Infederation Ltd v Google Inc. and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Roth |
| Judgment Date | 26 July 2013 |
| Neutral Citation | [2013] EWHC 2295 (Ch) |
| Docket Number | Case No: HC12A02489 |
| Court | Chancery Division |
| Date | 26 July 2013 |
[2013] EWHC 2295 (Ch)
Mr Justice Roth
Case No: HC12A02489
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Nicholas Green QC and Maya Lester (instructed by Sidley Austin LLP) for the Claimant
Jon Turner QC and Robert O'Donoghue (instructed by Bristows LLP) for the Defendants
Hearing date: 28 June 2013
Approved Judgment
Introduction
This action is a claim for damages for alleged breach of EU and UK competition law. At the first CMC, the defendants sought a stay of the proceedings pending further progress of the investigation into at least some of the same matters by the European Commission, whereas the claimant sought an order for standard disclosure. I informed the parties at the conclusion of the hearing that I considered that this case is more appropriately dealt with by way of close case management and targeted disclosure by reference to particular issues rather than general standard disclosure, and that I would not order a stay of such disclosure by the defendants save as regards one issue. This judgment sets out my reasons for that decision.
Background
The claimant is a start-up internet company which trades under the name "Foundem". I shall refer to it by that name. The first defendant is the operator of the very well-known search engine "Google" and the second and third defendants are, respectively, its Irish and UK subsidiaries. It is unnecessary for present purposes to distinguish between the defendants and I shall refer to them together as "Google".
Foundem operates a so-called "vertical" search engine which allows users to find and compare prices and other characteristics of a product or service from information on third party websites. Typically, this is used with reference to a category of product or service, eg flights, insurance, properties for sale, consumer products, and jobs. Vertical search engines generally earn revenue by charging merchants when consumers click on, or click on and purchase, one of the items listed in the search results. Foundem launched its website in January 2006. Foundem is an English company and the majority of the visitors to its website is based in the UK.
The Google search engine found at www.google.com is the most widely used search engine in the world. It is generally described as a "horizontal" search engine. Although Google by its Defence contends that the use of the terms "vertical" and "horizontal" as applied to search engines are not precise, they are widely used and provide a convenient summary for present purposes. In general, a horizontal search engine provides a list of web pages that it considers to be most relevant to a user's search terms, by examining a database of web pages that it has retrieved and analysed from the world-wide web. For this purpose Google, like competitor websites, uses its own search algorithms.
It is common ground that Google derives almost all of its revenue from online search advertising. It earns revenue when a user clicks on a search advertisement (sponsored link) that appears at the top of or beside search results. Google sells online search advertising space by means of its "AdWords" service that allows advertisers to associate one or several keywords with their advertisements. The price paid by an advertiser depends on a number of factors, including the keywords next to which the advertiser would like its advertisement to appear, the "click through rate", and an automated "Quality Score" that Google assigns to the pages to which the advertisement will direct a user.
It is also common ground that whether a website appears among the first few results of a user's search or lower down in the list makes a very significant difference to whether a user clicks on that website: the lower down in the list of results that the link to a webpage is ranked, the less likely is a user to click on that link. Moreover, a website appearing on the later pages of results will be largely ineffective.
Foundem contends that, like most internet-based businesses or vertical search services, it is dependent "to a significant degree" on users being directed to its website by accessing the hyperlinks that appear on the search results pages of a horizontal search engine like Google's.
Since around 2002, Google has itself provided vertical search services which compare the characteristics of particular products and services, including "Google Product Search".
The claim
By this claim, Foundem contends that Google is in a dominant position in:
(a) the market for the provision of internet search services for users of the world-wide web in the United Kingdom; and/or
(b) the market for the provision of online search advertising services for advertisers on the world-wide web in the UK.
