Vogel Internet, Information Technology, and e-Discovery Blog : Texas Internet, Information Technology, eCommerce, & E-Discovery Lawyer & Attorney Peter S. Vogel : Gardere Wynne Sewell Law Firm : Dallas TX

FairSearch.org filed a complaint with the EU asserting that Google’s use of the Android operating system dominates the mobile marketplace and is anticompetitive. FairSearch states that it “is an international coalition of 17 specialized search and technology companies whose members include Expedia, Microsoft, Nokia, Oracle, and TripAdvisor.” In the complaint FairSearch states:

Google is using its Android mobile operating system as a ‘Trojan Horse’ to deceive partners, monopolize the mobile marketplace, and control consumer data,… Failure to act will only embolden Google to repeat its desktop abuses of dominance as consumers increasingly turn to a mobile platform dominated by Google’s Android operating system.

Google clearly dominates the search market as Forbes reported that according to eMarketer “that Google controls 56% of the mobile ad market and 96% of its search ad segment,” and Strategy Analytics reported that Android’s share of the global smartphone market has surged from 51% to 70% by the end of 2012.

So given the fact that the EU already investigating antitrust charges against Google this may make things worse for Google, so stay tuned to see how Google fares.

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The EU Competition Commission concluded that Microsoft failed to comply with its 2009 agreement to offer browser choices to 15 million Windows customers so rather the customers were stuck with Internet Explorer. Under the terms of the 2009 settlement agreement between the EU and Microsoft when Microsoft Windows customers bought a new version they would have browser options including Google (Chrome), Apple (Safari), Mozilla (Firefox), Opera, and Internet Explorer.
The EU Commission made the following finding:

…that Microsoft failed to roll out the browser choice screen with its Windows 7 Service Pack 1 from May 2011 until July 2012. 15 million Windows users in the EU therefore did not see the choice screen during this period. Microsoft has acknowledged that the choice screen was not displayed during that time.

When Microsoft fired Steven Sinofky (President of Windows and a 23 year veteran of Micosoft) in November 2012 there was some speculation he was to blame for Microsoft's failure to comply with the 2009 EU agreement. But at this point blame does not help Microsoft!

The $732 million (€561 million) fine represents 1% of Microsoft’s annual world-wide revenue of $ 73 billion. Clearly the EU has now sent a strong message to Google concerning it anticompetitive behavior in the EU search market, and other companies, that the EU is serious about competition!
 

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Just as Google proposed a settlement with the EU, on January 30, 2013 i-Comp filed a new complaint of antitrust charges about which Bloomberg reported that Google’s “search results discriminate against competitors.” I-Comp is led by Microsoft and posted on its website: 

By creating an illegal network of exclusive relationships with these important partners, Google achieved its key objective: gaining scale for itself while preventing its rivals from doing the same,…

MSN News (published by Microsoft) reported: 

• If the commission accepts the proposals under its settlement procedure, it would mean no fine and no finding of wrongdoing against Google. 

• Companies found to be in breach of EU rules can be fined as much as 10 percent of global turnover, which could mean up to $4 billion if there is no satisfactory resolution in Google's case.

It is significant that comScore estimates that Google accounts for about 82% of all EU searches and about 67% of all US searches.

Since the FTC concluded that Google did not violate US antitrust laws in early January 2013 the new EU antitrust claims do not allow for a swift settlement as apparently Google hoped. 

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The Washington Post reported that the FTC and Google have reached a deal in the 2 year investigation about monopoly practices where Google “would agree to new limits on its ability to use snippets of content from other Web sites and would agree to make it easier for marketers to transfer their online ads to other services.” However the five FTC Commissioners still have to ratify this agreement.

Assuming the US resolves its antitrust claims against Google, don’t forget that the EU continues to press its antitrust claims against Google. In a report earlier this year the Washington Post indicated that the threat to Google was a:

…$4 billion fine and a formal ruling that it has abused its dominance in the search market to hurt rivals across a range of industries.

Since Google accounts for about 90% of the searches in the EU a negative antitrust ruling will surely impact Google’s business.
 

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With little fanfare and soon after the launch of Windows 8, Microsoft announced the departure of 23 year veteran Steven Sinofsky which is leading to speculation that Windows 8 may not be as successful as Microsoft hoped. Also the New York Times reported that in recent SEC filings Microsoft blamed Sinofsky for failing to comply with the 2009 settlement agreement with the EU to provide 12 browser options in Windows 7 called the Browser Choice Screen software. According the Microsoft’s 10-Q filed on October 18, 2012:

…that if a company is found to have breached a legally binding commitment, the company may be fined up to 10% of its worldwide annual revenue.

