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Dominic Raab (Esher and Walton, Conservative)

It is a privilege to secure my first Adjournment debate and to hold it under your chairmanship, Mr Gale. I wish to raise the increasingly important topic of protection of competition in the online marketplace and the neutrality of search engines. Free markets require the rule of law and space for robust competition, but they offer no place for monopolistic or cartel abuse, which is as true for the online market as it is for any other. The EU Competition Commissioner, Joaquin Almunia, has stated:

“I believe that the principles of competition must be maintained in the digital economy with the same intensity that they are imposed in the brick and mortar world.”

At both national and European levels, rules exist to prevent dominant undertakings resorting to anti-competitive practices to reinforce their position. Those rules do not prohibit or deter success in the global online marketplace. Businesses can hold, secure or maintain a dominant position, but not abuse it, and there is growing evidence that that is exactly what Google is doing.

Search engines are the gateways to the internet. With a 95% share of the search market in Europe, Google is in a uniquely powerful position. It is the most visited website in 25 of the 27 EU member states.

Foundem, a UK-based price comparison website, has complained to the European Commission that it, among others, has fallen foul of anti-competitive abuses by Google. The complaint is threefold. First, it was unfairly penalised by the mechanism Google uses to rank search results, especially the exclusionary automated penalty that has been applied to it and other competitors. The effect was to suppress Foundem on Google’s search results. Until December 2009, when it was corrected, Foundem’s rankings on a typical product such as a motor bike helmet were: first by Yahoo, seventh by Bing and 144th by Google. As the top five recommendations on the first page of results account for 88% of hits, Foundem effectively disappeared from the Google landscape. The day after the penalty was lifted, Foundem immediately rose to sixth place on Google’s rankings, so the impact is clear.

Secondly, Foundem’s complaints concern the review procedure at Google. It took Foundem more than three years to secure the lifting of the arbitrary penalty against it. For a small business in a fast-moving environment and marketplace, that could prove fatal. It did not in this case, but it certainly could for other small and medium-sized enterprises.

Thirdly, Foundem says Google distorts search results by imposing its own services in prominent positions. In the two years after Google started promoting its own price comparison website, Google Product Search, UK visitors to that site increased by 125%. Over the same period, visitors to the UK’s leading price-comparison websites fell by an average of 41%, so the discrepancy is stark. The fact that the European Commission has decided formally to investigate Google shows that these complaints are serious and that they require an answer.

Let us be clear about an important distinction that underpins competition law. It is one thing to sell space, ranking or priority online, but it is another thing altogether deliberately to stack the deck against potential rivals

while at the same time pretending to be operating and offering a neutral service. Google is trying to bury the competition.

I understand that the Minister may feel tempted to defer to the European Commission inquiry, but Britain must also ask whether enough is being done to prevent such abuse and why we have to wait for the cumbersome, clumping, clumsy conclusions of the European Commission to preserve our own free market at home. I would welcome the Minister’s views on this vital area of policy.

As a matter of domestic policy, there might be a prescriptive solution. I am not one to call for extra regulation or legislation, but one of the points that Foundem makes is that it champions the principle of search neutrality. That states that search engines should be transparent about the rationale and mechanism behind their online results rankings and that affected sites should have access to a timely appeals process.

The second principle advanced by Foundem is that search engines should not be allowed to discriminate in favour of their own services while maintaining the guise of neutrality. If their own products are inserted into search results, they could be identified in the same way as sponsored links. There is no reason for Google not to advertise its own wares, but it is something of a fraud to dress it up for the consumer under the ostensible impartiality of ordinary search engine results.

The proposals could be considered on a voluntary or industry-wide code basis or under legislation. I am fairly open-minded about that. An alternative solution is to focus on the more rigorous enforcement of the existing powers that domestic authorities have to preserve competition. After all, the Office of Fair Trading and Ofcom have the necessary authority under the Competition Act 1998 and EU law to issue directions and hand out fines.

I recognise that purists will say that we should resist any intervention in the online search market. Some will argue that the internet is a fast-moving and changing world and that we must be wary of trying to prejudge or predetermine its future development. Unless competition is safeguarded, a flourishing river of competition could become a stagnant pond. Does the Minister agree that far from being incompatible with a robust and rambunctious marketplace, this principle of search neutrality could bolster competition and consumer choice?

Our regulators can already take action, but they have so far proved unwilling to take a proper look at Google. The chief executive of Ofcom talks about the need to avoid suppressing reward for innovation and risk—we can all agree on that along with motherhood and apple pie. With more than a hint of complacency, the chief executive of the OFT has said that most complaints come from

“competitors who are not best pleased that Google makes a better offering to their customers.”

Mr Fingleton says that the OFT would like to see complaints coming from customers themselves. That is all very well, but customers may be oblivious to what Google is surreptitiously doing.

