The article is from WeChat public account: Economic Observation Network (ID: eeojjgcw) , author: Chenyong Wei, from FIG title: FIG insect
Guide
For a giant company like Google, the legitimacy of the business model is the most important. As long as antitrust penalties do not interfere with its business model, even paying billions of fines will not be too big. Conversely, if the penalty decision is directed at the business model, even without a fine, the damage to the business would be huge.
On Christmas Eve 2019, Google received a “year-end gift” from France. On December 19, the French Competition Authority (hereinafter referred to as the Authority) announced: The decision to deal with Google for 150 million euros (US $ 166 million) Fines to penalize abuse of market dominance during platform rulemaking and enforcement.
When many media reported the case, they used the word “high price penalties.” This formulation was actually inaccurate. Although in the eyes of ordinary people, 150 million euros is a huge sum of money, but for the “battled” Google, this is only a small fine. In recent years, the antitrust wave has swept the world, and Google, as one of the representatives of Internet giants, is naturally punished frequently. Only in Europe, the cumulative fines Google has suffered since 2017 have exceeded $ 9.3 billion.
However, the significance of antitrust cases can never be measured simply by the amount involved. For a giant company like Google, the legitimacy of the business model is the most important. As long as antitrust penalties do not interfere with its business model, even paying billions of fines will not be too big.
In contrast, if the penalty decision is directed to the business model, even without a fine, the damage to the company will be huge. In this case, although the amount of punishment was not high, the content of the punishment directly pointed to Google’s power to formulate, interpret and enforce rules. In this sense, what is hidden behind this small punishment is actually a big problem.
Google as an advertising service provider
When it comes to Google, the first reaction of most people is: This is a company that provides search services. This is certainly true. On the Internet, Google is known for its quality search services. However, Google does not charge for providing people with search, so what does it rely on to bear the huge cost of search services? The secret lies in advertising.
Although Google ’s business has been very diversified, from the perspective of revenue and expenditure, advertising revenue is still the most important source of revenue for Google. According to Google’s parent company Alphabet at the end of October of the third fiscal quarter of 2019, its total revenue for the quarter was 40.499 billion US dollars, of which revenue from advertising reached US $ 33.92 billion The proportion of total revenue is as high as 83.8%.
It’s easy and difficult to advertise for a company like Google that started as a search company.
Simple, because it is an important search entrance for billions of people, and it has huge traffic. As long as Google is willing, it can monetize this huge traffic through keyword auctions and other methods.To lie down and collect money.
It is difficult because in the process of monetization, it must always weigh the commercial interests and the neutrality as a search engine. If a search engine wants to gain people’s favor, the quality of its service is the first. Only when the search results it provides are objective and neutral enough to meet people’s needs will people choose it and use it.
If this search engine is artificially distorting the search results for business reasons, people will lose their trust in it, and gradually abandon it and stay away from it. In this regard, Baidu, which we are familiar with, has provided a good The negative textbooks are not repeated here.
In order to be able to make a trade-off between business interests and the neutrality of search, Google creatively proposes a solution that coexists with dual search results. When people search for keywords, Google ’s search engine will show two results: in the middle of the search results page, Google gives “natural” search results, which are calculated according to its algorithm and key Word most relevant results. Next to the “organic” search results, results with the word “sponsored” and other commercial ads will appear.
Here, results labeled “Sponsored” are based on auction rankings. For a certain keyword, different companies can bid on it. In the end, a higher bidding company can put its information higher up-of course, it needs to identify itself with the word “sponsorship”. Commercial ads may not be related to search keywords. Companies can bid to place their ads prominently on Google search results pages-of course, it also needs to add the word “advertising”.
Through this positional difference and identification, Google can more clearly compare “natural” search results with commercial ads (including “sponsored” search results and Pure commercial ads) to get sufficient commercial profit while maintaining search neutrality as much as possible.
At this point, sharp-eyed readers may have seen the problem: Although Google uses the above method to distinguish “natural” search results from commercial ads, do these ads also appear on Google’s search pages? If the ads themselves were problematic, wouldn’t the people who learned the information from Google’s search pages also blame Google for these problems?
