Travel start-up Barely Digital is fighting Google in court
Hamburg, Dusseldorf Google is one of the most powerful bouncers in the world. The search engine largely decides who is in the Internet is found – and who is not. This is especially true for the popular advertising product ads: Anyone who is not allowed to place ads here will quickly perish. In this way, the group also determines the weal and woe of entire business models.
A court case in Hamburg (Az.: 415 HKO 5/23), which the Handelsblatt learned about, shows what the concrete consequences are when Google makes use of its power. The dispute gives a detailed insight into the procedure of the search engine provider.
In its most recent judgment from the beginning of February, the district court largely followed the arguments of Google’s lawyers. However, the plaintiffs have already appealed. In addition, the question arises as to how fairly the group deals with its customers – and whether it might not abuse its dominance to promote its own plans. In this case: the expansion in the market for digital mobility services, which Google is penetrating with its Android Auto operating system.
Jan Martin Kofoet and Tobias Hübner, founders and managing directors of the online service provider Barely Digital, suddenly felt their dependence on Google ads. On October 19, Google blocked their account for the advertising product Ads – and suddenly shut down the business of the two entrepreneurs. According to their own statements, sales have since collapsed by around 80 percent.
Kofoet and Hübner earn their money with the sale of e-vignettes, among other things. For example, your customers can use their smartphones to pay tolls for Hungarian or Czech motorways.
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They also operate a portal that helps rail customers collect compensation for delayed train journeys. In case of success, a commission is then due.
The two brands, Vintrica (vignettes) and Fahrkartenzahlen.de, rely primarily on Google ads. If someone was looking for motorway vignettes or rail compensation, their offers were usually displayed relatively high up and thus lured to them. In addition, Kofoet and Hübner offered a lot of money on Google Ads for relevant search word combinations such as “Vignette” and “Hungary”.
Barely Digital paid four million for ads – then Google suspended the account
Google’s accusation: With their ads, the entrepreneurs violated the “Bypassing of Systems” policy. However, the accusation was not really understandable due to a lack of justification.
Kofoet and Hübner immediately objected and defended themselves with the help of their lawyers. After all, they have been a Google customer since 2018 and had spent around four million euros on ads there in the twelve months before the blocking. This emerges from court documents available to the Handelsblatt.
Google became aware of Barely Digital and included the company in the summer of 2021 in the so-called “Google Accelerated Growth Team” for “accelerated growth”. The deal: Google provided the two entrepreneurs with advisors to improve the business. In return, Barely Digital committed to spending a mid-six figure sum on Google advertising within three months.
was what Barely Digital said it had spent on Google ads in the 12 months prior to the ban.
Part of the special care was a kind of fine-tuning of the ads by Google employees. This means that Google not only knew what the company wrote in its ads. It even co-wrote and translated these ads itself.
Even so, just over a year later, Google dismissed the Barely Digital ads as illegal. Apparently that also seemed strange to the Hamburg judges. Shortly before Christmas, the chamber ordered Google to unlock the account with an injunction.
Didn’t Google employees know what their own rules say?
But Google seems to be serious about stopping vignette advertising. Now the group suddenly referred to another passage in its conditions: the osDD guideline. It prohibits Google customers from placing advertisements for services “that are also available directly from a public authority or a government-commissioned company”. In principle, this is the case with vignettes.
It is striking that the osDD guideline was also introduced in 2020, i.e. it already existed when Google wanted to beautify Barely Digital’s toll ads with Verve a year later.
In court, for example, anyone who believed that Google’s sales staff only marketed or optimized ads that conformed to the rules was disabused. “The behavior of employees from the sales area” cannot be interpreted as an “implicit contractual declaration”, Google’s lawyers said somewhat awkwardly. It had been made clear that “only recommendations would be made”.
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So maybe the employees didn’t even know what their own rules said? This also remains open on request.
It is also difficult to understand why Google wanted to include Barely Digital in a presentation about particularly successful advertisers in November 2021 and why the company was encouraged to post additional YouTube ads. The successful video platform also belongs to Google.
When asked about the case, Google said that “only governments or providers commissioned by them” are currently allowed “to advertise official documents or services”.
US group promotes its own mobility services
Kofoet and Hübner have only one explanation for Google’s change of mood: they believe that the company will soon be offering e-vignettes in one of its own services. Specifically, they accused the group of wanting to create an interface via the App Maps that would only allow motorway operators to sell their vignettes in the future. In countries like that USA toll prices are already displayed there. The group already arranges train tickets or taxi rides via Maps. The thesis is therefore not implausible.
Google had this disputed by one of its responsible US lawyers in court. However, it remains unclear whether this also applies to products such as Android Auto or the Waze navigation system, which are currently being promoted with particular emphasis at the headquarters in Mountain View. It is obvious that Google is working on convenience functions such as digital toll payment. At the request of the Handelsblatt, the group did not want to comment on this suspicion.
Other companies like Holiday Check, Booking.com or Idealo have made accusations similar to those of Kofoet and Hübner in the past. The tenor: Google is abusing its dominance for its own benefit.
Just last fall, a court confirmed a billion-euro fine imposed by the EU Commission on Google for illegal practices in its Android mobile operating system. Google was concerned with consolidating the market power of its search engine.
The Barely Digital case is also interesting because Google argues that it wants to protect its users with the directive. They should not be innocently lured into overpriced offers – especially when it comes to official services.
Barely Digital charges a fee from users
Because the group basically has one point with its revised guidelines: A middleman like Barely Digital offers customers little added value. The vignettes are cheaper online directly from the motorway operator, and compensation is also processed directly by the railways free of charge. However, if a searcher ends up with Kofoet and Hübner, they have to shell out an additional fee or commission.
In fact, Barely Digital says it charges an average of 16 percent of the vignette price as a fee. If you want to drive on Hungarian motorways for about ten days, you pay 14.18 euros for the vignette and 2.42 euros “service fee” on top – essentially for the translation into many languages and additional services such as a reminder that the vignette is expiring.
There are consumer advocates who see a problem in this, since the difference to the official original is not immediately obvious. Google therefore has a legitimate interest, at least in principle, in protecting its users and thus its own reputation. According to the group, it is about avoiding unnecessary costs.
But where exactly is the line between misleading and legitimate offers? Finally, fees or commissions from intermediaries for government services such as vehicle registrations or lottery tickets are not uncommon.
Fuzzy rules leave a lot of leeway
The antitrust hurdles for blocking legal offers are “relatively high,” says Fabian Stancke, a professor at the Brunswick European Law School. Google’s guidelines must be “unambiguous and must not discriminate against individual offers,” says Stancke.
The vagueness of some rules sometimes gives Google a lot of leeway. In another case, which also dealt with the osDD directive, the Frankfurt district court (Az.: 2-03 O 58/22) saw “market abuse” by Google last year. The judgment is already final.
In the USA the federal government accuses the group in court proceedings of having “deliberately created a misleading black box” with its advertising products, “in which Google sets the rules for auctions for its own benefit”.
Barely Digital lawyer Christopher Unseld speaks of “limitless rule-making power” at the search engine group, which has a market share of more than 90 percent. Colleague Philipp Westerhoff sees the verdict as a “free pass for Google to change the rules of the game overnight, without regard to the interests of the contractual partners and without the threat of consequences”.
The Hanseatic Higher Regional Court will soon have to comment on this as well.
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