€295 million damages claim filed against Google in Europe
Paris commercial court
Microeconomix estimated the damage suffered by 1plusV, the creator of an innovative hybrid search technology called VSearch and, jointly with expert partners, a large series of vertical search engines based on this technology, resulting from Google's alleged anticompetitive practices.
On 28 June 2011, a €295 million claim for damages (“assignation” in French) was filed by French technology provider 1plusV against Google Inc before the Paris Commercial Court. 1plusV is the creator of an innovative hybrid search technology called VSearch and, jointly with expert partners, a series of vertical search engines based on this technology. VSearch combines an algorithmic search and a complementary selection of pertinent Internet sites by human experts for thousand of most frequently used keywords, which admittedly leads to more accurate results than Google’s “natural” search.
The assignation, which is believed to be by far the largest claim against Google in front of a European jurisdiction, follows:
an initial complaint filed by 1plusV for eJustice.fr on 2 February 2010, which led the European Commission to open an in-depth investigation on 30 November 2010;
a complementary complaint made 22 February 2011, which enlarged the case to all vertical search services offered by 1plusV including E-Musicpro.com or eGuides.fr.
“Today’s claim for damages is the logical follow-up of our complaints to DG Competition”, said 1plusV founder Bruno Guillard. “Our actions benefit not just one company, but all players in the booming vertical search business”. Guillard added: “the problems we face are of paramount importance for e-commerce and also for the economy at large, and indirectly even for the preservation of democratic values in the Internet age”.
The assignation alleges that Google employed a number of anti-competitive practices and unethical behaviour over a period of four years to cripple 1plusV’s ability to generate business and advertising. The large total claimed results mainly from the combination of three elements:
between 2007 and 2010 no less than 30 vertical search engines created by 1plusV were “black-listed”, some of which showed significant business potential. A few or these 30 vertical search engines have been recently “white-listed”, i.e. indexed again by Google’s robots (without any content change nor explanation) but irreparable damage has been done;
if all 30 search engines created by 1plusV had been allowed to compete on their merits, yearly sales would currently amount to more than €30 million;
as Internet users become savvier, they understand that they may not always get what they look for using a universal search engine such as Google Web. This makes innovative vertical search engines increasingly valuable assets. Aardvark, whose hybrid search philosophy is for example broadly similar to VSearch, was bought by in February 2010 for around $50 million, i.e. eight times its sales, and would likely sell for a higher price today.
The damage has been estimated by Microeconomix using a standard method endorsed by competition authorities. The first step of this method determines the “counterfactual” situation, i.e. what would have most likely happened in the absence of Google’s anti-competitive practices. The second step estimates the damage as the difference between the profits gained by 1plusV in the counterfactual situation and the real ones. This intense work lasted for several months.
The €295 million claim brings before the Commercial Court documented evidence, including numerous bailiff reports, supporting its claims that Google prevents rival vertical search engines from developing by employing anti-competitive and unethical methods, including:
suffocation of technological competitors through a bundled access to ads revenue for the exclusive use of Google’s technology. 1plusV had to get rid of VSearch early in order to be granted access to AdSense real time.
unfair competition in referencing Editors websites through the listing in Google results of sensitive and private data, including data from Government agencies’ extranets which explicitly ban these practices.
manipulation of “natural results” through (i) the artificial pushing up of Google’s own services to the first page of search results without giving Internet users any chance to differentiate from real organic results and (ii) the discriminatory application of so-called “quality criteria” between competitors and own services.
In addition to seeking a positive outcome in the French Commercial Court, 1plusV continues to expect the European Commission to order Google to rapidly put an end to anti-competitive practices prohibited by Article 102 of the Treaty on the Functioning of the European Union (TFEU).
Bruno Guillard concluded: “it is reassuring to see that within just a year Google’s behaviour went from attracting scrutiny from a few European competition authorities suspected of anti-Americanism to being a real source of concern for antitrust enforcers, privacy enforcers and lawmakers on both sides of the Atlantic”. “It is not for 1plusV to decide what ought to be done, but it seems obvious that proper ex ante regulation of search engines will be needed before long. You may view search neutrality as part of the wider net neutrality debate but I think that search is so complex, and Google is so dominant, that a specific regulation will soon become unavoidable”.
For further information and/or clarification please contact: Jacques Lafitte, Avisa Partners, Marie-Cécile Rameau, Bredin Prat, Gildas de Muizon, Microeconomix.