First Impressions of Google AdSense Decision

By Viktorija Morozovaite

The Google AdSense decision has come out on the 20^thof March, 2019. With imposition of €1.49 billion fine it marked an end to the third European Commission’s investigation into tech giant’s practices, each resulting in spectacular penalties (together rounding up to €8.2 billion – a sum equivalent to Benelux countries’ annual contribution to the EU budget) and advancing the debate between competition practitioners and academics worldwide. Admittedly, the outcome did not come as a surprise to many – over the past decade, European Commission seem to have become the nemesis of giant tech companies with investigations into practices of Google, Apple, Facebook and Amazon. While the full decision is not published yet and it is difficult to comment on its merits, this blog post aims at distilling some of the ongoing issues, placing the decision in the broader context.

Decision

The investigation concerned online search advertising intermediation market. Through AdSense platform, Google acted as advertising broker, between advertisers and website owners that want to profit from the space around their search results’ pages. Google is also active in online search adverts market. In fact, it is platform’s most profitable core business area (see). According to the Commission, Google was found to be dominant in both of these markets (70% and 75% market shares held in each respectively for over 10 years).

By acting as a gatekeeper to the online search adverts market, as well as competing within the same market, Google inevitably holds a peculiar position and special responsibility precluding it from favouring own services to advance its dominance. In this decision, Art. 102 infringement was found on the basis that Google conducted its online search advertising intermediation services through imposing individually negotiated contractual obligations with the most commercially important publishers. Commissioner Margrethe Vestager stated that this way, ‘Google has cemented its dominance in online search adverts and shielded itself from competitive pressure’ (see). The agreements included the following anti-competitive clauses:

Exclusivity provision (since 2006) – most commercially important partners were prevented from ‘placing any search adverts from competitors on their search results pages’.
Premium placement (since 2009, designed to gradually replace exclusivity provisions) – direct partners were required to take on a minimum number of ads from Google and display it on the most profitable ad space.
Written approval was required from Google before publishers would make changes in the way in which competitors’ ads were displayed (since 2009).

Type of abuse

It is clear that in Google AdSense, Commission focused on exclusionary nature of the abuses, aimed to foreclose competitors and arguably protect its market position in the core (in this case, online search advertising) business area. While the conduct generally seems to neatly fit within the ‘exclusive dealing’ category (see para 32, Communication), it is not unlikely that the full decision would incorporate the echoes of ‘essential facility’ reasoning, due to the structurally important Google’s position in the platform ecosystem (in this case, through intermediating online search advertising services).

Theory of harm

When establishing the theory of harm, the Commission seems to have focused on impeded consumer choice, as a result of Google’s restrictive agreements with key commercial partners. According to the decision, by, in effect, excluding rivals in online search advertising market, Google not only deterred competition but also stifled innovation which resulted in less choice of alternative types of ads. It is plausible to see consumer choice being treated as a value that ought to be protected in digital markets, especially those dominated by giant techs. In fact, in multi-sided markets context, a shift from price to other parameters of competition (choice, innovation, quality) becomes necessary. For instance, in Google AdSense, consumers are operating in the zero-price side of the market, where they apparently pay no monetary price for the service (on zero-price markets, see). Thus, developing a theory of harm becomes a more nuanced exercise than finding an increase in price. However, in this particular case it will be interesting to see how the decision deals with establishing and measuring the alleged consumer harm. Questions arise whether there is more utility for consumers in having a greater variety of ads i.e. is more choice always pro-consumer? Would rivals’ ads result in more or less qualitative service? These questions, of course, although important are not novel and have been pertinent in Google decisions saga.

Remedies

Regarding online search advertising intermediation market, Google was ordered to ‘at a minimum, stop its illegal conduct, to the extent it has not already done so, and to refrain from any measure that has the same or equivalent object or effect’ (see). It is noteworthy that Google has stopped its illegal practices a few months after the issued Statement of Objections in July 2016. Therefore, it seems that the Commission did not have to decide upon ordering potential effective remedies. While in this particular case it may seem unproblematic, this has been a point of critique in the previous Google decisions, considering that lack of clear steps do not comply with the principle of legal certainty (Akman 2017).

During the questions time, when asked to elaborate on the fact that there have not been effective remedies put in place and ‘cease and desist’ order may not result in restoring competition, Commissioner Vestager reinstated that while this is one of the things highly featuring in the decision-making process, in fast-moving markets, even with a speedy Commission’s reaction ‘the risk is that the market would have moved on and it is very difficult to restore competition as it were’ (see).