Another argument that Google advances against intervention is that competition is just a click away. In other words, an open internet allows consumers to use any search engine they want. This theoretical defence misses the practical point. It is precisely the scope for

competition that Google is killing off. If Google’s policy means that businesses cannot access potential consumers, they will be choked out of the marketplace.

In his Budget statement, the Chancellor highlighted the importance of promoting high-technology growth in small businesses. He called for Britain to become a “home of innovation”. He is absolutely right. I hope that the Minister will recognise that there is a risk of that vision being jeopardised by anti-competitive abuse online and that the market must remain an enabling environment for businesses of all kinds, small and large, and not one that is condensed and conditioned to preserve the status quo.

Google is one of a handful of companies that has transformed our understanding of the internet’s potential. I have no doubt that it will continue to do so in the future, but it must not be allowed to pull up the ladder. We must preserve the space and scope for innovators and entrepreneurs to mirror, and even surpass, Google’s astonishing and outstanding success.

4:09 pm
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Phillip Lee (Bracknell, Conservative)

Thank you, Mr Gale, for chairing this debate and thanks to the Minister for allowing me to make a short contribution.

I begin by congratulating my hon. Friend Mr Raab on securing this timely debate. The primary reason why I am speaking in it is that Foundem is based in my constituency of Bracknell. I am very proud of this highly innovative UK technology business, and I am also proud that it is at the forefront of challenging Google in this way. By doing so, it is going into bat for future UK start-ups, particularly in the IT sector.

I noted that the Government’s new “Start-up Britain” website actually has Google on it, giving away AdWords. I must say that my eyebrows were raised by that and I suspect that, when that website was launched, those of Foundem’s owners were raised too, because when Foundem was launched in 2006 Google’s AdWords were 5p a hit. Overnight, that went to £5 a hit and, as my hon. Friend the Member for Esher and Walton has pointed out, Foundem slipped down the Google search rankings from fourth to 120th. Foundem was never given a reason for that, and it took the company more than three years to have that situation turned around. In that period, Google Product Search went up dramatically, a dramatic amount of money was made and a significant part of the search business was taken by Google.

It is time that we all got real about this. Ofcom and the Office of Fair Trading have the necessary legislation—the Competition Act 1998—and EU law to support them. They need to get on with protecting British start-ups, so that those businesses can thrive and there is a fair environment in which they can exist.

I note that in 2009 the chief executive officer of the OFT was quoted as saying that there was no case for the regulator to challenge Google’s dominance. In the same year, there was an op-ed piece in The New York Timesby one of the founders of Foundem, which basically outlined what had happened to the company in the preceding three years. Anybody who has heard Foundem’s case and seen its PowerPoint presentation would feel

the same way. I encourage the Minister to meet with Foundem’s representatives. I know that they have already requested a meeting with the Minister and I encourage him to see Foundem’s presentation, because it is quite compelling and totally contradicts the view of the OFT’s CEO in 2009.

Finally, I want to open this debate up by saying that it is not only about commerce. Commerce is obviously very important, and Foundem’s case is based on commerce, but the principle here is about where we access services, knowledge and information. Google provides 95% of searches in Europe. If someone goes to Google to search for a dishwasher or a new television, they also go there to search for news and knowledge. We now have Google providing search products, Google News, Google Health and a Google bank. Next we might have a Google dictionary and later on a Google religion. I may be overplaying things, but the reality is that this company has suppressed the growth of a business in my constituency—that is the reality. I do not think that that is in the best interests of this country, and I do not think that one company having that amount of power is in the best interests of this country, either.

Google is part of the infrastructure of the internet. That is the reality. If we stopped people on the street and asked them, “What is the internet?”, most of them would view it as starting with a search engine. And for search engines, 90% of Britons use Google. Google is to be congratulated on achieving such a powerful position in the world economy, but because it has that position, it needs to be subject to regulation so that companies such as Foundem and many others in the future can get a fair hearing in the world economy.

4:13 pm
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Edward Vaizey (The Parliamentary Under-Secretary of State for Culture, Media and Sport; Wantage, Conservative)

It is a delight to serve under your chairmanship this afternoon, Mr Gale. I participated in a Westminster Hall debate with you only this morning and I think that this is the second of three debates that I will be responding to in Westminster Hall today. I gather that my colleague the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend Mr Davey, has responded to the other two debates in Westminster Hall today, so we are slightly monopolising the time here.

I congratulate my hon. Friend Mr Raab on securing this debate. He said that it was his first Adjournment debate and that he was sitting on the “wrong” side of Westminster Hall; although he is sitting opposite me, we are in effect on the same side.

