More competition issues coming Google's way

Stuart Corner
Thursday, 22 September 2011 17:43

IT Policy - Regulation

Google has been found not guilty of breaching consumer protection laws by failing to sufficiently distinguish between search results and sponsored links (aka adverts) but its ability to use its dominance of the Australian search market to favour its own services over those of competitors is under increasing scrutiny by the Productivity Commission.

In December 2010 the Government launched a Productivity Commission enquiry into Australia's retail industry. The Initiative for a Competitive Online Marketplace (ICOMP) - a global member based organisation backed by Microsoft - has already made one submission to the enquiry and has just released a second in response to the Productivity Commission's draft report: a study commissioned from ACIL Tasman that claims to "highlight the potential dangers of a dominant online search provider and provide indicative estimates of the economic consequences should such a provider attempt to capitalise on its market dominance in ways that could compromise search efficiency for Internet users and/or reduce competition in online retailing."

The report claims to show that "a dominant search engine has both the incentive and the ability to reduce the efficiency of search in order to increase the number of searches made on its engine and thus its profit." It estimates that, "If this incentive is acted on and search efficiency is reduced by 10 percent, the annual cost to Australians in terms of lost time would be approximately $430 million."

It points out that Google accounts for approximately 90 percent of searches in Australia and suggests that: "a dominant search engine has both the incentive and the ability to prioritise its own product offerings over those of competitors, both actual and potential."

The Productivity Commission noted in its draft report that "The European Commission is currently investigating allegations that Google has abused a dominant market position in online search by lowering the ranking of unpaid search results of competing services, and that it accords preferential placement to the results of its own vertical search services and in so doing shuts out competing services."

Other than noting the EC action the PC's draft report devoted very little attention to the potential for Google to use its dominance of search to disadvantage competitors for other services it offers. The report said only that: "The role and quality of search engines is of broad interest to consumers, given their increasing role in advertising. The algorithm by which search engines rank websites is a proprietary matter for each company, and each is likely to produce different results for the same query."

It gave an example showing how three search engines - Google, Yahoo! and Bing - gave 11 different addresses in their top five results for a single search and noting that "This diversity of results may provide consumers a service provided, of course, that they are aware that such diversity exists, and also that other items on search results pages '” specifically ads and sponsored links '” are chosen and ranked on a different basis."

The Productivity Commission's final report is due in December.