Yes, this problem does exist. In fact, some searches in reality have followed suit here. Google certainly took this into account. To prevent this problem, it is aimed atReporting behavior sets very detailed standards. Only those companies that accept these codes of conduct are allowed to participate in the ad auction on the Google Ad platform, and their advertising content is finally allowed to be posted on Google’s search page.
It stands to reason, Google’s standard approach to advertiser behavior is conducive to ensuring the quality of search results, and it is also helpful to the consumer experience. It should be seen as a useful attempt by Google to make a trade-off between business interests and social responsibility. However, it was such a rule that eventually brought Google’s authority’s ticket.
Investigation due to a penalty
So how did this case happen? This starts with a French information consulting company called Gibmedia. Gibmedia has three types of websites: info-metro.fr, which publishes weather information, info-societe.com, which publishes company data, and pages-annuaire.net and directorys-inverse.net, which publish phone information. On the one hand, Gibmedia participates in the bidding on the Google Ad platform, publishing its ads on Google’s search page, and on the other hand, provides commercial advertising space on its own website to earn advertising costs.
Four years ago, Gibmedia found that Google had suspended its account on the Google Ad platform without notice to itself, and cancelled its right to post advertisements on Google pages, so it contacted Google Negotiations were held. The answer from Google was that Gibmedia provided advertising space for some scam websites with ambiguous fee terms, which violated Google Ad’s rules for advertisers. In the interest of protecting consumers, Google “does not want such information to appear on the system”, so it suspended Gibmedia’s account.
For a company like Gibmedia, advertising is the top priority of its business. Its revenue and profits are largely derived from advertising, and advertising revenue is mainly determined by website traffic. Where does the traffic come from? A considerable part comes from the diversion of search engines such as Google. Therefore, once Google deprives it of advertising rights, Gibmedia’s company cuts traffic and loses revenue and profits.
In a hurry, Gibmedia invested in the Authority on the grounds that Google ’s suspension of its account was “non-objective, opaque, and discriminatory” and would have anti-competitive effects.The lawsuit requested the authority to take urgent and temporary measures to stop this behavior of Google, while punishing Google accordingly. After receiving the complaint, the authority immediately analyzed the case and finally determined that the problems reflected by Gibmedia did not meet the emergency conditions, and therefore refused to adopt emergency interim measures to stop Google’s behavior. However, the Authority also believes that this complaint does reflect some issues and therefore decides to continue to investigate the situation.
What’s wrong with Google
It doesn’t matter if you don’t check it, a lot of problems have been found after a check. According to the information posted by the Authority on its website, Google Ad has four main problems with rulemaking and the treatment of Gibmedia: unclear rules, uncertain interpretations, lack of notice, and discriminatory enforcement.
1. The rules are ambiguous
The Authority believes that Google has a market share of more than 90% in the entire French search market and more than 80% in the search-related online advertising market. At the same time, it has a very high Market entry barriers. Based on these conditions, it can be comprehensively determined that Google has a dominant market position in the French search market.
In the opinion of the Authority, as a market-leading advertising search company, Google should give a clear definition of its advertising rules and implement its advertising platform operating rules in an objective, transparent and non-discriminatory manner. But in fact, the wording given by Google in the advertising rules is “not based on any particular permanent definition”, and Google can explain it at any time according to the situation.
Take Gibmedia as an example. The reason given by Google is that Gibmedia does not meet the “prohibition of charging users for fees for products or services that are normally free” in Google Ad ’s rules for paid advertising. However, the Authority considers that the Google Ad rules do not give a clear definition of “usually free”, and in reality this concept is actually very vague. In this regard, the Administration provided the provision of weather information as an example.
In the market, many websites provide free weather information, but at the same time, many websites, including the French Meteorological Agency, provide paid services. In this sense, it ’s hard to tell whether a specific piece of information like weather is “usually free”, Not to mention more general information. In this case, Google penalized Gibmedia for charging “usually free” services, which hit businesses with a vague rule. In the Authority’s view, this approach is unjust.
2. Uncertainty of rule interpretation
The Authority pointed out that in addition to the unclear rules, Google also has the problem of uncertain interpretation of rules. For example, in September 2014, Google had acknowledged that Gibmedia’s annuaires-inverse.net pay-per-use business model complies with its rules regarding the sale of generally free services, allowing it to place ads. But within a few months, Google disqualified the site from advertising, and in the process, the site’s business model did not undergo any substantial changes.
