Google keeps its secrets safe facing EU antitrust case
Competitors claim that search giant unfairly ranks results, favoring its own services
The European Commission has launched an antitrust investigation against Google over allegations that the internet search engine ranked its own services above those of competitors on its results pages.
"The opening of formal proceedings follows complaints by search providers about unfavorable treatment of their services in Google's unpaid and sponsored search results, coupled with an alleged preferential placement of Google's own services," the Commission said in a statement on November 30.
Regulators will "investigate whether Google has abused a dominant market position in online search," it added.
As part of the probe, EU regulators will examine complaints that Google had lowered the "quality score" for the sponsored links of competing "vertical search providers." Such providers let visitors search for specific content, to deliver price comparison tables, for example. The quality score is a factor in determining how much advertisers have to pay the search company.
The company says revealing its algorithms would be akin to nationalizing
Google commands a 90-percent market share in 12 European countries
The antitrust proceedings will also cover allegations that Google "imposes exclusivity obligations on advertising partners, preventing them from placing certain types of competing ads on their websites, as well as on computer and software vendors, with the aim of shutting out competing search tools," the EC said.
Although the Commission has not been explicit about the source of the complaints, they mirror those made in February by Microsoft's Ciao price-comparison service, the UK price-comparison site Foundem and the French legal search engine Ejustice.fr. All three companies are vertical search providers, and have alleged that Google demoted their sites in its search results because they are rivals.
Google offers two types of search result: unpaid results produced by the firm's algorithms that are displayed in the main body of the page and "ads," previously called sponsored links. Foundem alleges that Google's algorithms remove legitimate sites from its natural search results, irrespective of relevance. The European Commission may require Google to divulge information about the algorithms that determine the links listed at the top of its search results.
The Mountain View, Calif.-based company has zealously guarded those formulas in much the same manner as the Coca-Cola Co. protects the recipe for its signature drink or KFC keeps secret the ingredient mix for its chicken. Although any confidential information that Google shares with regulators would probably remain confidential, the company's executives may not want to run the risk of opening up its trade secrets to outsiders.
"It's still too early to say whether the Commission will ask Google to disclose the algorithms," said Amelia Torres, the spokeswoman for Competition Commissioner Joaquín Almunia.
In a statement last Tuesday, Google said it will attempt to answer the Commission's questions. If regulators conclude that Google acted illegally, the company could face billions of dollars in fines, similar to actions taken against Microsoft Corp. and Intel Corp. in recent antitrust cases brought by the Commission. The investigation marks the first time Google's core business practices have been delved into so deeply, although there have been other antitrust inquiries that have touched upon the company's dominance of the internet's lucrative search market.
Google processes about two of every three search requests on the web, even though there's nothing to prevent people from using other services, such as Microsoft's Bing or Yahoo! - the next two biggest search engines. People have become so addicted to Google in Europe that it commands a 90-percent market share in some countries.
William Echikson, head of communication for Google's southern European operations, argues the company has a right to refuse to reveal its algorithms. "There's no way that we can reveal them; it would be like nationalizing Google. The Commission hasn't asked to see them because this is about competition, not transparency." He adds that the Commission's investigation has not shown that Google enjoys a dominant market position. "We are sizable in terms of our volume of business. As for advertising, we have a less-than three-percent global market share."
"Years ago, the initial equation for PageRank was simple, and well known. But Google has changed it and made it more complicated, and now nobody knows how it works. Every now and then it changes factors and other aspects at its whim. The rest of us will just have to adapt to the situation as best we can," says Fernando Maciá, the CEO of Human Level consultancy, and an expert in search engine optimization, known as SEO.
SEO is the process of improving the visibility of a website in search engines' "natural" or un-paid results. In general, the higher on the page and more frequently a site appears in the search results list, the more visitors it will receive from the search engine.
As an internet marketing strategy, SEO considers how search engines work and what people search for. Optimizing a website may involve editing its content and associated coding to both increase its relevance to specific keywords and to remove barriers to indexing by search engines. Promoting a site to increase the number of backlinks or inbound links is another SEO tactic.