Microsoft reported to the SEC in its 10K report annual revenue of $ 73 billion, so an EU fine of $7.3 billion would be unbelievable. Microsoft’s future seems not so bright between the slow start for Windows 8 and alleged failure to comply with the EU settlement agreement.
 

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The 27 heads of European data agencies complained that Google’s failed to respond adequately to charges that Google’s new Privacy Policy effective on March 1, 2012 violated the EU privacy laws which are referred to as the 1995 Data Directive  –“Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data.“

The October 16, 2012 letter from the Article 29 Data Protection Working Party included this statement about the Google’s response to the EU’s inquiry:

Google’s answers have not demonstrated that your company endorses the key data protection principles of purpose limitation, data quality, data minimization, proportionality and right to object. Indeed, the Privacy policy suggests the absence of any limit concerning the scope of the collection and the potential uses of the personal data.

The letter included these three legal issues:

• Firstly, the investigation showed that Google provides insufficient information to its users (including passive users), especially on the purposes and the categories of data being processed.
• Secondly, the investigation confirmed our concerns about the combination of data across services.
• Finally, Google failed to provide retention periods for the personal data it processes.

In September 2012 Netmarketshare reported that Google accounts for about 85% of all searches world wide the impact of potential fines for privacy violations by the EU based on its revenue may be significant. In addition to possible fines Google may be subject to criminal charges for violating EU privacy laws.

What do you think about Google’s position regarding its new privacy policies?
 

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In 2009 Microsoft agreed to offer EU customers a browser choice of 12 options until 2014, but apparently Windows 7 released in February 2011 did not contain that option. As result Joaquin Almunia (Vice President of the European Commission responsible for Competition Policy) announced on July 17, 2012 that and investigation is underway because: 

Although Microsoft submitted in a report to the Commission in December last year (2011) that the choice screen was still present, we have received indications from third parties that Microsoft has not complied with its commitments in the period from February 2011 until today.

Under the terms of the 2009 settlement agreement between the EU and Microsoft when Microsoft Windows customers bought a new version they would have browser options including Google (Chrome), Apple (Safari), Mozilla (Firefox), Opera, and Internet Explorer.

It will be interesting to see how the EU deals with this settlement breach, and what penalties that may be assessed against Microsoft.
 

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Since 92% of adults use search engines every day means that they share volumes of information with Google, who dominates searching, 66.4% in the US and 80% in the EU. No one was surprised when Pew Research reported that 92% of adults search daily, but what Google does with our personal information changed on March 1, 2012 when Google simplified its Privacy Policy.

To learn more about challenges to Google’s new Privacy Policies, I encourage you to read my column in eCommerce Times entitled “Google's New Privacy Policy vs. the World.” 

Let me know what you think about your privacy when you use Google!
 

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 Although Google claims its new Privacy Policy helps simplify privacy, the EU claims otherwise and specifically that the new Privacy Policy “makes it impossible to understand which purposes, personal data, recipients or access rights are relevant to the use of a specific service.”  

The EU gave the lead to investigate Google’s new Privacy Policy to the French Commission nationale de l’informatique et des libertés (CNIL). CNIL states that it “is responsible for ensuring that information technology remains at the service of citizens, and does not jeopardize human identity or breach human rights, privacy or individual or public liberties.”  

On February 27, 2012 CNIL sent a letter to Google CEO Larry Page (which was follow-up to a February 3rd letter) complaining that Google failed to properly consult EU authorities about the new Google Privacy Policies and that the:

…preliminary analysis shows that Google’s new policy does not meet the requirements of the European Directive of Data Protection (95/46/CE), especially regarding information provided to data subject.  

The CNIL highlighted the significance of Google’s penetration in the EU with the following statistics about Google’s usage: 

-more than 80% of the European search engine market,
-around 30% of the European smartphones market,
-40% of the global online video market and
-more than 40% of the global online advertisement market

Apparently Google has chosen to ignore the EU’s warnings and surely we will see more headlines soon.

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The Court of Justice of the European Union (CJEU) refused to order a Social Media site to prevent the unlawful use of copyrighted works. In 2010 SABAM (Société Belge des Auteurs, Compositeurs et Editeurs), the Belgian collecting society for music royalties, lost a lawsuit to force Netlog (a Social Media site) to add a filter to block copyrighted works from its 2 million users.

