Right after coming back from a surely well-deserved summer break, the German competition authority, the Bundeskartellamt, published its decision as regards a complaint brought by press publishers against Google over the German ‘snippet levy’, locally referred to as the Leistungsschutzrecht. Press publishers argued that by not displaying snippets, which are small pieces of text below the hyperlinks in search results, Google was abusing its dominant position. At the end of this rather bizarre complaint, the answer of the antitrust watchdog is simple: if an online service does not want to acquire a license for the display of snippets and hence only displays search results in a more limited, shorter version, it can do so. There is nothing in antitrust law that would prevent companies from doing so, even if they are found to be dominant on a given market.
Let’s quickly recap the facts: In August 2013 Germany passed the controversial ancillary copyright for press publishers. The law tried to give press publishers exclusive control over the use of snippets on all online platforms. Brushing aside serious legal and economic concerns, the law required online aggregation services to acquire a license for the display of snippets. Various online players decided to simply not carry snippets of content produced by VG Media members, the collecting society tasked with enforcing the ancillary copyright.
Google took a similar approach, continuing to include these publishers’ content in search results, but displaying only headlines, with no related snippets. Axel Springer, Germany’s biggest news publisher and the major driving force behind the Leistungsschutzrecht, even gave Google (and Google only) a free licence to display snippets of their content. This did not prevent VG Media from lodging a claim against Google with the German competition authority arguing that the popular search engine was abusing its dominant position by not displaying snippets. It seems VG Media’s hope was for competition law enforcement to compel Google into licensing agreements for a practice which should not require a license under copyright rules in the first place. (View CCIA’s detailed background and explanation of ancillary copyright legislation here).
The decision of the Bundeskartellamt to not open formal proceedings against Google should not be a surprise for anyone. In fact, it already expressed its unwillingness to move on this complaint a year ago in a letter to VG Media right after the collecting society initiated the complaint. Andreas Mundt, the President of the competition authority, has repeatedly stated that competition law does not require anyone to obtain a license for the display of snippets. The decision is also interesting in the context of another lawsuit filed by VG Media against Google, Yahoo, DTAG and 1&1 at the German Copyrights Arbitration Board (DPMA) for payment under VG Media’s tariff. The DPMA will have to decide whether VG Media’s tariff is reasonable and whether snippets actually fall under the scope of the law given its inherent vagueness. It could well rule on an aspect as detailed as the snippet length threshold triggering the applicability of the ancillary copyright. Ultimately though, its ruling may prove to be largely moot, since the Bundeskartellamt decision allows online services to simply not display snippets. In these cases there is no need to get tangled up in discussions around the applicable tariff or snippet length.
Interestingly, it is this vagueness that the Bundeskartellamt also criticises in its recent decision. Google justified its decision to not show snippets by claiming that the risk of potentially breaking the ancillary copyright law was too high. The Bundeskartellamt concurs: “Even a dominant company cannot be compelled under competition law to take on a considerable risk of damages where the legal situation is unclear” [emphasis added].
Statements like these as well as the experiences with the Spanish ancillary copyright confirm that such laws simply do not work. To put it bluntly, the underlying flaw in this strategy is that these legislative proposals misuse copyright for industrial policy purposes. It remains unclear which problem or market failure these laws actually try to solve. The impact of these proposals on digital services has been discussed at length, not least because of the high-profile Google News shutdown in Spain. What has not been so widely discussed, at least until very recently, is the impact on media plurality and competition in news publishing. The recent study produced by NERA Economic Consulting at the request of the Spanish Association of Publishers and Periodical Publications has shed some light on this issue.
According to NERA, smaller, less popular online publications have suffered the most from the introduction of the law which caused a significant online traffic decline. While the average traffic decrease to online publications amounts to more than 6%, the traffic decrease for small publications amounts to more than double the average, 14% exactly. NERA predicts that in the long-term this impact will even be greater, threatening the viability of some small online newspapers. This can hardly be a surprise. Smaller online publications which do not enjoy brand popularity derive significantly greater benefit from news aggregation services than large ones. Since the ancillary copyright literally shut down tools for people to find alternative sources of information, competition in the market for news publishing becomes distorted in favour of bigger publications, especially in favour of those whose brand is visible to people everyday on the newspaper stand around the corner. According to the most recent Reuters Institute Digital News Report, 46% of Spaniards find news directly via the brand of the publication — one of the highest rates among all the countries analysed in the report.
And given that news aggregators contribute to people being exposed to a greater spectrum of opinions and perspectives, one ends up with a societal problem as well. A functioning democratic society thrives on a plurality of views and opinions. Laws which make it harder for citizens to access a wider spectrum of views is not something policymakers in democratic societies should be supporting. Related to this issue is the loss in consumer surplus which NERA estimates to amount to EUR 1.85 billion per year for all Internet users in Spain.
Was all of this so difficult to foresee? Certainly not. Before the Spanish government passed the law, the country’s competition authority published a report highlighting the law’s potential negative impact on effective competition. The authority opined that the proposal is essentially unnecessary because there is no problem in the market. Furthermore, it noted that the law could create a barrier to entry for companies that want to enter the market for content aggregation. It was a strong message calling on the government to not distort the market with unnecessary and inefficient economic regulation. Clearly, the competition authority got it right from the very beginning.
(For more information on ancillary copyright legislation you can visit CCIA’s dedicated webpage here).