Echikson says that Page Rank is modified frequently "because information also changes frequently. If you look at Google a decade ago, it had nothing to do with the way the search engine works today. Innovation is what we do."
The theory of PageRank is simple enough: the more hits that a website receives, the higher its ranking. If these hits come from trusted pages ending in .org, .gov, or .edu, then the ranking goes up further. "The Universia web is the only .es site that I know with a Page Rank of 10," says Macía. Facebook, Adobe and Yahoo! are other domain names with top scores. "But that can change with a minor adjustment of Google's algorithms," he cautions.
Google is much more transparent about how another of its tools, Quality Score, works. Quality Score assesses the quality of AdWords, the pay-per-click (PPC) and site-targeted text, banner, and rich-media ads. The AdWords program includes local, national and international distribution.
"Google gives us all the information about how it calculates and functions so that we can come up with better campaigns, says Guillermo Vilaroig of the Overalia online advertising agency. Experts like Maciá and Vilaroig say that there is only one way to describe Google's position among search engines: monopoly. "It absolutely dominates the sector. By keeping its ranking formula secret, it places everybody else at a disadvantage. A change in their ranking can spell disaster for some companies," says Maciá, adding that not only are Google's rivals at a disadvantage, but internet users are as well. "To all intents and purposes, there is only one window through which to access information."
Echikson says that Google already provides information about the workings of its ranking. "We don't want people playing around with our system, we are doing everything possible to make sure that our results are credible and have not been subject to tampering," he says.
Miguel López, the organizer of Spain's first SEO congress, says that Google's algorithms are subject to more than 250 factors. "It is the basis of their classification system, and even a mathematician would have problems understanding it," he says, adding that he doesn't believe that Google will be required to reveal its secrets. "This would open the door to anybody being able to tamper with its results, thus eliminating the purpose of a search engine. Everybody wants to be in the top 10; if you are not on the first page, you might as well not exist."
When is a trademark not a trademark?
Two Spanish consumer defense groups, Facua and OCU, are currently mired in a three-year legal battle that illustrates the potential for misusing Google's search criteria. Facua accuses OCU of using its brand name as a keyword, so that internet users searching for Facua will trigger the appearance of an OCU advertisement on the results page. Facua says that it has been trying to get OCU to drop the use of its brand name for the last three years.
Facua is accusing OCU of using the strategy again in November. For its part, OCU denies that it uses the brand names of other organizations or companies. It says that the root of the problem may lie with organizations with which it is associated using both its and Facua's names as keywords on their sites.
Companies' use of rivals' brand names as a means to trigger advertisements has been a problem since the early days of internet advertising.
In March, Google won a crucial victory in a five-year legal battle in the European Court of Justice against luxury bag maker Louis Vuitton, which means the internet search engine is not liable when people use the luxury goods maker's trademarks - such as Dior and Moët & Chandon - in online advertising campaigns.
The judgment reversed the earlier opinion of one of the court's own advisers, meaning that advertisers may still find themselves being sued by the owner of a trademark they are using in their campaign.
It could force Google to reverse its controversial decision to allow any advertiser to bid for trademarks in its AdWords system, which creates the sponsored links that appear above and alongside the blue search results on its website.
Google allows rival firms to bid for each other's trademarks. Google claims that this leads to better search results for users. While it has made similar moves in dozens of other countries, it has held back from opening up AdWords in any other European jurisdictions.
Louis Vuitton was furious that Google's search engine was being used by sellers of counterfeit or fake designer goods to advertise their wares and went after the highly profitable search engine itself. Google stressed during the case, however, that it has strict policies that forbid the advertising of counterfeit goods.
Google and eBay benefit when a user is confused into buying counterfeit goods on the internet, believing them to be genuine. This case is the first nail, but only the first nail, in the coffin of that practice. The only thing that can be said with absolute certainty after the judgment is that there will be more litigation to come.
The European Court of Justice (ECJ) has made it plain that Google should not be held liable for trademark misuse, adding that its AdWords system is an "information society service" under the terms of EU law. Crucially, this means Google does not have to monitor everything that goes on in AdWords, it must merely react swiftly when a trademark owner notifies it of any infringement.
