France mulls Google tax and competition probe

Out-Law News | 11 Jan 2010 | 4:47 pm | 1 min. read

French president Nicolas Sarkozy is considering a plan to pursue a competition law case against Google over its dominant position in the search engine market and another proposal which would increase taxes on internet companies.

A French Government report published last week has recommended radical action to protect creative industries against the loss of income allegedly caused by the online consumption of music, books and other cultural products.

The report was produced by the head of auction house Sotheby's in France; a former government minister; and Patrick Zelnick, a music industry mogul who is record producer for Carla Bruni, Sarkozy's singer wife.

According to French newspapers, the report expressed concern that Google's dominance appeared to have driven the cost of internet advertising down, which in turn made it more difficult to fund cultural services online.

The report recommends asking competition authorities to investigate whether Google is abusing a dominant position in the market for internet advertising.

The report has also recommended that the government introduce an additional tax for internet advertising of an extra one or two percent for the biggest operators of online advertising systems.

The €10 million to €20m raised by this measure would help fund some of the report's other measures, such as the public subsidy of a 'music card', which young people would use to buy music at online retail outlets.

French reports said that Sarkozy called for a "more accurate" tax of online advertising services.

Google has rejected the proposals and said that it was already responsible for helping to create content in France.

"Google already supports content creation through partnerships with many French publishers and content creators," said Olivier Esper, senior policy manager for Google in France. "In fact, around the world, we distributed more than €4.2 billion last year to our partners, helping to fund great content creation."

"We don't think introducing an additional tax on internet advertising is the right way forward as it could slow down innovation," said Esper. "The better way to support content creation is to find new business models that help consumers find great content and rewards artists and publishers for their work."

The young person's music card would be funded partly by the online music industry as well as by Government and through a charge, the report said. The card, worth €50, would create a "virtuous effect" by encouraging young internet users to visit legal online music shops rather than engage in illegal file-sharing, it said.

Sarkozy said that the Government would meet half of that cost and that the card would be available by summer.