I also welcome the contribution of my hon. Friend Dr Lee in standing up for his constituents who established Foundem. In what is an extraordinary “David and Goliath” story, those constituents have managed to get the European Commission to investigate allegations of anti-competitive behaviour by Google.

I should say at the start that I am extremely sympathetic to what my hon. Friends have set out in terms of their principles. If I can take, as it were, a philosophical approach—although it might be unhelpful for a Minister to take such an approach—there is no reason why any

organisation should be exempt from the competition rules simply because it exists on the internet.

We could all reel off a list of companies that are, in effect, the dominant providers on the internet and from which we purchase our books, our groceries or our consumer goods, or from which we access search facilities or other applications, because they have first-mover advantage. However, they certainly seem to have held on to that advantage for a significant amount of time. It is perfectly appropriate for the competition authorities, when appropriate and when a matter is referred to them, to look into those organisations.

However, one of the reasons why people feel that the internet is perhaps more competitive than the high street is that the barriers to entry are lower on the internet. If someone wants to set up a retailer providing a service, they do not have to go and buy land or rent property—or take on, say, the established supermarkets in trying to provide better products. The regulations are much lower for the internet and people can set up a website at very low cost.

Photo of Phillip Lee

Phillip Lee (Bracknell, Conservative)

I just want to expand on my hon. Friend the Minister’s analogy of the internet being like going to the shops. There is a sense with Google that there is one big motorway that we all travel along to go to a set of shops, some of which Google itself owns. The problem is that there are not enough roads to lots of different shops, because there is a perception that people go to Google to go shopping.

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Edward Vaizey (The Parliamentary Under-Secretary of State for Culture, Media and Sport; Wantage, Conservative)

Absolutely. In effect, I was going to agree with my hon. Friend’s point before he made it, in the sense that the internet is seen as being different because it is possible to set up a new company and to compete relatively cost-effectively on it. One only has to look at, for example, the rise of Groupon, which is another one of these phenomenal companies. It effectively started from zero and now, within about 18 months, it is worth an estimated $20 billion. One also sees it in the market of political journalism, which I could say is a market close to our hearts. Nevertheless, there should be concerns when there appear to be dominant providers on the internet.

As my hon. Friend the Member for Esher and Walton is aware, there is an EU anti-trust probe into alleged abuses by Google, concerning allegations about the manipulation of its search results, the consequent unfavourable treatment of its unpaid and sponsored results and the preferential placement of Google’s own services. Although my hon. Friend said that the process of the EU’s anti-trust probe was going to be clunky and time-consuming, I remind him that the EU challenged Microsoft a few years ago and fined it substantially. This process regarding Google will be effective, as it continues, in establishing whether any of the allegations that have been made against it are true and need to be remedied.

It is perhaps ironic, given that Microsoft was in a dominant position a few years ago, that it is now Microsoft asking the European Commission to investigate the dominant position of Google. To a certain extent, that reinforces the point that although there may be so-called “dominant providers” on the internet, the

balance of power can shift extraordinarily quickly, particularly if one does not anticipate, as it were, “the new new thing”.

For example, if I was a spokesman for Google, I might say that Google’s next threat was not necessarily from the European Commission, but from Facebook, which is now the dominant provider in social media services. It might well be that we have not anticipated Facebook’s next threat, but that it will manifest itself in two or three years’ time. Nevertheless, it is interesting to note that Microsoft has asked to be joined in this action against Google and Microsoft makes some interesting points. The position that Google would take—perfectly justifiably—is that alternative search methods are just “one click away”. Indeed, I understand that we have something like 177 UK search engines serving the UK market at the moment.

I have already agreed to see one of those companies, Reach Global, when I am next in Manchester, at the invitation of Graham Jones in whose constituency it is based. I would be absolutely delighted to take up the offer made by my hon. Friend the Member for Bracknell to meet the founders of Foundem. Microsoft’s point is its allegation that Google restricts access to certain content, particularly to YouTube content on phones that run Windows, and it has set out its concerns extensively.

Google also comes in for criticism from rights holders, who say that the search engine helps to promote piracy, and Google is taking steps to address those concerns. For example, its introduction of predictive text when searching for a piece of music in effect meant that the phrase was filled in with BitTorrent, almost directing someone to pirate sites to download music. That has now been remedied by Google, and it is now also very good at addressing concerns about its AdSense product. That product allows adverts to appear on appropriate sites with appropriate content, but they were often appearing on sites that promoted pirated music. Google is now happy to remove those ads, if notified by the rights holders. I also know that the company is keen to work with rights holders on notice and take-down issues, and will take down search results that direct users to private sites, provided that it is notified and given adequate evidence.

