2. Google’s Search Manipulation & Its Effect on Consumers Jonathan Kanter July 22, 2015

3. Google dominates search and search advertising Google’s search manipulation harms US consumers Europeans will likely have greater protections than Americans FTC Staff found that Google’s behavior was intentional New evidence of consumer harm Innovation and competition are threatened What we now know… and why you should care 123 54 6

4. How does Google search manipulation impact consumer welfare?

5. Two different enforcement agencies reach two different conclusions. US and European regulators reached different conclusions based on an assessment of the facts. Difference relates to assessment of consumer harm. Does new evidence address this apparent gap?

6. The Commission is concerned that users do not necessarily see the most relevant results in response to queries – to the detriment of consumers and rival comparison shopping services, as well as stifling innovation. EC Press Release (Apr. 2015)

7. European Commission has uncovered detailed evidence of harm to competition EC issued its own Statement of Objections based on Google’s search manipulation with respect to comparison shopping. It contained many important findings regarding the effect on competition: Google’s favorable positioning of its comparison shopping service was meant to divert traffic from competing services 1 Experimental user behavior analysis shows when Google puts its shopping Universal “above the fold,” it gets far more clicks than organic search results 2 Ample evidence of strong negative effects on competitors’ search traffic 3

8. FTC concluded that the introduction of Universal Search, as well as additional changes made to Google’s search algorithms – even those that may have had the effect of harming individual competitors – could be plausibly justified as innovations that improved Google’s product and the experience of its users. It therefore has chosen to close the investigation. Chairman Jon Leibowitz (Jan. 2013)

9. The FTC Staff Memo cites numerous internal documents …Google used the occurrence of competing vertical websites in its natural search results to automatically boost the ranking of its own vertical properties above that of competitors. (p. 26; n. 136) The leaked FTC Staff report provides ample evidence of Google’s intent to use Universal Search to suppress competition from local search rivals. Google’s Universal Search results pushes all other web search results down, which significantly decreases click-through to the websites displayed in Google’s natural search results. (p. 24)

10. Google recognized the harm to consumers Unable to get positive reviews from raters when Google demoted comparison shopping sites, Google changed the raters’ criteria to try to get positive results. (p. 132 n.154) Google claims it is focusing on the best user experience, but FTC Staff discovered internal studies from Google confirming that users prefer links to independent vertical websites over Google’s biased Universal Search results.

11. The Luca/Wu Study A new study fills in the blanks on consumer welfare effects, showing that Google’s search manipulation hurts consumers

12. Universal Search Boxes Local search is distinct from general search – it relies on consumer opinions. Local search accounts for one billion+ searches daily (33% of desktop; 50% of mobile). For many queries, Google displays its local search results in Universal Search boxes, usually above its organic results. Organic Search Results What is local search?

13. Google populates its Universal Search Box with links to its local search content Universal Search itself is not a problem, but Google populates its universal search results with links to its own local search properties… …even when rival content is deemed more relevant by Google’s own algorithms. It doesn’t have to be that way.

14. Does this Maximize Consumer Welfare? Google displays links to its own local search content, even when it contains minimal reviews. It’s difficult to see how this maximizes consumer welfare. g+g+ 5 reviews

15. [I]f we know the answer it is better for us to answer that question so [the user] doesn’t have to click anywhere, and in that sense we … use data sources that are our own because we can’t engineer it any other way. Eric Schmidt (Sept. 2011)

16. g+g+ g+g+ g+g+ g+g+ g+g+ Google+ Sourced g+g+ Focus on the User A new report confirms the user harm Europe found ample evidence that Google’s conduct harms rivals, but a new report shows how that conduct hurts consumers. Profs. Luca and Wu looked at what happens when you populate Google’s universal search boxes with the results deemed most relevant by Google’s own organic search algorithm. They called this modified Universal the “Focus on the User” (FOTU) search results.

17. Focusing on the User produces a better user search experience FO TU Focus on the User g+g+ Google+ Sourced 31 reviews 719 reviews Luca and Wu found that the query “pediatrician NYC” yields only 31 reviews from Google+, but 719 reviews from the unbiased FOTU results.

18. 45 % increase in user engagement 32 percent of user clicked on Google+ results vs. 47 percent of users presented with the unbiased FOTU results.

19. Luca and Wu’s report shows that Google is not showing users the most useful search results, which leads to three different types of consumer harm: Some users don’t find what they’re looking for and abandon their search, leading to unconsummated transactions Users take longer to find the information they need, suffering greater search costs in the process Some users end up patronizing businesses or service providers that would not be their first choice

20. Luca and Wu’s Focus on the User study is the missing link in the case against Google The study undermines Google’s primary justification for its manipulative conduct – that it is good for consumers. To see in more detail how Focusing on the User maximizes consumer welfare, visit: www.focusontheuser.eu