On 20 December 2019, the French Competition Authority (Autorité de la Concurrence) (the “Authority”) announced its finding that Google had abused its dominant position in the French market for search advertising through the operating rules applied by Google Ads (previously known as AdWords), its auction-based advertising system. The Authority fined Google €150 million and has required Google to make a number of changes aimed at clarifying Google Ads’ rules and procedures which it deemed to be opaque, difficult to understand, and applied in an unfair and random manner (the “Decision”).
Overview of the decision
On 6 March 2015, Gibmedia, which operates “paid content websites” that include weather forecasts, business data, and telephone information, filed a complaint (including an application for interim measures) against Google following the suspension by Google of Gibmedia’s AdWords account. Gibmedia submitted that Google’s conduct was non-objective, discriminatory, and lacked transparency, and thus anticompetitive under both European and French competition rules (Article 102 of the Treaty on the Functioning of the European Union (“TFEU”) and Articles L. 420-1 and L. 420-2 of the French Code of Commercial Law (Code de commerce)). Although the French Authority refused Gibmedia’s application for interim measures, it investigated Gibmedia’s complaint which led to the adoption of the Decision.
The complaint / Google Ads
Like many other companies providing online services, Gibmedia does not rely solely on traffic from Google’s general search results (“SERP”); it also acquires traffic via Google Ads.
Any advertiser can bid in the auction to feature in Google Ads results, which can appear above or below the general search results on Google Search, but will generally appear near the top of the SERP. Advertisers will identify key words and specify a maximum bid price, which is the amount advertisers will pay to Google each time a user clicks on their advert, for each key word. When a user enters a search query on Google’s Search engine, an auction will be triggered between the advertisers. Google determines which keywords are relevant to the user’s search query, and advertisers who have bid on those keywords are eligible to participate in the auction. Once in the auction, which advertisers appear, where they rank and how much they pay is determined by a combination of the amount of their bid and their Google “quality score”.
In order to participate in the Google Ads platform, advertisers must create a Google Ads account and agree to abide by Google Ads’ terms and conditions. These rules include a provision prohibiting advertisements for services or products that are normally available online for free (the “Sale of Free Items Rule”). In January 2015, Google suspended Gibmedia’s AdWords account, purportedly for violating Google’s Sale of Free Items Rule, on the basis that certain of Gibmedia’s paid services, including, for example, its weather forecast service, were available for free elsewhere online.
The findings of abuse
Having established that Google held a dominant position in the markets for online search and online search advertising in France, the Authority made four separate, but connected, findings of abuse against Google.
First, the Authority found that Google Ads’ rules are subject to frequent change and are not based on any “specific and permanent definition.” In particular, the French Authority concluded that the content of Sale of Free Items Rule lacked specificity, as advertisers cannot determine what products are “normally free.”
Second, the Authority found that the application of the Google Ads’ rules is not transparent. The Authority observed that sites which, at one point in time, were considered compliant, could find that their accounts had suddenly been suspended without those sites having made any changes to their websites or the way in which they were monetized. Furthermore, the support and quality teams took different approaches to the rules; with staff in the support team referring cases to the policy team, recommending the lifting of sanctions, and then the policy team rejecting the request.
Third, this unpredictability was exacerbated by Google changing its rules without communicating the changes to advertisers, thereby depriving them of the opportunity to make modifications to their sites to comply with the new rules. This was occurring notwithstanding the Authority’s commitment decision in the Navx case, in which Google had been required to set up procedures to inform advertisers in advance of changes to the Google Ads rules.
Finally, the Authority found discrimination. It ruled that Google had suspended Gibmedia’s AdWords accounts for a violation of the Sale of Free Items Rule, but at the same time Google allowed Gibmedia’s sister company to run advertisements for similar services on Google Ads. In addition, the Authority found that, at times, when Gibmedia’s Google Ads accounts were suspended for violating the Sale of Free Items Rule, other companies continued to be permitted to advertise comparable services.
This finding differs from the finding of discrimination in the Google Search (Shopping) Decision, where the Commission found that Google was giving preferential treatment to its own comparison shopping service, Google Shopping, over that of its competitors. It seems to be the first time that a competition authority has made a finding of discrimination against Google when the anticompetitive conduct did not directly benefit Google’s own services, but concerned purely a difference in treatment of those dependent on Google’s services, in this case, advertisers.
However, although Google was not directly competing with those to whom it was providing services, it is not the case that Google did not benefit from the discrimination it applied to those advertisers. The Authority expressly recognized that Google benefits indirectly in – at least – two ways from its anticompetitive conduct. First, the Authority found that the suspension of Google Ads accounts of sites with paid content reduced or removed traffic to those sites. Sites offering paid content are, in some instances, sites which might compete directly with Google’s other services (for example, maps, translation, etc.) which are offered for free and are not subject to the Google Ads restrictions. Google thereby removed its potential competitors from the market by reducing their visibility and, as a result, their traffic. Secondly, Google’s conduct also meant that sites which might have operated on a paid model basis were effectively forced to offer their services on a free basis and finance their services through advertising – for which Google is a natural (unavoidable) partner – thereby increasing Google’s advertising revenues indirectly.
Further, the Authority noted that while Google’s conduct may have fallen short of being “deliberately” anticompetitive, it was “at best” negligent and “at worst” opportunistic, because Google continued to market its advertising platform to advertisers of sites which it considered “doubtful” (i.e. Google considered that these “doubtful” sites may also not comply with Google Ads rules, and thus should also have been suspended), with the objective to increase investments in its Google Ads support services.
Quality vs protection from anticompetitive conduct
The Authority recognized the tension between, on the one hand, Google’s “perfectly legitimate” objective to ensure only relevant, high-quality advertisements are displayed on its SERP; and, on the other, Google’s conduct, which has the result of depriving users of “sites with innovative economic models.” According to the Authority, even when a measure is intended to achieve a legitimate objective, it may still be anticompetitive if it is inadequately implemented]
The fine and additional measures
The French Authority imposed a fine of €150 million upon Google, and has required Google to: (i) clarify its Google Ads rules, and review its notification procedures for new and amended rules; (ii) clarify procedures relating to the suspension of accounts “in order to prevent them from being brutal and unjustified”; and (iii) implement its rules in a manner “strictly necessary and proportionate to the objective of consumer protection”.
The Gibmedia Decision establishes a fourth area in which Google’s has been found to have been in breach of European and national competition laws. Given Google Ads is operated in an apparently identical manner in all European markets, it would seem likely that there will be further regulatory scrutiny of Google’s practices in the digital advertising market.