Google’s unique selling point, and the area in which it finds it much more difficult to accommodate the concerns of rights holders, is in-search rankings, so one can perhaps see why there is such intense debate on the issue. Search rankings are one reason why Google is so popular. They are the holy grail, and the algorithm is the secret formula that provides swift and accurate search findings.

One concern of rights holders and of companies that seek to rival Google products is that they do not appear adequately high enough in the search rankings. A recent example that was brought to my attention by rights holders was that the day after publicity appeared for a single that will not be released until 30 May, typing in the name of the single revealed 160 different websites from which it could be downloaded illegally. Often, the legal source for a song will come on only the sixth or seventh page of the search results. Those are huge concerns, and it is absolutely right and proper that my

hon. Friends should bring them to the attention of the House, and that they should be debated as openly as possible.

I should address the point made by my hon. Friend the Member for Esher and Walton about whether the OFT or the Competition Commission should investigate the matter. The EU anti-trust probe is, I think, an adequate remedy at the moment, and I gather that the OFT looked into the matter three or four years ago and does not feel the need to do so again at this time. My hon. Friend is, of course, perfectly able to contact the OFT and to suggest a change of heart. Without wishing for this to be taken in any way as a criticism of the OFT or the Competition Commission, I should say that my hon. Friend might find that their procedures, in his perception, are clunky and time-consuming—I imagine that any probe would take at least two years.

The reason why this debate is so important is that we are constantly going to be challenged about the development of the internet. My hon. Friend the Member for Bracknell mentioned the possibility of a stranglehold on news by a company such as Google, and the rise of Google religion, almost like an Aldous Huxley novel, but it is not wrong of him to raise what some people might consider fantastic concerns; such concerns are raised with me all the time, although not specifically about Google.

As distinguished a man as Tim Berners-Lee has very strong feelings and very real concerns about keeping the internet as open as possible. That part of the debate, the net neutrality issue, which is the formal title of the debate today, focuses much more on the people who provide the infrastructure and the networks—the telecoms companies, in effect—than on web-based companies.

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Dominic Raab (Esher and Walton, Conservative)

It is useful to know that this is the latest in a series of feedbacks that the Minister has had. I know that he has debated the issue in Westminster Hall before. The OFT and the Competition Commission, as part of the quango review, are looking at their practices and at how they will consolidate. Might the Minister take this opportunity to feed in some of the points that have been raised about their ability to deal with online competition, so that when they consider whether they have the right level of powers and the right balance between looking at things thoroughly and quickly, they might consider this issue, which is likely to arise more and more?

Photo of Edward Vaizey

Edward Vaizey (The Parliamentary Under-Secretary of State for Culture, Media and Sport; Wantage, Conservative)

I absolutely take on board my hon. Friend’s point. The review currently being conducted by the Department for Business, Innovation and Skills aims to reduce costs and bring in greater efficiency, but there is

an ongoing debate about the scope of a particular Competition Commission review, a debate that often, certainly from my perspective—this is the area I know best—touches on the changing face of the media. For example, when we discussed contract rights renewal, there was a strong debate about whether the Competition Commission had looked widely enough at the competition that ITV faced from the internet. Given not just the convergence of the media but bizarrely, now, its huge expansion regarding competition both in this country and globally, that is a very live issue.

On the general principles, it is important that we, in this House, stay focused on the need for an open internet. In a speech last year I raised net neutrality, which has not been an issue for live debate in this country, although there has been a very live debate in the United States. I raised the issue to start a debate, because the future operation of the internet, as my hon. Friend the Member for Esher and Walton said, is absolutely fundamental to the future of this country and of many economies across the world.

In that speech, I set out what our principles should be: openness in infrastructure provision by both fixed and mobile operators; a clear obligation to offer all legal content at the speed at which consumers contract for; transparency, in the sense that consumers know what speeds are offered and what traffic management practices are taking place; and, finally, support for innovation and investment, so that we can create the content and the network that the future requires.

I have maintained my focus on this very important debate and last month I held a round-table discussion on the open internet, with attendees from across the industry, including internet service providers, mobile network operators, content providers, and also Google, which continues to engage with us on a whole range of issues. I was privileged to have Sir Tim Berners-Lee speak at the meeting, as well as the chief executive of Ofcom. I was also delighted that we were able to launch a first draft of a voluntary code of practice on traffic management transparency, developed by the broadband stakeholder group, and I am very happy that the industry has committed to working together to further develop those principles.

I thank you, Mr Gale, for the opportunity to debate these important issues, and I look forward to meeting representatives of Foundem. The EU will continue its process, which is effectively a judicial one. No company, internet-based or not, should be above competition rules, and no doubt many of the concerns that have been raised by my hon. Friend the Member for Esher and Walton, and by my hon. Friend the Member for Bracknell on behalf of his constituents, will be raised in the very robust and thorough investigation taking place in Brussels.