Even though is it appreciated that each case should be assessed individually and that it is difficult to predict development of the fast-moving digital markets, moving forward it may be desired to incorporate clearer steps as to how platforms as Google may reach compliance with European competition law. Nevertheless, this involves further research in the nature and characteristics of the digital markets as well as more clearly defined competition law enforcement strategies (for recent reports, see this and this).

Bringing it all together

To understand the outcome of Google AdSensedecision it is important to put it in the broader context. The so-called ‘Google saga’ began in 2010, with European Commission opening a probe into Google’s search and comparison-shopping services. In 2015, the official proceedings were opened in relation to Google’s Android operating system, followed by an inquiry into search advertising intermediation market just a year later. In addition to heavy fines, Google Shopping and Google Android decisions resulted in an outright divide of competition law circles, criticizing or praising the difficult (policy) choices made by the Commission each time (to name a few, see: Akman 2018, 2017; Picker 2018; Hoppner et al 2018). However, Google AdSense does not seem to have ‘stirred up the waters.’ While the decision was not unpredictable per se, the Commission’s reasoning (or its themes) could be expected to overlap with the previous Google decisions, thus having a crystallizing effect in regard to emerging competition law enforcement trends.

For instance, the decisions dealt with markets where Google, on the one hand, was a provider of a certain service and, on the other, an intermediary providing access point to that very same market. Indeed, a significant body of research recognises a central role that giant techs play in the platform ecosystem (to name a few, see: Van Dijck et al 2018; Gillespie 2018; Petit 2016). Without appropriate balance being struck between competition law and regulation, competition enforcement may appear to be the only means of curbing platform’ power. Arguably, that balance is not present yet. While economic, social and even political influence (and ramifications) of the Big Tech is undeniable, the question that competition practitioners and academics have grappled with for over a decade now is whether competition law is the right means to curb this power? And, if so, is it suitable to address the challenges posed by digitalisation?

All in all, in Google AdSense, Commission delivered a clearly identifiable exclusionary abuse, established a theory of harm that could still be subject to debate as well as omitted the question of effective remedies. The decision itself was in many ways predictable and fits well within the rest of ‘Google saga’. One is left to eagerly await the full details of the reasoning regarding this outcome.

Brexit and the ways forward for the UK and EU agencies

By Lisette Mustert, Béla Strauss, Miroslava Scholten and Matthew Wood

Brexit raises the question of which way forward for the UK in its relationship with the EU and with EU agencies. For future research and legislative design, this in turn raises a more fundamental question of when which type of agreement between a third country and EU agencies is appropriate, in light of factors such as salience and the interests on both sides. Having analysed all EU agencies’ founding acts, we show in this post that there are three types of formal relationships that exist at this moment between EU agencies and other countries: full membership, observership and cooperation. We argue that the type of this relationship would vary for the UK depending on the score of ‘Brexit salience’, a concept that we introduce. The higher the ‘Brexit salience’ rating is, the more formal the arrangement – full membership or observer – the UK (and the EU) would need to have with an EU agency. According to our scores, this would concern the European Medicines Agency (EMA) and the European Aviation Safety Agency (EASA). In the case of EU agencies that score low on our salience rating, the UK (and the EU) would want to opt for a relatively limited form of cooperation with EU agencies. This would be the case for Cepol, EIGE, ACER, Frontex and CPVO. Surprisingly, the seemingly highly salient agency in the public debate – the European Border and Coast Guard Agency (also known as Frontex) – scores the joint lowest rating. How is this possible, when for the UK immigration is so important during the Brexit vote? It is because, first, our Brexit salience measures do not focus on what is salient in general for the British or European public. Rather, we are concerned with practical matters of policy implementation. As a matter of policy, Frontex has a clear and well-resourced opposite agency – the UK Border Agency – and its operation does not affect a discrete and well-defined policy area.

EU agencies and third countries: three types of formal relationships

Having studied founding acts of all EU agencies, we have seen three types of formal relationships that exist between EU agencies and third countries:

