Does Google violate antitrust laws by eliminating competition?
Vertical search is an expanding market where a lot of money can be made. The
term "vertical search" refers to more or less specialized search engines for
specific topics, such as Google News for news or YouTube for videos. There are
already more searches conducted at YouTube or eBay than at Yahoo in several
countries. TradeComet also operates a specialized search engine for B2B goods
and services. To promote its web site TradeComet used the Google AdWords program
and was quite successful at the beginning. Officials even meet with Google to
further increase the effectiveness of the ad campaigns. In December 2005
Google praised Trade Comet as "site of the week." In May 2006, however, Google
raised the minimum bids for keywords on which TradeComet bid. Instead of 5-10
cents, several keywords were only available at a minimum price of 5-10 dollars.
These ad rates were way too expensive for the plaintiff to continue promoting
itself within Google's online marketing network. So this move strangled
plaintiffs primary source of search traffic, resulting in substantial drops in
traffic and revenue (about 90%). Google explained to TradeComet that the
increase was due to its poor landing page quality.
TradeComet alleges that Google manipulates its auctions to favor certain
advertisers like business.com over others. Google establishes minimum pricing
thresholds that can differ by advertisers based on criteria , such as "Landing
Page Quality", that is exclusively in Google's control. It is impossible to know
how Google actually picks the winners and losers of its ad actions. In the eyes
of TradeComet officials, Google learned that its search engine was a potential
competitor. The lawyers stated that, “Google understood the threat that vertical
search engines posed to its business mode.” Hence Google increased the bid rates
for advertisement for the company by as much as 10,000 percent.
The suit could be a
real danger to Google. So far, no court has said that Google has a monopoly. But
the courts only considered an online, not a smaller search advertising market.
After the aquisition of DoubleClick Google has strenghtened its position in the
online advertising market and remarks by the Federal Trade Commission lead to
the conclusion that the relevant market indeed is sponsored search advertising
only. And on that market, Google probably has a monopoly share.