Google ordered to let Lottoland advertise

The SA Competition Tribunal reined Google in a bit with a ruling that Google has to grant Lottoland access to its advertising platform after it blocked Lottoland from advertising.

The Competition Tribunal said in an announcement that it has issued an interim order directing Google Ireland Ltd and Google South Africa (Pty) Ltd to permit Lottoland SA (Pty) Ltd access to its advertising services (Google Ads) in the same manner that other betting firms in SA have.

The order applies for a period of six months from its date, or the conclusion of a hearing into the prohibited practices alleged by Lottoland, whichever is earlier.

The tribunal says the Google advertising platform enables advertisers to display advertisements to users who utilise Google search, with Google Ireland acting as the service provider for Google Ads in SA.

The ruling follows an application for interim relief by Lottoland, a licensed bookmaker in SA.

The bone of contention between Lottoland and Google is that Lottoland offers fixed-odds bets on the outcome of various lotteries around the world, including the SA national lottery, which Google argued is in contravention of SA legislation.

Lottoland complained to the Competition Commission that Google terminated its access to Google Ads without justification while allowing access to its competitors, causing Lottoland financial harm and distorting competition in the market, also harming consumers.

The tribunal did not agree with Google’s argument that Lottoland offered fixed-odds bets on the outcome of the national lottery and that this contravenes sections of the Lotteries Act.

“It submitted that in terms of its online advertising policies, which are designed to protect users, restrictions are placed on the promotion of certain gambling activities,” according to a statement issued by the Competition Tribunal, which heard arguments from both sides.

“Of particular relevance, the promotion of lotteries is limited to state-licensed entities and that this restriction is in place to ensure compliance with the provisions of the Lotteries Act.

“Google claimed that supplying Lottoland with access to Google Ads carries with it the potential for criminal liability and other commercial risks.”

The tribunal concluded that Google’s argument was undermined by the fact that Google allowed Lottoland’s competitors to advertise the same or similar services which Google claimed contravenes the Lotteries Act.

Google trying to avoid being ‘dominant’?

Although the tribunal noted that it will furnish the reasons for its decision later, it explained the basis of its decision. It said Google had not presented clear evidence that Lottoland is in breach of the Lotteries Act.

It said there are substantive disputes in relation to the legality or not of Lottoland’s business as it relates to fixed-odds betting on the outcome of lotteries and that “it is not appropriate for it to attempt to determine these disputed issues”.

“Google contended that other marketing channels such as offline advertising (including print media, outdoor advertising and television) comprise the broader (undefined) ‘advertising ecosystem’ that should form part of the relevant product market, such that it is not dominant.

“The Tribunal, however, was not persuaded by Google’s argument that the relevant product market encompasses the broader advertising ecosystem,” it said.

“It found that Google, on a prima facie basis, is a dominant firm in the online search and search engine marketing markets in SA.”

This part of the ruling has wider repercussions in that it attacks Google’s repetitive arguments that it does not dominate the market and does not engage in anti-competitive or monopolistic behaviour.

“Google Ads is likely to be dominant (by virtue inter alia of Google’s market power in the inter-related market for search) in instances where consumers search online to identify a specific bookmaker or gambling offering.

“Google is the predominant search alternative in South Africa … bookmakers reviewed in SA generally do not have physical premises and customers interact with them primarily through the internet,” the statement by the tribunal quoted from evidence presented during the hearings.

Google Ads a ‘scarce service’

Lottoland competes with other licensed bookmakers in South Africa such as Hollywood Bets, World Sports Betting, Betway, Betfred (which owns Lottostar) and Netbet (trading as Sportingbet).

The tribunal found that Google Ads can prima facie be considered as a scarce service.

“The findings of the CMA [Competition and Markets Authority in the UK] and Commission show customer preference for Google search; that there is no feasible substitute for Google Ads. Google’s rivals likely face significant barriers to attracting advertisers; Google Ads is a service which cannot be easily replicated by [its] competitors,” it said.

The tribunal agreed with Lottoland’s argument that Google should allow Lottoland to advertise. Lottoland proved that Google provides access to Google Ads to some of Lottoland’s competitors.

“Lottoland seeks nothing more than equitable access with its rivals. Google has previously supplied Google Ads services to Lottoland and there is no evidence to suggest that it was not economically feasible for it to do so at the time,” Lottoland argued in the hearings.

Refusal

The tribunal concluded that it can be accepted that Google’s conduct amounts to a “refusal to deal” as described in sections of the Competition Act.

“Taking all the above evidence into consideration, we conclude that the termination or restriction of access in this matter prima facie constitutes a refusal to deal in the context of section 8(1)(d)(ii), given that the refusal prima facie undermines Lottoland’s participation and expansion within the market in which it operates.

“The conduct prima facie distorts competition by impeding the ability of a downstream firm to expand within the market relative to its rivals in the absence of any technological, efficiency or pro-competitive gain,” it said.

Lottoland presented to the tribunal that it quantified the effect of Google’s refusal to accept advertisement, arguing that its new customer registration had dropped significantly since Google blocked its advertisements.

It said that, based on the seven months in which Google supplied its Google Ads to Lottoland, Lottoland estimates that the subsequent refusal to accept advertising reduced its revenue.

Interim relief

The tribunal said that the evidence shows that Google’s conduct in this case prima facie resulted in significant commercial harm to Lottoland, as well as affecting its ability to compete with its rivals for new users.

The tribunal concluded that the balance of convenience favours the granting of interim relief.

“Any prejudice which the respondents may suffer during the period of our interim order, pending the determination of the matter, must be considered against the prima facie effect on competition in the market by Google impeding Lottoland’s ability to expand within the market relative to its rivals, direct harm to Lottoland’s business and depriving end-consumers of choice.”

The tribunal noted that the interim relief is a way to temporarily protect and maintain competition pending the conclusion of a hearing into the alleged restrictive practices, such as abuse of dominance.

The relief is decided without the benefit of a full investigation and oral evidence.

It says it is not the tribunal’s function, in interim relief proceedings, to arrive at a definitive finding of a contravention. A successful applicant is only required to make out a prima facie case, not to establish its case on a balance of probabilities.

This will be decided later. – bbc.com