Foundem contends that Google has abused its dominant position contrary to Article 102 of the Treaty on the Functioning of the European Union ("TFEU") and section 18 of the Competition Act 1998 in a number of distinct respects:
(i) between June 2006 and December 2009, lowering the position of the Foundem website in the list of Google's search results by the application of a particular algorithmic criterion, which discriminated against Foundem as compared to Google's own vertical search engine and Foundem's competitors;
(ii) between August 2006 and September 2007, lowering the "Quality Scores" accorded to Foundem's website pages, thereby increasing the cost for Foundem of advertising its website via Google's AdWords service to a level far above that applicable to Foundem's competitors;
(iii) failing to deal with Foundem's complaints about these various matters according to a fair and transparent procedure, or to publish transparent rationale and/or criteria to determine when such unfavourable treatment would be applied and, conversely, removed by the process referred to as "whitelisting";
(iv) since December 2007, using its "Universal Search" mechanism which determines the placement of Google's own services, so as to position its own price comparison search product more favourably than Foundem's and other companies' vertical search services; and
(v) since about April 2011, applying its "Panda" update to its algorithms in the United Kingdom thereby significantly lowering the position of Foundem and other vertical search services in Google's search rankings.
Foundem's claim in this action is for a declaration and damages. Although the last two heads of alleged abuse are ongoing, Foundem does not seek an injunction.
The Commission's investigation
In November 2009, Foundem lodged a complaint with the European Commission that Google had abused a dominant position contrary to Article 102 TFEU, which complaint has subsequently been amended. The complaint apparently covers all the matters contained in Foundem's claim in the present action. I was told that some 16 other enterprises had also made complaints against Google to the Commission along the same lines, although there is no doubt some variation as between the substance of the different complaints. Foundem states in para 9 of its Particulars of Claim that its case and evidence "have remained central to the European Commission's investigation".
On 30 November 2010, the Commission announced that it had opened an antitrust investigation into allegations that Google had infringed Article 102. The Commission's press release stated:
"The Commission will investigate whether Google has abused a dominant market position in online search by allegedly lowering the ranking of unpaid search results of competing services which are specialised in providing users with specific online content such as price comparisons (so-called vertical search services) and by according preferential placement to the results of its own vertical search services in order to shut out competing services. The Commission will also look into allegations that Google lowered the 'Quality Score' for sponsored links of competing vertical search services. The Quality Score is one of the factors that determine the price paid to Google by advertisers."
On 21 May 2012, the Commission stated that it had reached the preliminary conclusion that one of Google's business practices that may be considered to be an abuse of dominance is that Google may give preferential treatment to its own vertical search services compared with competing vertical search services. The Commission gave Google a period of time to submit written proposals to address the Commission's concern.
Google proceeded to offer certain commitments to the Commission, and on 25 April 2013 the Commission issued a memorandum stating that it was seeking feedback on those proposed commitments. The memorandum set out the Commission's "preliminary view" that Google is dominant in the EEA both in the market for website search and in the market for search advertising. The memorandum noted that the Commission had outlined four competition concerns about Google's business practices in Europe. Only one of those four concerns relates to the subject-matter of this action. This was the way Google displays links to its own specialised search services which, the Commission stated, may constitute more favourable treatment of Google's own services than potentially competing specialised search services. In other words, this relates to Foundem's complaint (iv) about Google's "Universal Search".
The memorandum took the form of questions and answers, and included the following:
" Is the Commission not concerned with the...
To continue reading
Request your trial
-
Barings (UK) Ltd v Galapagos S.A.
...Re Hellas Telecommunications (Luxembourg) II SCA [2010] BCC 295, Re European Directories (DH6) BV [2012] BCC 46, Re Magyar Telecom BV [2013] EWHC 2295 (Ch), Re Zlomrex International Finance SA [2014] BCC 440, Re ARM Asset Backed Securities SA [2014] BCC 252, Re DTEK Finance BV [2015] EWHC......
-
Secretary of State for Health and Others v Servier Laboratories Ltd and Others
...has considered it appropriate to limit disclosure in the first instance to material already disclosed to the Commission: see Infederation Ltd v Google Ireland Ltd [2013] EWHC 2295 (Ch), [2014] 1 CMLR 13, at [37] to [38] per Roth J. 39 In the light of what I have said, I hope that the partie......
-
The Secretary of State for Health and Another v Servier Laboratories Ltd and Others
...has considered it appropriate to limit disclosure in the first instance to material already disclosed to the Commission: see Infederation Ltd v Google Ireland Ltd [2013] EWHC 2295 (Ch), [2014] 1 CMLR 13, at [37] to [38] per Roth J. 39. In the light of what I have said, I hope that the part......