Google retreats on controversial 'fake' price comparison site scheme

Google has diluted a controversial scheme which critics say encourages the creation of "fake" price comparison sites - prompting one ad agency to say Google's "screwed everyone over".

Sky News revealed last month that Google was offering substantial incentives - often amounting to hundreds of thousands of pounds a month - to retailers who passed their ads through a Google-certified comparison shopping service, or CSS.

The search giant then showed the names of the CSSs in its Google Shopping insert, giving the impression of a thriving comparison shopping marketplace.

Now Sky News has learned that Google has slashed, by almost 85%, the incentives it gives all but the biggest retailers, effectively killing the scheme for many smaller agencies.

The search firm gave no reason for the change, but following Sky News' investigation it has faced criticism over the true nature of its certified CSS sites.

Asked about Sky News' story in the European Parliament, the powerful European Commissioner for Competition Margrethe Vestager said: "This has reached us as well. Claims of false shopping comparison sites.

"And of course we are looking into this, how is this market developing, and is this a Trojan Horse into actually making the changes work?"

Google is under pressure to prove it has increased competition on its search engine after it was fined €2.4 (£2.1) billion by the European Commission in 2017 for demoting competitors and ordered to give its rivals "equal treatment".

After its first attempt to encourage price comparison sites to bid for places in its Shopping box experienced poor take-up, in June 2018 Google began approaching ad agencies and inviting them to build comparison shopping sites.

The incentives on offer encouraged what one agency called "a feeding frenzy" among ad agencies and ad tech firms. Within the first four months of launch, more than 120 sites signed up to the scheme.

Then, to the surprise of participating agencies, Google changed the terms of the arrangement.

In an email on 4 October, Google told agencies that it would no longer be giving retailers a rebate of 30% on their advertising spend, worth up to €32,000 (£27,000) a month.

Instead, starting 1 November, the rebate would be 5% - although the total monthly sum a retailer could receive was increased to $100,000 (£77,000).

To get that amount, a retailer would have to spend $2m (£1.7m) on advertising through a CSS in a single calendar month.

After months of encouragement, the sudden withdrawal of incentives left the CEO of one agency, who did not want to give their name, feeling betrayed.

"It was a big exercise," they told Sky News. "We had to pull developers off all our existing projects to get this up and running."

"It'd be nice to get someone from Google, if they were going to put out a statement, or just something to say, 'Sorry, we kind of screwed everyone over'. It doesn't really strike me that it even registers on them the effect this has had on everyone."

Sky News found that although, at first glance, the CSS sites resembled price comparison sites, on closer inspection, many froze or crashed. Most offered only a tiny range of products.

That was because, several site operators told Sky News, the Google-certified sites were never intended to be used for shopping. One called it "an advertising system that looks like a price comparison".

"They've gone out to all these agencies and said, 'Hey come on board, set yourself up as a CSS,' and it's effectively fake CSS," says Richard Stables, CEO of Kelkoo, one of Europe's biggest price comparison services.

"They advertise on Google and it looks like they're a price comparison site. They're not. If consumers actually went to those sites they would be appalled. But Google doesn't care.

"We're in this marketplace being dominated by a player that is effectively doing evil. Is using its power to kill off whoever they choose to."

Since the introduction of Google's remedy in September 2017, Kelkoo says its traffic from the search engine has dropped 68% with the revenue it gets from Google declining by 67%.

Asked about the latest changes, Mr Stables said Google's system was "not fit for purpose". He added: "At the moment you don't have a real price comparison experience. You have ads on top of Google."

If Google fails to satisfy the Commission, it could be liable for non-compliance payments of up to 5% of the average daily worldwide turnover of Alphabet (Xetra: ABEA.DE - news) , Google's parent company, backdated to the start of non-compliance.

A Google spokesperson told Sky News: "We've complied with the European Commission's order. We allow all comparison shopping services to compete equally to show product ads from merchants on Google's Search results page.

"To help drive awareness amongst merchants who are unfamiliar with these new opportunities, we're currently offering incentives for them to work with comparison shopping services.

"One year on, both services that existed before the remedy and services that are new to comparison shopping are participating successfully."