Why does Google have such obvious inconsistencies in the interpretation of the rules? This is basically because the rules themselves are too vague, leading to differences in interpretation of the specific provisions of the rules, even within the company. According to regulations, when advertisers are not clear about the terms of the rules, they can consult Google’s support team. However, in many cases, some actions that the support team considers to be in violation of the rules will be punished by Google afterwards.
The reason is that the support team does not actually have the final interpretation of the rules. In Google, the final interpretation of the rules belongs to the so-called policy team. What exactly does a rule mean, and whether an advertiser ’s behavior violates the rules, they count. The trouble is that in reality, the support team and the policy team often fail to communicate, and the former does not understand the true intentions of the latter. In this case, there is a phenomenon in which the support team recognizes an action, but the policy team denies it.
3. Lack of notice
Google’s ambiguity on the rules and uncertainty about the interpretation of the rules itself is a headache. What makes it even more of a headache is that Google often changes rules and interpretations without notice.
A lot of times, some websites will find that their promotion is suddenly suspended by Google. After asking Google, they received a note about the new rules as a justification for the punishment. In this case, it is often difficult for a website to object, because before penalties are given,Most of Google has modified the rules in the Help Center and other places. However, in most cases, Google will not notify advertisers of the modification and specific content.
In the view of the Authority, Google ’s self-modifying rules and then penalizing its violations without notifying advertisers are obviously inappropriate. In this case, advertisers will be placed under a high degree of legal and economic uncertainty, and their operations may be affected by Google policies at any time.
4. Discrimination in law enforcement
In addition to the above-mentioned problems in the formulation and interpretation of the rules, Google also suspects of discriminatory behavior in the implementation of the rules.
Take the punishment for Gibmedia as an example. While Google has repeatedly punished Gibmedia for violating the rules, it still advertises on its search page providers with companies similar to Gibmedia’s business. The agency’s investigation found that Gibmedia was not the only company to enjoy Google’s discriminatory treatment.
In fact, many websites that provide reverse lookup or weather information payment services have been revoked by Google for violating the so-called “usually free” rules, but at the same time, many other companies engaged in similar businesses Without any punishment.
Whether such discrimination is intentional or unintentional by Google, objectively it has caused inequality in competition among companies.
What does Google’s rules mean
According to the general anti-monopoly treatment process, the Administration further analyzed Google ’s intention to take these actions and its consequences after determining that Google does have “abuse of market dominance”.
The Authority first affirmed Google ’s actions to modify and reinterpret the rules for the purpose of protecting consumer interests, and considered it to be completely legal in itself. However, in the opinion of the Authority, safeguarding consumer interests is not enough to provide a legitimate basis for Google to treat participants in different and random ways under the same circumstances. The Authority believes that even if Google did not have a clear intention to take such discriminatory actions, it was at least negligent or opportunistic.
So why is Google emphasizing “free service sales” in its advertising rules? It really doesIs it purely selfless? In the opinion of the Authority, the answer may be no. In fact, Google’s rules will have a big impact on the business models of companies that rely heavily on its diversion.
Specific to the “free service sales” rule. When Google emphasizes this rule, websites that guide its traffic will be more inclined to choose the “free content + advertising” business model-on the one hand, it attracts through free services. Customers, on the other hand, earn revenue through ad display. In addition to being a search engine, Google is also an important advertising service provider. Therefore, when more companies choose the “free content + advertising” business model, Google has more sources of business. In this sense, although Google emphasizes that the “free service sales” rule is made for the benefit of consumers, it also has some selfishness behind it.
What are the consequences of Google’s rules? In the opinion of the Authority, the most immediate consequence is the damage to the website’s innovation in the business model. If there are no similar rules, then the website’s business model innovation may be multifaceted. It may choose either the “free content + advertising” model or the direct charge model. The existence of the above rules may destroy this diversity and make more websites choose “free content + advertising”.
In addition, the Authority believes that the existence of the above rules may harm those less-exposed websites, making it more difficult for them to establish their brand and reputation. Although, as we pointed out in the previous article, Google will display both “natural” search results and auction ranking results on the search results page, in fact, the optimization process of “natural” ranking is very long. For a new website, If you want to be seen in a short time, you can only choose the channel for auction ranking.
