Ebay backs Google over Brussels antitrust inquiry

Richard Waters and Alex Barker

Ebay's chief executive has added weight to Google's antitrust defence by saying that the pair are direct competitors in online shopping, echoing the US search group's claim that Brussels misunderstands how people buy products online.

John Donahoe said in an interview with the Financial Times that barriers were breaking down between different areas of online commerce. The auction website chief's comments support arguments already made by Google in its first response to the European Commission's landmark competition case.

EBay headquarters in San Jose, Calif.
Getty Images

Brussels's complaint, announced this month, focuses on a claim that Google has abused its dominance of web search to squeeze out rival specialist shopping search engines by favouring its own in-house service.

Google has responded by saying that European regulators have not recognised how it is dwarfed in online shopping by eBay and Amazon, making questions about how it handles product queries on its own site beside the point.

Asked if eBay was a direct competitor of Google Shopping, Mr Donahoe said: "Yes . . . We are a strong commerce competitor [of Google's]."

The eBay chief's comments highlight the challenges that Brussels faces in bringing its most important case in the fast-moving tech world since taking on Microsoft more than a decade ago.

When European regulators began their antitrust inquiry into Google five years ago, for instance, entering a query about a product triggered a set of algorithmic search results. Now, it summons a new form of advertising-funded listings.

"Whatever the product was when the case was brought, the business is more fluid than can be easily regulated," said Brian Wieser, an analyst at Pivotal Research Group.

Key to the commission's case is the argument that Google dominates the market for shopping search, thanks to its role as a general-purpose search engine.

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European competition commissioner Margrethe Vestager pointed to Google's share of more than 90 per cent of the general web search market in Europe as evidence of its influence. But in a blog post, Google claimed that this overstated its influence when it came to online shopping sites, with Amazon and eBay overshadowing it in Germany.

The role Amazon and eBay play in online commerce has changed as they have expanded from their retailing and auction roots to become broader online marketplaces for other merchants to sell their products.

"Generally, Amazon remains the first place where people start their commercial queries, but they would often move to Google next if they can't find what they're looking for on Amazon," said Yousseff Squali, an analyst at Cantor Fitzgerald in New York.

In one indication of their relative scale, Google Shopping had 13m unique visitors in Europe in February, compared with more than 100m each for eBay and Amazon, according to ComScore.

eBay's profit plan

Google's argument has been dismissed by rival comparison shopping engines, which rely on attracting traffic from Google's search engine and are at the centre of the commission's case.

"As Google is well aware, neither Amazon nor eBay are rivals to Google's shopping comparison service," said Shivaun Raff, co-founder of Foundem, the UK comparison shopping service that was the first to file an antitrust complaint in Europe.

Instead, she said, the bigger ecommerce sites act as "merchant platforms" — full-service sites where third-party sellers can complete transactions. Comparison shopping sites such as Google Shopping and Foundem, by contrast, only take a referral fee for sending users on to full ecommerce sites.

Another sign they inhabit different markets is that comparison shopping engines list products for sites such as Amazon, said another person close to the commission's case — highlighting a symbiosis between the different categories of website. By contrast, comparison shopping sites do not list each others' products, this person added.

These can seem like fine distinctions, however, particularly as the boundaries between different online services erode. Even one backer of the case against Google admitted that trying to define the different players in online ecommerce was a "grey area", while adding that "they are not precisely the same market".

The second consideration that complicates the commission's case has been a fundamental change in how Google handles shopping searches in the years since the antitrust investigation began. Brussels had initially called on the company to stop giving preferential treatment to its own shopping results but in 2012 Google Shopping was converted into an advertising-based service. Merchants now bid in an auction to have their listings included in an index, then pay when users click on their products, making it similar to Google's Adwords.

"Circumstances have changed," said Gary Reback, a lawyer representing several US comparison shopping engines against Google. "We don't rank the same way we do on a relevance algorithm." As a result, he said, the commission's call for Google to apply its algorithm fairly risked confusing the picture and distracting from more relevant ways of limiting Google's power.

Some rivals believe another solution could involve showing another company's shopping results instead of Google's own advertising-based service if the former were a better deal for consumers. However, that would mean overriding a form of paid advertising on Google, going well beyond the commission's stipulation to be fairer in how its search algorithm works.

In an attempt to avoid thorny issues like this, former competition commissioner Joaquín Almunia spent years on a fruitless attempt to reach a voluntary accord with Google. The formal complaint his successor has filed will trigger a new and more high-risk stage in the long-running case.