further down, often onto the second page, making it more difficult for competing sites to gain visibility.”
Barnett also claimed that Google has failed to live up to representations regarding the ITA acquisition.
“In April 2011, the Justice Department challenged Google’s acquisition of ITA Software as a violation of the antitrust laws and obtained a judicial decree that limits Google’s ability to use its control over this key technology to undermine competition for online travel search. Prior to being acquired by Google, ITA had a long history of developing innovative new flight search technology that it made available to its numerous licensees, including Orbitz, TripAdvisor, Bing Travel, and other online travel search sites.
“In an effort to deflect this concern, Google sought to defend the transaction by claiming that it would use ITA technology to “benefit passengers, airlines and online travel agencies by making it easier for users to comparison shop for flights and airfares.” Just last week, Google launched its own online travel search service. Notwithstanding the judicial decree and Google’s promise, the service excludes any link to online travel agencies, which are key options for comparison shopping. Further, the Google service utilizes a new version of ITA software that, now that Google owns ITA, is available only to Google, also continuing to undermine choices for consumers.”