Google offers not to put News Showcase into search results in Germany as antitrust probe rolls on

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Attempting to resolve an antitrust inquiry into its news licensing product in Germany, Google has offered that it would not extend the display of News Showcase “story panels” into general search results in the latest regulatory setback for Big Tech in Europe.

As a result of the German Federal Cartel Office’s (FCO) antitrust concerns, the company has proposed several measures, which include taking steps to create clear blue water between News Showcase contracts and ongoing negotiations with publishers related to copyright licensing obligations around so-called neighboring rights for news, which are currently under discussion.

Following a 2019 EU copyright reform implemented into German law in May 2021, Google will be required to pay copyright fees to news publishers in exchange for showing samples of their material on its search engine results pages.

When German legislators attempted to force Google to pay licensing fees to local publishers for displaying snippets of their content in Google News, they were easily defeated by the tech giant’s decision to switch to an opt-in model for the aggregator in the market, which was implemented around a decade ago.

In the end, it took a pan-European directive, along with local antitrust action, to force Google’s hand on this problem, ensuring that the company cannot just modify how it functions to avoid paying.

Although, to put it gently, the internet giant’s compliance with EU copyright law is still a work in progress; it has made significant strides recently. (Its activities in the area on this front have already resulted in a fine of more than half a billion dollars in France, for example, where Google’s approach to news licensing is also under careful regulatory scrutiny.)

Also under scrutiny are Google’s discussions with local news publishers and its efforts to gain operational concessions from the company about the way it conducts News Showcase, which began today.

The Foreign and Commonwealth Office (FCO) expressed concern that if Google integrates News Showcase into general search results, as the company has previously stated it intends to do, it will result in the company “self-preferencing” its services or “impeding services offered by competing third parties.”

Aside from that, it is concerned about whether the News Showcase contractual provisions “unreasonably prejudice” the participating publishers — for example, by making it “disproportionately harder for them to protect their general supplementary copyright while participating in Google News Showcase.”

The regulator also said that it is evaluating Google’s terms and conditions for access to its News Showcase service to determine whether non-discriminatory access is provided to publishers.

It’s most certainly no coincidence that the Foreign and Commonwealth Office (FCO) revealed last week that it has the authority to apply special restrictions to Google’s operations under powers to combat digital market giants enacted by local MPs at the beginning of last year. This shortens the timescale for regulatory action and reduces the amount of wiggle space Google has to attempt to evade any FCO regulations.

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Similar copyright measures aimed squarely at Big Tech are now happening in the United Kingdom. When it comes to gatekeeping giants, the EU is well on its way to enacting ex-ante laws that will apply to all of them (aka, the Digital Markets Act). As a result, Big Tech’s operating leash in Europe will only get shorter.

In addition to offering not to expand the showcasing of licensed content to general search results in Germany, the Federal Ministry of Foreign Affairs (FCO) stated today that Google has “already changed some of the practices under investigation and declared its willingness to address any remaining ambiguities and concerns by modifying the Showcase contracts and providing clarification statements.”

“In particular, Showcase contracts need to be explicitly distinguished from the current talks between Google and the publishers or their collecting bodies over any ancillary copyright payments,” the company said.

Back in October 2020, Google revealed that it would pay partner publishers a total of $1 billion to license their news material to display in so-called “story panels” (as shown in the samples below from Google’s product marketing) across all of its products throughout the world.

The company was dealing with increasing regulatory obligations in several locations about paying for the presentation of news material at the time (Australia came up with its legislative template targeting Google and Facebook to pay for news reuse in August 2020, for example).

Consequently, the News Showcase strategy seemed to be a transparent effort by Google to mitigate a coming revenue blow while at the same time utilizing its market position to produce as much upside as possible for its ad-monetizing Internet content company.

In the instance of News Showcase, Google had the opportunity to dangle the carrot of licensing payments and pit publishers against one another to compel publishers to adhere to its requirements and reduce legally required licensing prices via closed-door commercial arrangements.

Initially, Google said that material licensed under the News Showcase program would show in story panels on mobile devices running the Google News app. This was followed by an expansion of the areas where participating publishers’ material appeared to include its News aggregator product for desktop computers and a tailored content feed on mobile devices known as Google Discover.

