LCQ4: Anti-competition practices of some Internet search-engine service providers
Following is a question by the Hon Paul Tse and a reply by the Secretary for Innovation and Technology, Mr Nicholas W Yang, (in the absence of the Secretary for Commerce and Economic Development) in the Legislative Council today (July 12):
At the end of last month, the European Union (EU) ruled that Google Inc. had manipulated Internet search results by giving the highest priority placement to its price comparison shopping service, abusing its market dominance in the Internet search-engine market and breaching EU's antitrust rules. Google Inc. was required to end such conduct within 90 days and to pay a fine of 2.42 billion euros. On the other hand, the findings of a survey have indicated that last year, Google Inc. had a market share of nearly 80 per cent in Internet search-engine service in Hong Kong, occupying a dominant position. In this connection, will the Government inform this Council:
(1) whether it knows if the Competition Commission (the Commission) has made reference to the aforesaid case and investigated whether Google Inc. has engaged in anti-competition practices of the same kind in Hong Kong and whether the company has breached the Competition Ordinance; if the Commission has investigated, of the details and outcome; if not, the reasons for that;
(2) whether, in the light of the aforesaid ruling by EU, the authorities have studied the implementation of measures to ensure that Hong Kong's Internet users will not be misled by manipulated search results when using Internet search-engine service; and
(3) given that commercial organisations may make their advertisements appear nearer the top of the Internet search results by paying huge amounts of advertising fees, that such advertisements are often displayed in a format similar to that of search results making it difficult for Internet users to distinguish between the two, and that there is currently no legislation requiring Internet search-engine service providers to provide clear indications on advertisements, quite a number of Internet users have therefore mistakenly thought that the listing of products or services nearer the top shows that such products or services are "better" or "more popular", whether the Government will request the Commission to study if any measure should be taken to ensure that search results will not mislead local customers, so as to protect the rights and interests of consumers?
My reply to the three parts of the question is as follows:
(1) Established under the Competition Ordinance, the Competition Commission (the Commission) is an independent statutory body which enforces the Ordinance.
The First Conduct Rule of the Competition Ordinance prohibits agreements, decisions and concerted practices among businesses which have the object or effect of harming competition in Hong Kong. Cartel conduct, which includes agreement between competitors to fix prices, share markets, rig bids or restrict output, constitutes serious anti-competitive conduct under the Competition Ordinance.
According to the Second Conduct Rule of the Competition Ordinance, businesses with a substantial degree of market power are prohibited from abusing that power to harm competition. Conduct which may contravene the Second Conduct Rule includes predatory pricing, anti-competitive tying and bundling, etc.
Pursuant to the Competition Ordinance, the Commission may only conduct an investigation if it has reasonable cause to suspect that a contravention of a competition rule has taken place, is taking place or is about to take place. The Commission will determine whether or not to pursue a case having regard to its Guideline on Investigations and Enforcement Policy. For effective investigations and to protect the interests of all persons involved, the Commission will generally not comment on whether a case is being or will be investigated.
The Commission maintains liaison and exchanges with competition authorities in other jurisdictions. On the Google Inc. case, the Commission indicated that it is aware of the European Commission's recent decision and the response of Google Inc., as well as the development of the relevant issue in other jurisdictions. The Commission will keep abreast of the development, and continue to monitor the situation in Hong Kong with a view to promoting competition for enhancing the long term benefit of the community.
(2) Different jurisdictions hold different views on whether Google Inc. has wrongfully manipulated its search results. Regarding the decision of the European Commission, we note that Google Inc. has expressed disagreement and would consider an appeal. We also note that subsequent to a comprehensive investigation, the United States Federal Trade Commission (USFTC) considered that there was insufficient evidence that Google Inc. had manipulated its search results to unfairly disadvantage its competitors or violated the relevant laws. It therefore decided to close its investigation into anticompetitive conduct by Google Inc. Nevertheless, there have recently been calls for the USFTC to re-examine the case concerning Google Inc.
As seen from the above, the matter is complicated and there is no consistent view across jurisdictions. As an independent statutory body which enforces the Competition Ordinance, the Commission will continue to liaise with other competition authorities, closely monitor the development of the Google Inc. case and continue to monitor the situation in Hong Kong.
(3) The sequence of results displayed by Internet search-engines is determined by certain underlying algorithms, for example the number of backlinks to a website. Displaying advertisements alongside search results may not constitute misleading conduct on the part of the service providers of Internet search-engines. From what we observed on the Internet, links to paid advertisements are labelled as advertisement when search results are displayed on major Internet search-engines.
On consumer protection, the Consumer Council (the Council) offers consumption and related information to consumers, and acts as a conciliator in an effort to bring settlement to the dispute between traders and consumers. The Council has all along been promoting the importance of smart consumption to consumers, including reminding them to pay attention to details such as the terms of services when making online purchases. A good number of articles have been featured in the CHOICE Magazine in recent years to provide tips to consumers for purchasing various products online. The Council also gives recommendations to enterprises, encouraging them to strictly comply with the law, adopt good practices and enhance customer services.
Ends/Wednesday, July 12, 2017