The end of Google as we know it?*

The recent reform of the German Competition Law (the GWB) introduces some new powers through which the Bundeskartellamt (BKartA) can deal with competition concerns arising in digital markets. These powers appear to be incredibly far-reaching, perhaps to a greater extent than the drafters may have intended.

For instance, 19(a)(1) introduces a category of undertakings “of paramount significance for competition across markets”. Such undertakings are prohibited from various actions as set out in 19(a)(2), including as set out in sub-paragraph 19(a)(2)3.:

“The BKartA may prohibit such undertakings from… 3. directly or indirectly hinder competitors on a market on which the undertaking can rapidly expand its position, even without being dominant, in particular:

a) to combine the use of an offer of the company with an automatic use of another offer of the company, which is not necessary for this purpose, without granting the user of the offer sufficient possibilities of choice with regard to the circumstance and the manner of use of the other offer;

b) to make the use of an offer of the company dependent on the use of another offer of the company;”

subject to objective justification (as set out at the end of 19(a)(2)).

By way of example, let’s think about applying this to Google’s main business. (I assume that Google will be one of the companies found to have “paramount significance”.) Google has a search engine which allows customers to search for websites. Google then uses the search term to sell advertising to those users. So it combines (per 19(a)(2)3.a)) the search offer of the company with the advertising offer of the company. The advertising offer is not necessary to provide the search offer. As far as I know Google does not provide end users the option of getting an advertising free search product. Per 19(a)(2)3.b), Google is making the use of the organic search offer dependent on the use of the advertising product. 

Let’s look at a further clause. 19(a)(2) 4.a) outlines that it is also prohibited:

·      “to make the use of services conditional on users consenting to the processing of data from other services of the undertaking or a third party provider without giving users an adequate choice as to the circumstance, purpose and manner of processing”;

Google is making the use of its search service conditional on users allowing that data to be processed for its advertising service.

So it looks as if Google’s main product could well be considered to breach 19(a)(2)3.a), 19(a)(2)3.b), and 19(a)(2)4.a). (I note that the start of 19(a)(2)3. talks about hindering competitors to allow Google to rapidly expand its position. So maybe this clause only applies to new product offerings, rather than existing offers, although I imagine that e.g. Bing’s lawyers might argue that Google is hindering the development of rival search services by using its advertising revenues to enhance the quality of its search engine.)

If this is right, then whether Google could continue in its current form in Germany will depend on whether there is an objective justification for its behaviour. This seems to be a question entirely dependent on the judgement of the BKartA. Clearly Google would say that without the advertising revenues, it would not provide the search engine. But would the BKartA say that it could provide a subscription service? Or could Google provide an advertising service based purely on “display” advertising – using the many eyeballs that arrive on Google to provide essentially random adverts using no personal information? Many websites operate on this basis. Google clearly makes more money through using the data customers provide it on search terms (reflecting their specific interests at that moment in time) to target adverts at those customers very effectively. But is this a sufficient objective justification for BKartA?

I do not mean to suggest that this would be a sensible or desirable outcome. I only observe that the powers that the BKartA has been granted are both vague and incredibly wide-ranging. Much therefore depends on how the BKartA chooses to apply these powers, which cannot be a satisfactory position. The European Commission might also be wise to consider the implications of the GWB in detail before finalising its proposed Digital Markets Act.

* Probably not. But the fact that one can reasonably put the question indicates the remarkable scope of the new legislation. Note that I could have chosen other examples here - this is not a Google-specific issue. (NB I do not work for Google or Bing.)