Monday, December 20, 2010

Google facing regulatory scrutiny and ?45m tax bill in France

Google is feeling more than a little French resistance this week, beginning when the French competition watchdog indicated closer scrutiny of Google's business in the country yesterday and said the company might have abused its dominant market position.

The Autorite de la Concurrence said that Google could face sanctions if found to have abused that power, but suggested what it called "targeted responses" rather than formal penalties.


Photo by Spen H on Flickr. Some rights reserved

The authority spent 10 months investigating the market on the instruction of the French government. Google is estimated to hold a 90% share of the search advertising business in France, and accounted for 43% of the global ad market ? worth $16.4bn in the third quarter of this year, according to Strategy Analytics.

The authority's president told journalists yesterday it wanted to warn Google where it risks crossing the line, and the conditions attached to certain practices. It had identified "possible exclusionary conduct intended to discourage, delay or eliminate competitors through procedures that do not consist of merit-based competition".

But it said it had found "possible operational abuses, whereby the search engine apparently imposes exorbitant conditions on its partners or customers, treats them in a discriminatory manner or refuses to guarantee a minimum degree of transparency in the contractual relations that it establishes with them".

Google's statement is that: "Search ads are one of many options for advertisers. If the price of search ads rises, advertisers can and do switch to other formats, both online and offline. That's the sign of a competitive and dynamic industry."

? The French government also decided that it will introduce a 1% tax on online advertisements from 1 January. The proposal is part of the 2011 national budget but now looks likely to be passed. Dubbed the "Google tax", companies based in France would pay 1% of the net spend on online advertising and will raise around ?50m; Google's 90% search market share will see a payout of around ?45m.

? Both those developments follow a separate antitrust investigation launched by the EC, which heard complaints from internet companies including vertical search specialists Foundem and ejustice.fr. The EC will look at four areas: whether it lowered the rankings of some services while boosting links to its own tools; whether it lowered the ranking of rival vertical search providers; whether it imposes exclusivity obligations on advertisers; and whether it restricts advertisers from using campaigns on rival ad platforms.

What does it all mean?

Given the money Google has in the bank, even a ?45m (�38m) tax bill won't hurt much. Google's revenues in France are estimated to be around ?800m. What will be a concern is if other governments, particularly those in the regulation-heavy EU, follow suit.

The French government initially proposed the tax following complaints from media companies that it was benefiting from ad revenues based on exploiting publishers' content for free. The tax could be diverted to the creative sectors struggling to develop their businesses online, it had suggested.

Google has said the best way to develop support those businesses would be to encourage innovation rather than introducing a new tax. Fellow web businesses defended Google, saying it was too easy to make Google a scapegoat for the failure of traditional businesses to adapt to the internet.

While it is unlikely this rather clumsy tax will be introduced elsewhere, Google will be more concerned that regulators in other countries, particularly in the EU, will scrutinise Google more closely. The findings by the Autorite de la Concurrence could influence, however unofficially, the EC's investigation which ultimately questions the core part of Google's business operation.


guardian.co.uk © Guardian News & Media Limited 2010 | Use of this content is subject to our Terms & Conditions | More Feeds

Source: http://www.guardian.co.uk/technology/pda/2010/dec/15/google-france-regulators

advertising agency advertising small business marketing tips internet advertising trends

No comments:

Post a Comment