French Farce: Search Neutrality rules Moliere Would Delight In
While there has been much discussion of the European Commission’s recent announcement of a statement of objections being sent to Google, over in Paris the French Senate isn’t waiting. The Senate is debating ‘search neutrality’ amendments to the ‘Loi Macron’, an economic reform bill.
This is not a bout of contagion carried on the high speed ‘Thalys’ train from Brussels to Paris. Rather, the French political establishment has long been a critic of Google, and in fact Internet platforms more broadly. While Google may be a tempting opponent, opinion in Paris would like to see Internet platforms more broadly regulated in law, as illustrated by the recent joint Franco-German letter to the European Commission.
So while this initiative isn’t a huge surprise, its consequences could be. Search is a feature of almost every website and application. Putting aside the obvious search engines, think of sites such as Dailymotion, Deezer, eBay, Facebook and Amazon. Without a search function it would be hard to find the information and products you want.
But more broadly think of the websites of Carrefour, FNAC or the TV station TV5: without an effective search function these sites would be unusable.
Searching for information has become an important way of hunting for the needle in the haystack of the Internet. What might be the consequences for needle hunters if this ‘search neutrality’ law were to come into existence?
Firstly, the law would apply to a search engine having a ‘structural’ effect on the digital economy. Many important companies could have a ‘structural’ effect on the digital economy. The ones I mention above might all qualify. TV5 has a vast reach by broadcast and online. It might well be bound by these rules. What about Carrefour? A search for ‘corn flakes’ on carrefour.fr shows the Carrefour own brand product first before that of Kellogg’s. Would this law give Kellogg’s grounds to complain about that? Given the convergence between online and offline activities would Carrefour be considered to have a ‘structural’ effect on the market?
This is even clearer for online services such as Dailymotion and Deezer. These successful services would be likely to benefit from investments that would help them scale. In contrast, a neutrality obligation that would not apply to their competitors in Asia or the United States would put them at an immediate disadvantage. Wither the European growth story. To take a different example, would BlaBlaCar, a company that currently has 90% of the ride-sharing market in Europe, need to ensure its search function showed results from the SNCF and bus companies?
Secondly, the proposal would oblige such a search engine to act in a non-discriminatory fashion and not to favour its own services. In practice what would this mean? Which, or whose, services must be shown under such an obligation? On what basis would the adjudicator, probably the telecoms regulator ARCEP, make such a judgement? The companies mentioned above would endlessly need to take account of who might be inconvenienced by changes to their algorithm (which occur frequently). Given that many suppliers, advertisers, and competitors may be inconvenienced, this would be impossible to avoid, resulting either in paralysis or litigation. This also smells of privileged access for the politically well connected.
Thirdly, the proposal would forbid the integration of search with an operating system or a device like a PC, tablet or smartphone. Would Microsoft be prevented from bundling its search field in Internet Explorer (soon to be Microsoft Edge)? Would Android and iOS not be able to preinstall their search services whether text based or voice activated? While iOS only has a 21.6% market share in France in smartphones it is difficult to see France letting Apple escape such an obligation. In a world of easy downloading of apps it seems strange to forbid this integration as it is so easily circumnavigated.
Fourthly, in a blatant bout of industrial policy the Senate’s most recent idea is to oblige search engines in the scope of the law to show three alternative search engines to users. One of these would have to be French! Can such an approach be legal in the European Union?
Perhaps the biggest question is whether there is a case at all to regulate platform markets, and search more specifically. We at DisCo have often called for regulatory intervention in markets where there are impediments to competition. Are those conditions present here? Given the dramatic rise and fall of technology firms and specific services there seem to be few bottlenecks to new services arising and their uptake by consumers. If there are few bottlenecks then the case for regulation is clearly weak as all players are under constant pressure to evolve. As Yves Gassot, the CEO of the research firm iDate points out in a recent piece on platforms “the idea of regulation that applies specifically to platforms is gradually coming to the fore. It may not be a good idea. Competition law, even ex post, is not necessarily ineffectual.”
Fans of Moliere’s ‘L’Avare’ (“The Miser”) will know that the humour derives from the exaggeration and absurdity in the play. In this particular play the anti hero, Harpagon, wishes to have the whole town arrested following the disappearance of his hoard of money. Just as Harpagon wanted to arrest the whole town, this legislation risks penalising all users and all website owners. Moliere sought to parody society and this legislation would surely be in his sights.
We should hope that the pragmatic approach shown by the French government to the recently announced Alcatel-Lucent / Nokia merger results in an embracing of the Internet and an open economic policy. By this path lies the road to success.