On February 16, 2012 the European Digital Rights (EDRI) announced the result of an appeal of the 2010 decision and that the CJEU ruled that Netlog:

…cannot be obliged to install a general filtering system, covering all its users, in order to prevent the unlawful use of musical and audio-visual work.

This is an important ruling for copyright owners and Social Media sites.
 

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The Electronic Privacy Information Center (EPIC) filed a Motion to enjoin Google from implementing new ToS and Privacy Policies on March 1, 2012. On February 8, 2012 EPIC filed a Motion for Temporary relief against the Federal Trade Commission (FTC) to enforce Google’s March 2011 Agreement Containing Consent Order which included the FTC's oversight on Google’s Privacy Policies for 20 years. EPIC’s Motion comes on the heels of the EU’s request that Google slow down the implementation of the new ToS and Privacy Policies.

EPIC Motion claims that Google's new ToS and Privacy Policies violate the FTC Consent Order and includes the following claims:

Users will no longer be able to keep personal information they provide to use the Google email service for simply that service; Google will be able to combine the user information provided for email with other Google services, including the Google social network service.

Based on the March 1, 2012 date for the new Google ToS and Privacy Policies, EPIC reported that the court accelerated the briefing schedule so that the FTC must respond on February 17, 2012 and the EPIC file its reply by February 21, 2012. 

As a result of this fast track for EPIC’s Motion it is likely we will have a ruling by the court before March 1, 2012.
 

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EU officials announced that the new Google Privacy Policies may not insure compliance with EU laws and asked Google to halt these changes pending an investigation of the implications of personal data protection. Google’s new Privacy Policies are scheduled to go into effect on March 1, 2012 and the New York Times reported that EU authorities wrote to Larry Page (Google CEO): “call for a pause in the interests of ensuring that there can be no misunderstanding about Google’s commitments to information rights of their users and E.U. citizens.”

In the Meantime – EU Proposes Changes to its 1995 Privacy Law

The current Privacy law went into effect in 1995 and the origins of the law began in 1989 because of social concerns about privacy on mainframes, long before Social Media took off with Facebook, Google, Wikipedia, and the rest. So as you may image in 1989 let along 1995 there was no way the EU could have foreseen the evolution of the Internet and Social Media.

As my good friend Erika Morphy recently reported for eCommerce Times that “Europe appears poised to enact strict new privacy regulations geared to protect consumer data, but the debate is far from over. Representatives of businesses, particularly e-commerce companies, are descending on Brussels to plead their case.” 

In particular Facebook and other Social Media sites are concerned about the EU’s new plans for privacy that restrict Internet sites more strictly than ever before and require the Internet business to assume more responsibilities for protecting individuals. The new EU law includes a new concept referred to as “right to be forgotten” which would surely impact the large Social Media sites.

So was Google trying to change its Privacy Policies before the EU modified its 1995 Privacy laws? What do you think?
 

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No surprise that Google’s search engine continues to grow at the expense of Yahoo! and Microsoft’s Bing. Hitwise now reports April 2010: Google at 71.4%, Yahoo! down 1% to to 14.96%, Bing down 2% to 9.43%, Ask down 37% to 2.18%, and the remaining 78 search engines accounted for 2.03%. As these search engine wars continue it seems pretty clear where we are headed. However antitrust issues are on the horizon!

EU confirms Google antitrust probe

The EU Commission confirmed that 3 complaints were filed and Google’s blog indicated that:

The complaints filed with the Commission came from U.K. price comparison site Foundem, a French legal search engine called eJustice.fr, and a German search site called Ciao that was recently acquired by Microsoft Corp. Google pointed out in its blog that Foundem is a member of a trade group called iComp, which is largely funded by Microsoft.

Given Bing decline it’s no wonder that Microsoft is pushing the EU to try to reduce Google’s control over the search engine market.

New Look: Google Search Engine Reults

To make Google even more user-friendly Google has evolved and morphed into a new look again. Check out Google’s new search engine results:

However, look closely since Google is now asking if users want Google to access to their location...privacy redflag if ever there be one!  Stay tuned for more Google in the market as Google dominates the search engine market and much more!

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The recent conviction of 3 Google executives in Italy for a video posted on Google which showed the bullying of a disable teenager captured many headlines. No question that the video was in poor taste and Google took the video down within 24 hours of its posting after Google got 2 complaints. The conviction of the Google’s global privacy counsel, Peter Fleischer and two other executives raises significant issues. A fourth Google executive was acquitted, and Google plans to appeal these convictions. Does it make sense that Google, or any other ISP (Internet Service Provider), be liable for content posted over which the ISP has no control? The US Communications Decency Act of 1996 protects ISPs from liability since they have no control over content posted. How Google fares with these convictions may have an interesting impact on ISPs around the world.