Full membership: the essential feature here is that the third country has a place in the agencies’ main organ – like a management board. Therefore, the third country has the same rights and privileges as EU member states in the agency, except the right to vote (Lavenex 2015) The agencies that currently have at least one third country member are EASA, ERA, EEA, EFSA, EMCDDA, EMSA, Frontex, EIOPA, GNSS. The EFTA states are almost exclusively the ones that cooperate in this manner with the agencies, although in two instances (EEA and EMCDDA) Turkey is also a member. Frontex is the only agency where the EFTA states have some voting rights, so it might be seen as the most intense participation of third countries in any of the agencies. The reason the EFTA states have this special position in the Frontex management board is that participation in Frontex was negotiated in special separate agreements.
Observership: the term ‘observership’ is used very frequently, but never defined. The term obviously suggests a less intense form of participation than membership, a form of collaboration where the third state is simply there to passively take in the events that unfold in the EU agency. This makes it hard to distinguish membership from observership, especially because third country ‘full members’ generally also lack a vote, which otherwise could serve as the distinguishing feature between the two. In many instances, EFTA states are, if not members to an EU agency, at least observers. However, unlike the membership model which is almost exclusively applicable to EFTA states, the observer status is more widely available, in particular to (potential) candidate countries for accession to the EU such as Macedonia, Bosnia and Herzegovina, Albania and Serbia. Currently, there is at least one third country observer participant in EASA, ENISA, EBA, Cedefop, EMA, Eurofound, EASO, EU-OSHA, ECDC, ECHA, FRA, EFSA. Only EFTA and (potential) acceding states are observers to the EU agencies.
Cooperation: EU agencies increasingly make use of this option by adopting working arrangements or memoranda of understanding with third countries. The basic regulations of the EU agencies frequently mention the need for cooperation with third countries. The following agencies have these provisions: EFCA, EASA, ERA, EBA, ESMA, GNSS, Europol, Eurojust, Cepol, SatCen, EMA, EASO, EU-OSHA, ECDC, EEA, EFSA, EMCDDA, EDA, EIOPA and Frontex.

Brexit salience concept

Brexit salience can be defined as the extent to which Brexit may affect EU agencies’ internal workings, how important their role may be in ensuring maintenance of regulatory standards, and how closely they are connected to key areas of the UK economy. To conceptualise and analyse the extent to which Brexit-specific arrangements may be required between EU and UK regulatory agencies so as to enable a smooth form of regulatory alignment after Brexit, we propose to analyse EU agencies with respect to their ‘Brexit salience’ across three aspects:

Connections internally with British staff: this is the extent to which, after Brexit, EU agencies may internally face some instability in their labour force. EU agencies are staffed by members chosen both to represent a range of member states, but also, crucially for our purposes, to bring relevant and specific expertise in the relevant regulatory field. While overall the UK seems to contribute relatively few staff to EU institutions compared with France or Germany, some agencies rely heavily on British staff and expertise. The EMA, for example, has voiced worries about how ‘our activities will be impacted [by Brexit] and we need to plan for this now to avoid the creation of gaps in knowledge and expertise’.
UK agencies’ capacity to maintain regulatory standards:this is the extent to which the UK has similar regulatory capacity to the EU level to maintain regulatory standards. If this is the case, then EU agencies are likely to be less salient as the regulatory environment is likely to stay largely similar, so long as the UK maintains standards on, for example, environmental pollution. However, where the UK does not have regulatory capacity in the form of well-resourced agencies capable of implementing regulatory, information sharing and communication activities that regulatory agencies undertake, EU agencies are more likely to be salient in continued collaborative efforts to maintain regulatory standards.
Economic interconnectedness: lastly, and from the perspective of the UK, EU agencies are more likely to be significant where the UK has significant economic interests tied to the economic sphere those agencies have jurisdiction over. Areas in which the UK economy is especially embedded in global supply chains – for example in financial services – are most likely to elicit interest from UK policymakers with regard to cooperation with agencies I those areas.

This tripartite framework for assessing Brexit Salience in EU agencies covers the salience of Brexit for agencies (their internal workings and employment of UK nationals as staff), salience for the EU (ensuring the UK has the requisite capacity to maintain similar regulatory standards) and salience for the UK (the extent to which agencies cover the regulatory areas that it is concerned with). Brexit salience is a multidimensional concept and not all elements of it will always pull in one direction.

The score board below includes initial salience rating developed inductively scoring ‘low’ (1), ‘medium’ (2) and ‘high’ (3) for each of the agencies for each of the three aspects described above and then adding the scores together to produce an overall ‘rating’ out of 9. The ratings are preliminary and will be further developed through double coding and comparison before final publication.

