Google’s EU Antitrust Settlement Offer Won’t Suit Rivals

Google Inc. (GOOG)’s offer to settle an antitrust probe with the European Union by labeling its own services more clearly in Web search results is a “non-starter” for a group of competitors such as Microsoft Corp. (MSFT) and Foundem.

The companies and at least 10 other rivals that filed complaints with the EU will be able to give feedback on the remedies submitted by the Mountain View, California-based company to settle the almost three-year-old investigation.

Google, operator of the world’s largest Internet search engine, told the Brussels-based EU that it would create more distinction in searches between its own services and competitors, a person familiar with the negotiations said last week. Google also proposed to offer links to rival search engines, said the person, who asked not to be identified because the details of the offer aren’t public.

“If what has been proposed is labeling or a modified form of labeling, frankly that’s a non-starter,” said David Wood, a lawyer for Brussels-based industry group ICOMP, which includes Microsoft. “We haven’t seen the proposals and the commission hasn’t explained them to us. We’re in the dark.”

EU Competition Commissioner Joaquin Almunia has urged Google to address four points, including allegations that the company promotes its own specialist search services, copies rivals’ travel and restaurant reviews, and has agreements with websites and software developers that stifle competition in the advertising industry.

Photographer: David Paul Morris/Bloomberg

Google, operator of the world’s largest Internet search engine, told the Brussels-based EU that it would create more distinction in searches between its own services and competitors, a person familiar with the negotiations said last week. Close

Google, operator of the world’s largest Internet search engine, told the Brussels-based... Read More

Close
Open
Photographer: David Paul Morris/Bloomberg

Google, operator of the world’s largest Internet search engine, told the Brussels-based EU that it would create more distinction in searches between its own services and competitors, a person familiar with the negotiations said last week.

Negative Test

Even with a negative market test, “the commission can go ahead, no matter what,” said Andreas Stargard, a competition lawyer with law firm Paul Hastings LLP in Brussels.

Still, the commission “has to keep in mind the potential of an appeal ultimately at the European court,” said Stargard. “It cannot be arbitrary in its rejection of concerns.”

The EU probe is another chance for Google competitors and complainants to get the changes they’re seeking from Google. The U.S. in January closed a 20-month investigation into whether Google unfairly promoted its own services in search results over competing websites. The Federal Trade Commission concluded that Google was motivated more by wanting to improve its search results and the user’s experience than by a desire to stifle competition.

Foundem, a shopping comparison website and a complainant with the EU, sued Google in London in June to get damages for revenue lost as a result of the search engine owner’s “anti- competitive conduct,” according to court documents.

High Stakes

“It is difficult to imagine a competition case where the stakes for European consumers and businesses could be any higher,” Shivaun Raff, Foundem’s chief executive officer, said in an e-mail today. “As the gateway to the Internet, Google plays a decisive role in determining what the vast majority of Europeans discover, read, use, and purchase online.”

Raff said Foundem will “withhold judgement on Google’s proposals until we have seen them.” The remedies described so far “would do nothing to resolve the commission’s stated concerns regarding search manipulation,” she said.

The EU is preparing a market test based on Google’s formal submission, Antoine Colombani, a spokesman for Almunia, said last week while declining to comment on the specifics of Google’s offer. Al Verney, a spokesman for Google in Brussels, said that the company continues to cooperate with the commission.

‘Non-Discrimination’

“When the market test goes ahead, we will try and be constructive,” Wood said in a telephone interview yesterday. “But if it doesn’t clearly set out non-discrimination principles and the means to deal with the restoration of effective competition, plus effective enforcement and compliance, it’s very difficult to see how it can be satisfactory.”

The EU started the formal probe in November 2010 of claims that Google discriminates against other services in its search results and stops some websites from accepting competitors’ adverts. While Microsoft and partner Yahoo! Inc. (YHOO) have about a quarter of the U.S. Web-search market, Google has almost 95 percent of the traffic in Europe, Microsoft said in a blog post in 2011, citing data from regulators.

Thomas Vinje, a Brussels lawyer for the FairSearch Coalition, another group of technology companies including Microsoft, Expedia Inc. (EXPE) and Nokia Oyj (NOK1V), said Google displays links to its own search services differently from links to competitors, resulting in preferential treatment in comparison to similar services.

“Google should subject its own products and services to the same policy it uses for others,” Vinje said in an e-mailed statement yesterday.

New Complaint

FairSearch said April 9 that it had filed a separate antitrust complaint against Google over its Android operating system on mobile phones. In addition, Google’s Motorola Mobility unit is the subject of another EU probe related to patent licensing.

Vinje and Wood both said that for any settlement with Google to be effective, it would have to be global and not only apply to the 27-nation EU.

The commission should also address how it will deal with “other issues that are on the table,” such as mobile search and concerns from online mapping companies, Wood said.

Streetmap, another member of ICOMP, sued Google in London on March 15 for promoting its own maps over those of competitors in what it claimed was “Google’s cynical manipulation of search results.”

“If the commission wants to have support on the remedies decision, it has to clearly deal with those things,” Wood said.

An EU settlement avoids any decision on whether a company broke antitrust rules. Companies can be fined as much as 10 percent of their annual revenue if they break the terms of a legally binding settlement. Almunia first told Google in May 2012 that he wanted to settle the investigation.

To contact the reporter on this story: Stephanie Bodoni in Dublin at sbodoni@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.