Google Street View May Breach EU Law

Only to make things more complicated recent reports that the Google’s Street View violates EU Data Protection laws since they retain the images for too long. As well it was reported that “Switzerland’s data-protection agency in November sued Google for allegedly failing to comply with proposals to make it harder to identify people and cars on Street View.” Of course disputes regarding Street View are not new since claims of breach of privacy have been under way since at least 2008 in Japan.

Google has More EU Antitrust Problems

ComScore recently reported that Google has about 79% of the searches in the EU and the EU renewed its investigation about Google anticompetitive behavior. Google claims that Microsoft may be the source of the investigation since Microsoft owns one of the companies that complained. It seems reasonable to assume that the search engine wars will continue, but how the EU ultimately rules may have a far reaching impact.

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With a barrage of antitrust headlines it hard to know which one has the greatest impact on the Internet and IT community. But clearly New York’s antitrust filing against Intel in Delaware is near the top of the list. Why Delaware? Apparently NY is using the on-going Advanced Micro Devices (AMD) antitrust suit against Intel as a form of piling on, not to mention that AMD is building a new $4.2 billion plant in NY. NY’s antitrust claims are a lot like the EU antitrust findings that Intel’s business practice of paying computer manufacturers rebates and incentives for using Intel chips rather than those of AMD (or anyone else).

Oracle’s Plan to Acquire Sun Hit an EU Roadblock

Apparently the EU is not pleased that Oracle, the database market leader, intends to acquire Sun which owns the open source database product MySQL without selling off MySQL. The EU is concerned about Oracle’s competitors Microsoft and IBM even though Oracle is the dominant database company. But some think that Oracle’s acquisition of Sun and My SQL will be transformational to the IT industry by providing a different market against Microsoft.

Challenge to EU Browser Settlement

Google, Mozilla, and Opera are still concerned about the Microsoft settlement even though the EU approved Microsoft’s plan to allow customers a choice of browsers, not automatically only provide Microsoft’s Internet Explorer. Net Applications recent market share reports indicates that “Internet Explorer has a 67 percent share of the global browser market,... Firefox has 24 percent, Apple’s Safari, 4.4 percent, Google’s Chrome, 3.5 percent, and Opera, 2 percent.” On the surface it seems that Microsoft’s competitors should be able to increase their EU market share based on the settlement, but stay tuned to see how the EU reacts to these new complaints.

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No surprise that dozens of filings were made in opposition to the proposed settlement of the lawsuit between the Google and the Authors Guild and Association of American Publishers which was filed in “2005 by the authors and publishers against Google over its plan to digitize millions of books from libraries without authorization from rights holders.” Although Google has received the support of Sony, civil rights groups, and antitrust experts, there were notable opponents to the settlement including “individuals, rival companies like Amazon and Microsoft, advocacy organizations, groups representing authors and publishers and even some foreign governments.”

EU Opposition of Google’s Settlement

Many voices in the EU complained at a hearing that the proposed settlement would give Google more power to exclusive rights to sell million of out-of-print works even though the copyrights are still valid. Not much of a surprise that Microsoft is backing the anti-Google settlement groups in the EU. Many groups in the EU feel that since they did not participate in the settlement that they were discriminated against.

What’s Next in the Lawsuit?

Federal District Judge Denny Chin must now sort through the filings to try to determine if the proposed settlement properly protects the authors, or else the case may continue on to trial. Among other issues for Judge Chin to consider are antitrust concerns that Google’s control over these works would give Google too much market power. There are many antitrust issues on the horizon for Google it seems with many opponents, not just with books but more broadly in the entire space known as eCommerce. Stay tuned as we see Google and eCommerce evolve.
 

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Apparently the US Justice Department is investigating anticompetitive behavior concerning among others Google, Yahoo! , and Apple since many Internet companies restrict recruiting and hiring of one another’s employees. Since anticompetitive employment agreements in the technology industry are the norm it’s particularly interesting that the Justice Department is pursuing these companies. Internet and IT companies rely of these non-competition provisions to protect trade secrets and Intellectual Property so it will be interesting to see how this develops.

