Facing fresh regulation in Australia, Google has taken a rather ambitious tack: it’s disputing the assertion by the country’s antitrust regulator that it needs to be reined in because of its “market power” in the areas of search, search advertising, and news media referrals.
Almost all web searches in Australia are conducted through Google’s engine. But the company is claiming that this position still leaves it vulnerable to meaningful competition in search and search advertising. Now that’s chutzpah.
The concept of market power is central to competition law. There’s nothing illegal about having an extraordinary share of a market, but problems set in when you use that power to shut out rivals or to capture related markets.
In December, the Australian Competition & Consumer Commission (ACCC) issued a preliminary report in its investigation into digital platforms. It said Google and Facebook were “unavoidable partners” for advertisers and media outlets in the country, due to their substantial market power: Google had 94% of the Australian search market, and Facebook 95% of the country’s social networking market.
“The ACCC considers that the strong market position of digital platforms like Google and Facebook justifies a greater level of regulatory oversight,” agency chair Rod Sims said at the time, arguing that new regulation was needed to protect journalism and privacy, and to promote consumer choice.
In a submission to the ACCC, Google claimed the agency’s preliminary report was based on “the mistaken premise that Google has market power in search, search advertising, and news media referrals.”
To be clear, Google is not arguing that it does not have significant market power in search—though it is using that argument regarding the “news media referrals” market. A 94% share of the search market is hard to dispute in itself, but Google is trying to claim that, in effect, it doesn’t matter that much.
“Google faces fierce competition from other providers, including vertical search sites like Amazon, Expedia, Domain and Carsales.com, many of which users access directly through mobile apps,” the submission read. “The preliminary report is incorrect to conclude that there is limited substitutability between generalized and specialized search services, and that Google is insulated from dynamic competition.”
App-based searches are a factor, but, especially as virtual assistants become the norm, generalized search is still where it’s at on mobile. Google is the default search engine on Apple’s Safari browser and, of course, on its own Chrome browser. That means most searches taking place on mobile devices go through Google—a hugely lucrative factor for Google, otherwise it wouldn’t be paying Apple a reported $12 billion this year for the privilege.
This is not a tactic that more specialized channels get to use—not even Amazon, which Google was quick to point out sees more product searches in the U.S. than Google does, but again, this is about Australia.
At this point, it’s worth remembering one of the reasons why Amazon doesn’t get to compete in this arena: Google used its dominance of the Android market to force manufacturers not to make Android phones using non-Google variants of the operating system. This was established by European Union antitrust regulators, who specifically noted how Google’s market abuse left Amazon unable to get any big manufacturers to use its Android-based Fire operating system. (The EU fined Google $5 billion for abusing its control of the Android ecosystem; Google’s appeal of the fine is still pending.)
No one can blame Google for trying to argue that it shouldn’t face fresh regulation. But equally, no-one should blame regulators for deciding that it’s time to rein the company in.