By Tom Fairless
BRUSSELS--New research by two prominent U.S. academics suggests
that Google Inc. is harming Internet users and violating
competition laws by skewing search results to favor its own
services, a potentially significant twist in Europe's long-running
antitrust investigation of the U.S. search giant.
The research combines statistical testing with detailed legal
and economic analysis to examine the ramifications of Google's
practice of promoting its own specialized search services, such as
for local restaurants or doctors, at the expense of rivals like
Yelp and TripAdvisor.
It was sponsored by Yelp, which has filed a complaint with EU
antitrust authorities over Google's search practices. It was
presented to EU regulators on Friday.
The study's authors-- Michael Luca of Harvard Business School
and Tim Wu of Columbia Law School--found that users were 45% more
likely to click on results that were ranked purely by relevance,
rather than as Google ranks them now, with its own services
displayed prominently.
"This suggests that by leveraging dominance in search to promote
its internal content, Google is reducing social welfare--leaving
consumers with lower quality results and worse matches," the
authors wrote.
The results, they went on, provide "empirical evidence" that
Google's search practices have harmed consumers in some cases and
as such "cannot be described as pro-competitive."
"The demonstration of consumer harm is, we think, an important
conclusion...that should influence any competition law analysis,"
the study says.
Mr. Wu is one of the most prominent academics in the field of
competition law and technology. A former adviser to the Federal
Trade Commission, he is known for coining the phrase "net
neutrality."
One official at a European antitrust authority, who declined to
be named, said any study that showed Google caused "quantifiable
harm" to consumers would "certainly bring things forward" for EU
regulators.
Those regulators "will be delighted to have as much evidence as
they can, " the official said.
EU antitrust chief Margrethe Vestager formally charged Google in
April with skewing results to favor its comparison-shopping
service, escalating a five-year investigation. At issue is whether
Google uses its 90% share of online searches in Europe to squeeze
competitors in related markets where it also competes.
The charges could lead to billions of euros in fines and
requirements for Google to change its business practices. Ms.
Vestager said she continues to examine other domains, such as
travel and local services.
Google declined to comment on the new study. The company has
repeatedly denied breaking EU antitrust rules, and has said it
strongly disagreed with the need to issue formal charges. U.S.
regulators closed their own investigation into Google's search
practices two years ago after the company agreed to voluntary
changes.
Google has long argued that it serves users by prioritizing its
own specialized search services for areas like maps and travel,
because it thereby answers users' queries more precisely.
The academics agreed that might be true in some instances, such
as displaying time or solving arithmetic problems.
But in other instances, they argued that Google was making its
overall product worse for users to provide favorable treatment to
Google content.
The authors focused on searches for local services like
restaurants or hotels, the largest single category of search
requests. They randomly displayed one of two sets of search-result
screenshots to more than 2,500 Internet users. One set of users saw
a page reflecting results currently displayed by Google, while the
other set saw a page that ranked third-party review sites like Yelp
and TripAdvisor based on their relevance--using Google's own
algorithm.
The survey found that 32% of users would click on Google's
current local results, while 47% clicked on the alternative
merit-based results. That near-50% increase in clicks is "immense
in the modern Web industry," the authors wrote.
"Stated simply, when it comes to local search, Google is
presenting its users with a degraded version of its search engine,"
the authors wrote.
The experiment was carried out on an online platform,
UsabilityHub, that is used for testing website designs before a
website is introduced to the market.
The authors conceded that there were differences between their
click surveys and actual search results, and that they didn't have
access to internal Google data to verify their results. They
nevertheless cross-checked the results using data from Yelp, which
indicated they provided a reasonable estimate of actual user
behavior.
In one example, users were asked where they would click first on
a screen showing results for "coffee Louisville ky."
The authors argued that Google's behavior could harm consumers
because they might not find what they were looking for in Google's
own set of results; they took longer to find the information; or
they ended up patronizing a business that wouldn't be their first
choice.
Write to Tom Fairless at tom.fairless@wsj.com
Access Investor Kit for Google, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US38259P5089
Access Investor Kit for Google, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US38259P7069
Subscribe to WSJ: http://online.wsj.com?mod=djnwires