The EU Competition Commission has its eye on Google

EU COMPETITION COMMISSIONER Joaquin Almunia has promised that the Court of Justice will be keeping an appropriately beady eye on search and social networking firms.

Speaking in London yesterday at the Jevons Colloquium on Competition Policy in the Digital Media and the Internet, which could probably do with a new name, Almunia said that fair and equal business was vital to the economy and added that ensuring effective competition is not without its challenges.

He told the assembled lawyers, "Competitive environments provide value and quality and most importantly they provide larger markets than those characterised by protection. They also encourage innovation that users actually will want to pay for, which is precisely what we need," he said, adding that that they should not be allowed to carry on without a degree of scrutiny.

"By enforcing competition, I want to ensure that no firm able to provide value, create or expand a market in whatever way is prevented from doing so through anticompetitive foreclosure."

As well as promising to keep the boot of regulation firmly pressed on the neck of telecoms firms, the Court of Justice will also take a good look at those companies that provide web-based services, including search and social networking, he explained.

Almunia said that analysing these businesses is complex in itself, as their business models continuously evolve. However, he added that some players in the market are so dominant that they are deserving of attention.

"The most important search engine in Europe benefits from a 95 per cent market share in usage and the most important social media site has close to 70 per cent," he explained.

Almunia didn't mention any names but we are going to go out on a limb here and suggest that they are Google and Facebook. He added that in the case of the latter more can be done to let users close up shop and take their personal information elsewhere.

"The real question remains the actual degree of contestability of these markets. Switching between search engines may appear to be relatively easy. Switching between social networks may be harder because of the stronger network effects and the portability of the data. But are switching costs of users the only criteria for contestability in two sided markets? Are there other barriers to entry?"

He suggested that these firms might also use their dominance to effectively close the market down, though then explained that this also might not be an easy task. "The fluid nature of the Internet may make this more difficult to do than in other markets. Nevertheless it may be possible," he added. µ