Preliminary brexit salience score board

	Agency	Overall Salience
1.	European Aviation Safety Agency (EASA)	8
2.	European Medicines Agency (EMA)	8
3.	European Fisheries Control Agency (EFCA)	7
4.	European Maritime Safety Agency (EMSA)	7
5.	European Banking Authority (EBA)	7
6.	European Agency for Safety and Health at Work (EU-OSHA)	7
7.	European Agency for Network and Information Security (ENISA)	6
8.	European Union Agency for Law Enforcement Cooperation (Europol)	6
9.	The European Union’s Judicial Cooperation Unit (Eurojust)	6
10	European Foundation for the Improvement of Living and Working Conditions (Eurofound)	6
11.	European Chemicals Agency (ECHA)	6
12.	European Environment Agency (EEA)	6
13.	Fundamental Rights Agency (FRA)	6
14.	European Food Safety Authority (EFSA)	6
15.	European Agency for Railways (ERA)	5
16.	European Securities and Markets Authority (ESMA)	5
17.	European Global Navigation Satellite Systems Agency (GSA)	5
18.	European Centre for Disease Prevention and Control (ECDC)	5
19.	European Monitoring Centre for Drugs and Drug Addiction (EMCDDA)	5
20.	European Centre for the Development of Vocational Training (Cedefop)	4
21.	European Union Satellite Centre (EUSC; SATCEN)	4
22.	European Asylum Support Office (EASO)	4
23.	European Defence Agency (EDA)	4
24.	Body of European Regulators for Electronic Communications (BEREC)	4
25.	European Insurance and Occupational Pensions Authority (EIOPA)	4
26.	European Agency for Law Enforcement Training (Cepol)	3
27.	European Institute for Gender Equality (EIGE)	3
28.	Agency for the Cooperation of Energy Regulators (ACER)	3
29.	European Boarder and Coast Guard Agency (Frontex)	3
30.	Community Plant Variety Office (CPVO)	3

About the authors:

This blog post is a result of a research project and academic paper (forthcoming) exercised by Lisette Mustert and Béla Strauss, two legal Research Master students at Utrecht University, under supervision of Miroslava Scholten, Rob Widdershovenand Matthew Wood.

EU-Japan Economic Partnership Agreement: Data Protection in the Era of Digital Trade and Economy

By Machiko Kanetake and Sybe de Vries

On 12 December 2018, the European Parliament approved the EU-Japan Economic Partnership Agreement (EPA) which the parties have been negotiating since April 2013. The Agreement, sometimes called as the “cars-for-cheese” deal in a symbolic sense, aims to vitalize economies which represent approximately 30% of global gross domestic product. The Commission presented the final text to the Council on 18 April 2018, which authorized, on 6 July, the signing of the deal. The parties have signed the agreement on 17 July, and, on 8 December 2018, the National Diet of Japan approved the agreement. In light of the Court of Justice’s Opinion 2/15 on the EU-Singapore Free Trade Agreement, the Commission assumes that the EU-Japan EPA does not require ratification by individual EU member states since the agreement is within the EU’s exclusive competence. Investment protection standards and investment protection dispute resolution, which fall under shared competences, have been subject to separate negotiations. The EPA, which is expected to enter into force on 1 February 2019, is arguably the biggest trade-related achievement of the current Commission, which ends its mandate in 2019.

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Robot Love / Robotgov

By Stijn van Deursen and Stefan Kulk

Robots are on the rise. They make life easier, they make economic processes more efficient, and they are even becoming objects of love and lust. At the same time, new ethical and legal questions arise. Should robots have rights? Can we send them to war? And, who is responsible for any ‘mistakes’ that robots make? They also make us question ourselves, and may teach us something about humanity. We can all agree that robots are not human. But what distinguishes us from ‘them’?

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Appointment of EU agency directors

EU agencies’ number and powers have grown tremendously in the recent years. Despite the so-called Meroni ‘non-delegation’ doctrine, EU agencies perform a wide range of tasks. They can contribute to or pass (soft) rules of general applications and impose sanctions for violation of EU laws vis-à-vis private actors (Scholten and Luchtman 2017). The increase of powers and hence impact of EU agencies on society raises the urge for legitimising these institutions. One of the major ways to legitimize institutions is establishing proper governance structures and ensuring suitable top-level officials who manage agencies and bare responsibility for agencies’ performance. In this blog post, we offer a comprehensive evaluation of EU agency directors’ functions and appointment procedures and requirements. We show that the appointed directors fit the profiles of EU agencies that they head well, nevertheless we quest the necessity of the existing excessive variety of appointment procedures (12!), which in our view hinders legitimacy. Continue reading →

The European Production Order – Tackling the Problem of Enforcement Jurisdiction and Extraterritoriality in Cyberspace

