Canadian watchdog clears Google of anti-competitive practices, with one exception

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A three-year investigation by Canada's competition watchdog has resulted in a report that clears Google Inc. of any substantial wrongdoing in its search ad business, and closely echoes a 2013 investigation by the U.S. Federal Trade Commission (FTC).

But while Canada's Competition Bureau issued a mild rebuke in one area, a continuing European investigation appears to be coming closer to a much more damaging conclusion about Google's competitive practices.

The bureau began its investigation in 2013 and carried out 130 interviews with everyone from publishers and advertisers to handset manufacturers and wireless carriers. The initial allegations suggested that since 2005, "the manner in which Google operates its search engine and search advertising platforms … amounts to an abuse of a dominant position."

In the final report, issued Tuesday, the bureau says it "did not find sufficient evidence of a substantial lessening or prevention of competition in the market to support the other allegations."

"We're pleased that the Canadian Competition Bureau has decided to end its inquiry," Kent Walker, a senior vice-president and general counsel for Google Inc. and Alphabet Inc., said in a statement. Alphabet Inc. is the holding company that owns Google Inc. and its Canadian subsidiary. "We work hard in a competitive landscape to create a great experience for our users and help them quickly and easily find what they need from Google."

The sole exception to this clean bill of health was an old practice that limited a user's ability to connect Google's AdWords product to a competitor's ad network software.

AdWords offers cost-per-click bidding on ads that display next to certain search keywords, either through automation or manual buying. In 2013, the FTC found AdWords's terms and conditions as well as the functioning of its application programming interfaces made it difficult to copy data from an AdWords marketing campaign into a competitor's ad market or bidding system. "There did not appear to be any technical or efficiency justification for creating these restrictions," the bureau said in its report.

In 2013, Google removed the restrictions in its system in Canada and the U.S., but the bureau now says it has an agreement with Google to extend that voluntary change for five more years.

"Plainly, this decision suggests that the bureau will be following, not leading, regulatory oversight of Google," says David Fewer, director of the Canadian Internet Policy and Public Interest Clinic at the University of Ottawa. "I think the investigation itself was a step in the right direction for the bureau – online services that are free to the user nonetheless impose costs on all of us that can be difficult to measure."

Meanwhile, reports suggest the European Union is preparing to issue formal antitrust charges against the company related to its Android smartphone operating system as early as Wednesday, in one of the biggest regulatory challenges Google has faced so far. If the EU finds Google guilty of market abuse, it could fine the company up to $7.4-billion (U.S.) or 10 per cent of 2015 revenue, while forcing it to change its business practices.

"Our concern is that by requiring phone makers and operators to preload a set of Google apps, rather than letting them decide for themselves which apps to load, Google might have cut off one of the main ways that new apps can reach customers," the European Union's Competition Commissioner Margrethe Vestager said at a regulatory conference in Amsterdam on Monday.

The Mountain View, Calif.-based company has faced competition probes going back to 2007, when the FTC looked into its DoubleClick ad network. More recently, it has faced investigations and in some cases findings of abuse by competition regulators in South Korea, India and Russia.

Google owns almost 90 per cent of the search ad market in Canada and perhaps closer to 95 per cent in Europe. In the United States, it has about 70 per cent of that market.

Canada's Competition Bureau declined to comment on the specifics of its interactions with either the FTC or the European authorities and could not confirm whether it was investigating Google for any of the practices that have invited regulatory scrutiny elsewhere.

"Should new evidence come to light of anti-competitive conduct that may affect the Canadian marketplace, by Google or any other market participant, I won't hesitate to take appropriate action," Commissioner of Competition John Pecman said in a statement.

According to Emarketer, global mobile Internet ad revenue soared from $40-billion in 2014 to $70-billion in 2015, but search ad revenue (the main area of interest to the Competition Bureau) made up only $8.7-billion in 2014 and $14-billion in 2015. Google's share of the global mobile ad market fell from 40 per cent in 2014 to 34.5 per cent in 2015, even as revenue grew from $16-billion to $24-billion.

With a file from Reuters.