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5 things to know about the EU’s new Google cases

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Brussels has opened two preliminary investigations into Google’s advertising practices, investigating how the company gathers data and how it operates in the multi-layered market of display advertising technology.

Today is the deadline for a host of companies to send their responses to questionnaires they received from the European Commission in December.

In this second round of questioning, the Commission narrowed down what were originally very broad questions about both Google and Facebook, and now it seems to be testing several lines of attack against Google. POLITICO was first to report on the new questionnaire.

EU competition law enforcers investigated and fined Google three times from 2017 to 2019, hitting it with more than €8 billion in penalties while ordering it to lower its barriers to competitors. The December questionnaires represent a new angle of approach to the U.S. search giant, at least in Europe.

Here are five things to know about the new Google inquiries.

1. Attacking the business model

Previous EU competition investigations looked into Google’s search results and its mobile operating system, and led to billions of euros in fines. This time Brussels is looking at the tech giant’s business model — how Google makes its money.

“The Commission realized that Google’s motive in both cases was to gather data. Now it moves toward the heart of the problem: how it monetizes these data through online advertising,” said competition lawyer Thomas Vinje at the firm Clifford Chance, who acts for Google opponents in several antitrust cases.

The 39 questions advertisers were sent mainly revolve around display advertising and how Google manages the complex process of matching advertisers with websites that offer space for video or non-video display ads.

Some dispute the claim that this goes to the heart of Google’s business model.

Display advertising is more important to the business model of news organizations, who can offer expensive advertising space on their high-traffic websites, than it is to Google, which earns more money with search advertising, a person familiar with the investigation said.

“Adtech helps websites and apps make money and funds high-quality content,” a Google spokesperson said, adding: “We have been engaging with the Commission and others on this important discussion for our industry and will continue to do so.”

2. Close, but not there yet

The Commission’s questioning seems to have narrowed down to digital advertising, but the general impression is that the opening of a formal investigation is not imminent.

Three people who saw the first round of questions Brussels sent out about Google and Facebook at the end of 2019 said it reminded them of a sector inquiry, in which Brussels very broadly explored the companies’ use of data and online advertising, rather than a specific investigation into an alleged offense.

Facebook even took to the EU General Court, which in October suspended two Commission orders to provide a wealth of information, “taking into account the likelihood that [the requests] will capture a large number of documents which are not necessarily relevant to the Commission’s investigation,” according to the ruling.

Google did not to go to court, and responded to the second round of questions the Commission sent in summer 2020, which was more focused on advertising technology, according to a person familiar with the matter.

In the new questionnaires it sent to publishers, advertisers and Google’s adtech competitors in December, the Commission built on the responses it got from Google, digging further into display advertising. The questionnaire’s headline has two case numbers, one with the mention “Google AdTech” and the other with “Google Data-related practices” (the same name as the probe Facebook disputed in court). The majority of questions this time seems to relate to the former probe.

“The Commission sees smoke, but is still checking whether something is burning,” said a lawyer who helped clients with the questionnaires. The existence of case files is not indicative in that regard, the person added, since such cases are sometimes closed even before Brussels starts sending questionnaires.

3. The lines of attack

The Commission’s most recent questioning suggests it has some very clear “theories of harm” in mind — legal theories of how it could declare Google’s behavior anticompetitive.

Many of the concerns were previously voiced by competition law professor and practitioner Damien Geradin, who represents news publishers.

“We identified Google as the leading, and most likely dominant player across the ad tech value chain and expressed the concern that it [seems to engage in] anticompetitive conduct, in that it uses its leading ad server to favor its ad intermediation business,” Geradin wrote shortly after the first round of questions was sent out.

In one question, the Commission asked about Google’s 2015 decision to stop selling YouTube ad inventory on its ad exchange. That meant it was no longer available to competitors of its own subsidiary that assists advertisers in buying space to run their ads.

Brussels’ competition officials in another line of questioning looked at how Google, in 2018, introduced the default setting “include Google Display Network” for advertisers who launched search campaigns. The Commission wanted to know if advertisers kept this setting or opted out, and what the consequences were.

The use of default settings by large digital platforms (in this case to attract more business) is often problematic for individuals, for example when it comes to privacy. But in this case, one of the Commission’s challenges will be to prove that professional users are not sufficiently equipped to find the “off” button.

4. Late to the party

In the world of competition law, Brussels was a trailblazer for a long time, handing out the first fines to the likes of Microsoft, Intel and Google with innovative theories about their anticompetitive behavior, albeit after lengthy investigations.

But many of the practices it is currently asking about echo investigations recently opened by U.S. state attorneys general and the U.K. Competition and Markets Authority.

In one of its last questions for advertisers, the Commission asked about Google’s 2019 decision to phase out third-party cookies on its Chrome web browser and replace them with other tools, an initiative the company called the “Privacy Sandbox” that is the main focus of an investigation by the U.K. competition authority.

Similarly, withholding YouTube inventory from competing ad-buying tools available is already part of a U.S. investigation led by Texas Attorney General Ken Paxton.

“At long last after everyone else … [has] been at it for years,” tweeted competition economist Cristina Caffarra, referring to the Texas and CMA probes and also to work by the Australian and French competition authorities. “It will only take another four years.”

5. Testing the DMA

Two people who saw questionnaires said the responses could also inform the Digital Markets Act, Brussels’ ongoing legislative effort to curb the market power of so-called gatekeeper platforms.

The proposal the European Commission tabled in December already contains orders on gatekeepers to provide access to data or ensure that data can be easily transferred, which could address some of Google’s adtech practices that companies have been complaining about. Another such obligation is specific for online advertising and requires the gatekeepers to provide publishers and advertisers with transparency about fees.

The Commission could still be testing if the rules it is proposing fit the behavior on the market, one of the people said.

Laura Kayali and Thibault Larger contributed reporting.

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