On April 17^th, 2018, the European Commission proposed new legislation to facilitate and accelerate access to digital evidence across borders in criminal investigations. The proposal aims at providing enforcement authorities with new tools for cross-border investigations in the digital era. European Production and Preservation Orders (the Orders) would allow law-enforcement authorities of a Member State to compel service providers – both domestic and foreign – offering services in the European Union to disclose or preserve user data, regardless of the data’s location. With this proposal, the European Commission moves away from territoriality as the determinative factor for enforcement jurisdiction in cyberspace. Thereby it could possibly set an international precedent to modernize international law in the area of transborder access to e-evidence. Continue reading →

Legal Status of Robots: The RENFORCE/UGlobe Seminar and Why I Decided to Sign the Open Letter

Photo credits: iStock/Global_PhonlamaiPhoto

Should a robot enjoy any legal status independent of its human creators? If so, what kind of legal status would that be? Should the robot enjoy its/her/his “rights”? One’s answers to these futuristic questions might in part depend on whether one’s image of autonomous robots comes from the film Bicentennial Man (1999) based on Isaac Asimov’s novel or a more recent movie Ex Machina (2014). In the film version of Bicentennial Man, a highly autonomous robot played by Robin Williams exhibits humorous, friendly, and warm-hearted characteristics that co-exist with human communities. By contrast, in Ex Machina, a beautiful human-looking robot ended up deceiving a man and achieving freedom by taking advantage of the trust that the man developed towards the robot. While we cannot tell if such a self-governing robotic machine could ever be built, these two movies depict diametrically opposed scenarios that robots can have both beneficial and disturbing consequences to human beings. Continue reading →

Cambridge Analytica and Facebook Fallout: The Renforce/UGlobe Seminar

On 11 April 2018, Facebook founder and CEO Mark Zuckerberg appeared at the US congressional hearings. At the heart of the testimony was the Cambridge Analytica fallout on the misuse of Facebook users’ data, which continues to reveal the vulnerabilities of social media companies and their impact on politics. The business model of social media companies is based on the sale of advertisements and the provision of apps which allow the social media platforms to make the most of users’ data. Their businesses’ unique strength resides in the “targeted advertising” of potential consumers — and voters. While Facebook and other similar social media generate an enormous benefit of sharing information, the companies’ reliance on users’ data triggers an unprecedented risk of information misuse, not only in a commercial sense, but also for political campaigns.

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Disrupting Technologies – A UGlobe Dialogue on Bulk Interception of Communications

Photo credits: iStock/Global_PhonlamaiPhoto

The UGlobe Dialogue Series “Disrupting Technologies?” hosted its first event on 15 March 2018, in the week before the Referendum on a new Dutch Law on the Intelligence and Security Services (the Wet op de inlichtingen- en veiligheidsdiensten, Wiv). This new law would extend the possibilities of secret services to monitor online behavior. Technology has changed since the usage of fixed telephony and dialup internet-access in the 1990s to the widespread use of smartphones, 4G and Wi-Fi-hotspots in 2018. So changes in the law regulating the intelligence services are necessary, and in view of the upcoming referendum it is necessary to engage in a debate on the new competences regarding these new technologies and the framework of supervision of these intelligence and security services. Continue reading →

Rotten fisheries: EU Advocate-General finds EU-Morocco Fisheries Agreement incompatible with international law

Credit: Katarina Dzurekova (CC BY)

The validity and scope of EU-Morocco trade agreements with respect to Western Sahara – a territory occupied by Morocco – has kept the Court of the Justice of the EU (CJEU) rather busy lately. In 2016, in a case brought by the Front Polisario, a movement fighting for the national liberation of the people of Western Sahara (the Sahrawi), the CJEU ruled that the territorial scope of the EU-Morocco Liberalization Agreement, which liberalizes trade in mainly agricultural products, did not extend to Western Sahara (see for a comment on this blog here, and for other comments here, here and here). Currently, a request for a preliminary ruling, referred by a UK court, concerning the validity of the EU-Morocco Fisheries Partnership Agreement is pending before the CJEU. This Agreement gives EU vessels access to fisheries in Moroccan fishing zones, in return for which the EU provides Morocco with financial contributions. On its face, this Agreement appears to apply not only to the waters off the coast of Morocco proper, but also those off the coast of Western Sahara. The case raises issues of self-determination of the Sahrawi in respect of the exploitation of ‘their’ natural resources, and the role of the EU in this respect. In January 2018, Advocate-General (A-G) Wathelet of the CJEU delivered his opinion in the case, proposing that the Fisheries Agreement should be considered invalid on the ground that it violates the right to self-determination of the Sahrawi people. This post commends the opinion for its detailed, although not always accurate, engagement with international law, and highlights the political salience of the case.

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