UK Office of Fair Trading clears acquisition of by Google

On 11 August 2011 the UK Office of Fair Trading (the “OFT”) issued its decision on the merger between Google and (“BTQ”), a provider of consumer finance price comparison services (“PCS”) in the UK, clearing the transaction without referring it to the Competition Commission.

Prior to the merger, Google and BTQ overlapped in consumer finance PCSs in the UK. For instance, Google supplied general internet search to users, and BTQ supplied “white label” PCS platform technology to third parties (such as newspapers, supermarkets and other branded PCSs) that integrate price comparison functionality on their websites.  The transaction raised both horizontal and vertical issues. Consequently, the OFT first assessed its effects on a number of markets where the parties compete or were in a vertical relationship, including:

  • the supply of online advertising space on consumer finance PCSs in the UK;
  • the supply of overall online advertising space in the UK;
  • the supply of consumer finance PCS search services to users in the UK; and
  • the supply of “white label” PCS technical platforms in the UK.

At the horizontal level, the OFT assessed the effects of the merger on the loss of competition in the supply of the above services in the UK and concluded that the merger did not raise a realistic prospect of decreased competition due to, inter alia, (1) the parties’ combined market share post-merger (the parties higher market share in the supply of overall online advertising space in the UK was almost all attributable to Google, and the increment from BTQ was very limited), (2) the competition that the merged entity will face from large consumer finance PCSs, and (3) the low barriers to entry.

With respect to vertical concerns, the OFT assessed whether the combined entity Google/BTQ would have both the ability and the incentive (i.e. in terms of economic profitability) to totally or partially foreclose traffic from unpaid (natural) search and paid search (sponsored links) to rival consumer finance PCSs. Third parties suggested that the merged firm would have both the ability and the incentive to foreclose BTQ’s rival consumer finance PCSs as natural and paid search results from Google’s search engine are a key source of traffic to consumer finance PCSs.  However, according to the OFT, the merged firm would have the ability, but not the incentive, to foreclose rivals.

In particular, the merged firm may have the ability to pursue a foreclosure strategy on the basis that: (1) there is evidence to suggest that Google is an important source of traffic from which rival consumer finance PCSs may not easily be able to switch away, (2) there are examples of alterations in the ranking in Google’s results of consumer finance PCSs and evidence that these materially affect traffic to the sites, and (3) Google accounts for a significant share of traffic to consumer finance PCSs.

However, the evidence did not suggest that the merger added to any incentive that Google may have had to foreclose rival consumer finance PCSs; it would be foregoing greater upstream profits on lost advertising than it would be gaining on extra PCS sales downstream.  In this respect, the OFT also took into account the deterrent effect of the current antitrust investigations against Google in some jurisdictions and their impact on the incentive to carry out the behavior in question. [Gabriele Accardo]