EU Unhappy with Microsoft for Not Distributing a Browser

Following the antitrust dispute in the EU regarding Microsoft’s alleged monopolization of the browser market, Microsoft recently announced that when it distributes Windows 7 there not be any browser. The EU regulators are unhappy with this solution, even though on the surface it does seem that the complaining browser companies (Google, Mozilla, and Opera) should be pleased since they claimed that Microsoft’s embedded Internet Explorer violates antitrust laws.

Are Antitrust Laws Out of Touch with the Internet?

Since antitrust laws evolved from the need to try control monopolies in the 1800’s how much sense does it make to still use these concepts in the Internet world of 2009? Microsoft’s deployment of its operations systems took over the PC market was great for the users since before Microsoft there was no operating system standard on PCs. My Internet Third Big Bang was the 1981 advent of the PC, not just because IBM and Microsoft got into the market, but as result of the PC Clones using Microsoft operating systems a de facto standard developed on Microsof. As a result users could depend on continuity and consistency between software and applications. So maybe the US and EU should re-evaluate antitrust laws for the Internet and IT world that we live with today and in the future.

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Recent reports from the EU potentially impact a number of Internet and IT industry issues of great import, including plans for new laws to protect consumers from IT security breaches, Microsoft’s strategy to defend antitrust claims regarding the Internet Explorer (IE) browser, and a ruling that Intel violates antitrust laws.

EU Notice for Loss of Data

The EU plans to pursue new laws that would create more stringent reporting of IT security breaches, more like the US and Japan. Of course IT breaches are not a new topic in the IT community nor on this blog. However the new California law in 2003 requiring notice to consumers was a model that many states of have adopted, and citizens are clearly better off that they are notified of possible loss of their personal information.

Microsoft Browser Strategy

Recent blogs that Google, joined Mozilla and Opera complaining about Microsoft’s anticompetitive distribution of the IE browser is taking an interesting turn. Apparently Microsoft plans to argue in defense that restrictions on distribution of its IE will strengthen Google’s search-advertising market in an anticompetitive way. Apparently the EU estimates that 85% of the browsers in the EU are Microsoft’s IE, but if Microsoft has its way IE will continue to be distributed with Windows Operating Systems as it has since 1995.

Intel to Get an Adverse Ruling

The EU is expected to rule this week that Intel’s marketing in the EU violates antitrust laws, and Intel’s 81.9% market share is not because it has superior products. Rather the EU will rule that Intel has illegally handed out rebates and paid computer makers to delay products with rival chips.

EU Impact on IT

It’s probably about time that the EU enacted IT security breach laws to protect consumers like many US states. The EU is taking IT very seriously, and not reacting well to US IT companies’ market strategies that may be acceptable in the US. As more countries provide high speed Internet access to all citizens, countries around world will need to be even more vigilant to protect their citizens, by informing them of IT security breaches to protect personal identity and from anticompetitive behavior.

Since I see the Internet as the greatest social change in the history of humans (since there are no boundaries of time and geography), it seems reasonable that governments will only have a higher responsibility to protect citizens since we are all more and more reliant on the Internet and IT.
 

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Reports that the EU regulators have now formally accused Microsoft of antitrust charges for including Internet Explorer as part of the Windows operating system is hardly a surprise. Apparently in December 2007 the Opera Software the Norwegian browser developed filed a complaint with the EU that Microsoft violated EU antitrust laws. Opera’s 2007 complaint jump-started the EU’s Competition Commission and only a few months earlier Microsoft ceased appealing the EU’s 2004 antitrust violations related to the Media Player that included fines of $1.3 billion.

What Happens Next?

Microsoft has 8 weeks to respond to the EU why Internet Explorer should not be removed from the Windows operating system. But it seems clear that the EU wants Microsoft to change it marketing practices or risk more fines. Stay tuned for more rulings from the EU on these charges.

Historical Perspective

The Internet’s been around since the 1960’s as an academic research platform to help the space race in response to Russia launch of Sputnik in 1957. Until the browser was available the Internet was not user friendly. The Internet was a lot like MS-DOS before the advent of the mouse and GUI (graphic user interfaces) and using the Internet required users to know arcane and alien instructions. What changed the Internet and allowed it to take off was that Microsoft started giving away Internet Explorer with Windows in about 1995. Of course other browsers existed before 1995, but had it not been for Microsoft embedding Internet Explorer as part of Windows it is debatable whether the Internet would have taken off when it did and with such gusto.

Irony of Ironies

It seems ironic that Microsoft is now being penalized for including the Internet Explorer with Windows, since had Microsoft not embedded Internet Explorer with Windows in the mid 1990’s, the Internet may never had developed at the pace it has.
 

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