So, under the “free service sales” rule, which companies would be more willing to choose a bid ranking? The answer is of course those companies that rely more on traffic and use advertising as their main source of revenue. In this case, those websites that are less dependent on traffic will have a hard time coming up, and it will be hard to find them.
Based on the above analysis, The Administration believes that although Google has some reasonableness in the formulation and adjustment of advertising rules, it does have a lot of problems in the implementation process, which has the effect of damaging competition. Accordingly, the authority decided to impose a penalty of 150 million euros on Google. In addition, the Authority also requested that Google clarify the rules for Google Ad advertising and clarify the penalties imposed on advertisers based on the rules, and provide compulsory training to advertisers to keep them informed of the rules. Changes in status.
Where is the limit of platform rule autonomy?
Although Google ’s case happened in France, it is also very significant for Chinese Internet practitioners and regulators.
With the development of Internet technology in the past ten years, the platform has risen rapidly and has become an important form of economic organization. In terms of business models, there are huge differences between platform companies and traditional companies. Platform enterprises have largely broken through the role of traditional enterprises, and have the role of market operators and regulators.
As a market operator and regulator, of course, the platform is obliged to be responsible for the operating order on it. But this obligation naturally means that the platform has a right to make rules to decide what the operators and users on the platform can and cannot do.
There is basically no objection to this, both in academia and policy. However, how much autonomy does the platform have, and how much freedom does it have to make rules, interpret rules, and enforce rules? How to define the boundary between platform autonomy and abuse of market dominance? Controversy over these issues has never stopped.
In this case, the Authority believed that Google had problems with the clarity of its rules and the uncertainty of its interpretation. It should be acknowledged that these problems should exist objectively, and they may also cause problems that the Authority said hinder website innovation and suppress websites with low exposure. However, if we look at it from Google’s point of view, it seems that we can find some arguments for these issues.
We know that the Internet economy is a highly innovative economic model, and its innovation and development may be rapid in a short period of time. The rules are written under the given conditions. Often a rule has just been written, and its corresponding situation may have changed. Therefore, if a platform sets the rules very fine, its rules will become outdated and its own certainty may be weak. In this case, some platforms can usually only adopt some principled expressions when formulating rules, and when they encounter specific problems, they only use specific explanations to explain the rules.
It is worth pointing out that this method is not unique to the platform. In fact, it is more like a national practice. At present, in most statutory countries, legal provisions are very principled. Depending on the situation, legislators will continue to issue documents to supplement and explain the law, and may modify the law if necessary. And in concrete practiceThe judge will also give his own interpretation of the legal provisions based on the actual situation and his own judgment. From this perspective, the act of making principled rules like Google’s and subsequently interpreting the rules may not be a big problem in itself. As for issues such as discrimination in law enforcement, Google seems to easily find an excuse to justify itself.
The reason I gave above for Google is by no means to “wash the ground” for Google, but to explain a problem, that is: if we want to think in principle which platform rules are legal and which It should also be regarded as “abuse”, then it is likely that we will not be able to reach a clear conclusion. Although we may reach consensus on some principled issues, for example, the rules of the platform should minimize negative externalities and maximize the welfare of the society, but as soon as it goes into specific cases, these consensuses will quickly turn into controversy.
Based on this, I personally believe that in strong antitrust cases dealing with design platform rules, one should not simply rely on whether the platform has formulated certain rules or adopted certain methods to maintain the rules. It made a ruling. While thinking about behaviors, you should look more at what performance these behaviors produce.
In this case, the Authority has actually made some demonstrations, in addition to identifying behaviors, it has also analyzed the impact of behaviors. For this analysis, we should learn from it. Of course, in practice, we should probably go further. For example, we can consider quantifying the positive and negative aspects of behavior to see how the changes in Google ’s advertising rules have brought about benefits to consumers and how much they have affected advertisers ’profits. After making a comprehensive comparison of the positive and negative costs and benefits, a final judgment is made. If so, the whole conclusion may be more objective and credible than purely logical reasoning.
The operating rules must keep pace with the times and must accompany the contradictions of the interests of all parties. How to define the autonomy and abuse of the platform?
The article is from WeChat public account: Economic Observation Network (ID: eeojjgcw) , Author: Chen Yongwei