It intended to increase further the areas where licensed material might be seen throughout its online real estate — including by incorporating News Showcase in search results — as a consequence of the agreement.

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However, in Europe, where Google’s search engine continues to be dominant, the company’s approach swiftly got it in hot water with regulators over worries about unfair competition.

For participating publishers, the News Showcase product, as its name suggests, offers the prospect of increased visibility by showcasing their content to Google users across a variety of touchpoints — including giving mobile users the ability to follow publishers so that more of their content is threaded together into personalized feeds. Because of this, publishers have a significant incentive to enter into agreements with Google, providing the search giant negotiating advantage in content licensing discussions.

Examples include publishers feeling pressured to sign agreements with Google for News Showcase to avoid missing out on the prospect of additional traffic being directed their way (especially if competitors have already signed contracts), putting commercial pressure on them to agree to broad licensing terms that may waive or reduce copyright-based licensing fees (for example, if competitors have already signed agreements).

Rather than falling for Google’s attempt to use a proprietary news display product and commercial terms to obscure copyright compliance by combining News Showcase negotiations and contacts with legally required licensing fees, European competition regulators have listened to publisher complaints that the search giant is not playing fairly in the news display business. (For example, the FCO investigation was launched due to a complaint lodged by the collecting organization Corint Media.)

The French competition watchdog found that Google had attempted to unilaterally impose its global news licensing product in negotiations with publishers — pushing for the neighboring legal right to be incorporated as “an ancillary component with no separate financial valuation” — and that this had resulted in a significant fine.

Its probe is still ongoing, but Google has already been hit with a $592 million punishment for violating a previous court order.

Germany has not yet imposed any sanctions, but the danger is there, given the fact that the Foreign and Commonwealth Office (FCO) has been given expanded authority to deal with abusive internet companies. As a result of Google’s prompt promise to make changes to how its News Showcase product functions in Germany, the situation has been resolved (the FCO only began probing the T&Cs last summer).

Because of Google’s dominance in Europe’s general search market, the business has been subjected to several antitrust enforcement actions in recent years, both at the EU and at the state level. However, it is fair to say that the competition authorities of EU member states have been the most responsive to the concerns of news publishers.

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Because Germany was one of the first markets to get News Showcase, it is possible that the FCO was able to conduct a relatively brief review of the product. French lawmakers were among those who moved more quickly to enact the EU’s copyright reform into national law — and their competition watchdog has been particularly interested in Google’s compliance with the neighboring right requirement, as well as the specifics of how the company has negotiated fees with news publishers to reuse their content.

In December, several agreements to negotiate in good faith were issued by the French regulator. It recommended that these obligations be in effect for five years, rather than just one.

France’s antitrust authority is consulting on Google’s proposal until the end of this month, following which it will decide whether to accept them or whether to need more measures to be implemented.

The German Foreign Office is also currently consulting on Google’s operational offerings in the News Showcase area on a regional level.

The company president, Andreas Mundt, issued a statement saying, “Google has recommended steps in response to our competitive concerns about Google News Showcase.” According to the business, showcase material will no longer be shown in the regular search results. The terms and restrictions for participation in Google News Showcase are not intended to preclude publishers from pursuing their usual ancillary copyright rights in their publications. It is possible to access Google News Showcase if you meet certain conditions. We depend on the evaluation of the market participants who may be impacted to guarantee that the actions provided by Google are practical. To account for the vast range of interests that publishers may have, we are undertaking more extensive sector-wide surveys.

His comments were followed by explaining how the regulator is keeping a close watch on how Google negotiates with publishers over copyright costs. He said that “in parallel with the Google News Showcase process, we are carefully monitoring the discussions on ancillary copyright fees.”

As a result of publisher (and ad tech) complaints, the UK’s competition watchdog has placed Google’s plan to deprecate support for third-party tracking cookies and transition to an array of new ad targeting technologies (known as the Privacy Sandbox) under scrutiny — and as a result of this, Google has proposed a series of commitments to be allowed proceed.

Separately, France’s competition authorities fined Google $268 million last summer for self-preferencing its ad tech, prompting the tech giant to make yet another behavioral concession, this time in the form of a series of interoperability obligations.

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