13. 05. 2024
Although in the autumn of last year, Tomáš Braverman stepped down as Managing Director of Heureka, the leading price comparison platform in Eastern Europe, he has by no means given up his fight against Google. "We have lost market share over the past ten years simply because Google has abused its dominant market position," says Braverman, who now works as a consultant for Heureka. His successor as Heureka CEO, David Chmelař is less reserved: "Google is strangling us." In an interview with F.A.Z., Chmelař accuses the subsidiary of the US company Alphabet of illegally favoring its webshops when searching searches on Google pages. "If we let Google carry on like this, there will be no other providers in the future." It shouldn't come to that.
Heureka versus Google is an unequal battle. But Heureka is no small player. The comparison site links 55,000 online shops and has 20 million visitors a month who click through 150 million offers. This makes Heureka the market leader in nine countries: the Czech Republic, where the main focus is, Slovakia, Hungary, Slovenia, Croatia, Bulgaria, Romania, Serbia and Bosnia-Herzegovina.
But the difference between Heureka and Google remains huge. Compared to the 280 billion dollars that Google's parent company Alphabet earned in 2022, the Czechs only made 55 million euros. It took Google less than two hours to generate what the Czechs need a whole year to do. Nevertheless, things are not looking quite so bad in the battle between the Czech David and Google Goliath.
Just last week, Heureka won a long-running case against Google before the European Court of Justice. Courts in the Czech Republic can now decide whether and, if so, how much compensation Heureka is entitled to due to "continued anti-competitive behavior".
The EU Commission had already criticized this in 2017. The proceedings, in which the Commission imposed a fine of 2.41 billion euros, have not yet been finalized since Google is exhausting its legal remedies. Meanwhile, the Commission opened new proceedings against Google in March. It essentially addresses quite similar allegations of market abuse but now it is based on a new and stricter legal framework.
Google has rejected accusations of inadequate implementation of the EU Digital Markets Act (DMA). The Commission has one year to investigate the matter. Braverman and Chmelař are hoping for a quicker result: "Competition Commissioner Margrethe Vestager has told us that she wants the proceedings to be concluded before she leaves office in September." The Commission's term of office ends in October.
Heureka's management has joined forces with a good three dozen price comparison and shopping platforms, including Idealo, which belongs to the Axel Springer publishing house, to coordinate their efforts. As soon as the DMA legislation came into force, they called for legal action against Google. They are united by the complaint that the giant is cutting into their market with unfair practices by favoring results from its webshops in the search function, whether it's for travel, flights, job searches, or other items, says Braverman. He adds: "Many other providers have already been forced out of the market because ofGoogle." Thousands have lost their jobs. There have also been no newcomers in recent years. He takes this as evidence of how big the hurdles are that have piled up in the market.
Google is rolling up the European market from west to east, says Braverman. This can be seen in the data that the EU Commission collected for the 2017 proceedings. Braverman has compiled it into charts, which he recently showed to members of the European Parliament. They show how rapidly grew the proportion of hits on search results pages that ended up on Google Shopping instead of other shops. By the middle of the last decade, the proportion of Google Shops in the UK, France and Spain was already over 90 percent, while in Italy and Germany, it was 80 percent and above. It is therefore easy to imagine how the curves have developed since then, says Chmelař. In any case, the result is clear: "The price comparison sites in Europe are running out of steam."
In Eastern Europe, they were better prepared for the arrival of Google. Not so much in the sense that they were better able to protect their own comparison sites. Heureka itself was forced to change its business model - from a pure price comparison and review portal to a marketplace. This would now cause additional stress for customers who run their online shops, as they would inevitably be interfering in their business. Developing this also costs a lot of money and has reduced profits.
In fact, the Czech financial group PPF, which like billionaire Daniel Křetínský holds a 50 percent stake in the e-commerce company, reported an impressive pre-tax return (based on EBITDA) of 37 percent for Heureka in 2022, even though this was 5 points below the previous year's figure. Chmelař prefers to refer to the sharp decline in cash flow. In 2022, the ratio to revenue was only 18.7 percent, compared to 31 percent in the previous year. And things didn't get any better in 2023, he says.
The figures for 2023 (the financial year ended on 31 March 2024) are not yet available, says Chmelař. But he can declare the following: "Growth has slowed, profitability has shrunk." The company has to respond to this now. The future strategy is being discussed. He does not want to say whether and how many of the current 660 jobs will be affected. "We are examining all options."
Chmelař is not only concerned about the business. Consumers suffer from the monopolization of supply. Years ago, the consultants at Grant Thornton in Sweden calculated based on EU figures from 2016 that products in the Google shop were overpriced: On average, the prices had exceeded those of the comparison sites by 13.7 percent; the median, i.e. the price of most cases observed, had been 7.2 percent higher. In some countries, deviations of up to 30 percent were reported. Reason enough for the Commission to take action as a consumer protection organization, says Chmelař.
It has already taken tougher action in other cases of suspected monopolies. Braverman recalls the separation in the segment of electricity and gas companies, which are no longer allowed to control networks and production. But Google's competitors don't want to go that far. Together with more than 100 other IT companies, they have founded the "neutralsearch.eu" initiative.
They have set out "ten principles for restoring fair and neutral online search". The most important of these ten principles are numbers three and five: Gatekeepers, IT corporations such as Alphabet, Apple, Amazon, or the TikTok provider Bytedance, should not put providers "of a similar service in a worse position", and they must "ensure that any third-party provider offering a comparable service is given an economically equal opportunity to offer its services via this online search engine".
New players such as Temu are complicating the situation, says Heureka boss Chmelař. The aggressively priced Chinese low-cost provider that everyone is currently talking about is primarily using "the only super-powerful tool, namely Google". Even more marketing billions would flow to the American company, which could further strengthen its position. The Chinese-American alliance worries Chmelař: "We are putting our European market in the hands of the Americans and Chinese." The EU must also put Temu in its place, because "that's not a fair competition either". He hasn't even listed the accusations of poor quality goods, a lack of sustainability, potential dumping practices, and disregard for customs regulations which were articulated against the provider associated with the Chinese e-commerce platform Pinduoduo.
But above all, it's about Google. It will soon be back before a Prague court, following the European Court of Justice's clarification that the Prague proceedings are legal. There, Heureka sued the Americans for almost 16 million euros in damages based on the 2017 EU proceedings. They now hope that the decision "will help us in our dispute with Google over its dominant market position". Another lawsuit would then follow on its heels. Because, says Braverman, Google has turned up the heat again since 2016. He estimates: "The damage amounts to hundreds of millions of euros."
Interview in original version: https://www.faz.net/aktuell/wirtschaft/unternehmen/wie-ein-prager-e-commerce-anbieter-sich-gegen-google-wehrt-19673427.html
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