Google Appears to Have Dodged Antitrust Fines over Search in Europe

By Peter Bernstein February 05, 2014

It seems that the long battle/negotiation between Google and the European Commission (EC) over its search practices and the belief of European regulators and competitors that Google by showing preference to its own products in search was violating antitrust laws, at least for the EC is drawing to a close.  At least that is the impression left by the EC in a statement by Commission Vice President in charge of competition policy, Joaquin Almunia.

For TechZone360 readers, you are aware that we have been following all of this since its inception and have provided periodic updates as developments have warranted.  Before going into the details, it is significant to note that assuming this ends the squabble between Google and the EC, which literally could have cost Google billions in fines, they will have managed to avoid paying antitrust violations in first the U.S. and now Europe which is something Microsoft has not been able to do. 

For the short term, Google has masterfully avoided a large dent in its wallet, regarding search practices in the European market where it has 75 market share. However, speaking of Microsoft, the EC still has under consideration a Microsoft promoted effort to find Google guilty of EC antitrust laws from leveraging its domination of the smartphone market via Android.

The give and take between Google and the EC

So here is where things stand with the EC following the third set of proposals by Google to mollify regulator and competitor concerns. 

First, Google has accepted to guarantee that whenever it promotes its own specialized search services on its web page, the services of three rivals, selected through an objective method, will also be displayed in a way that is clearly visible to users and comparable to the way in which Google displays its own services and applies to future services as well. 

Commission Vice President in charge of competition policy, Joaquín Almunia, stated:

 "My mission is to protect competition to the benefit of consumers, not competitors. I believe that the new proposal obtained from Google after long and difficult talks can now address the Commission's concerns. Without preventing Google from improving its own services, it provides users with real choice between competing services presented in a comparable way; it is then up to them to choose the best alternative. This way, both Google and its rivals will be able and encouraged to innovate and improve their offerings. Turning this proposal into a legally binding obligation for Google would ensure that competitive conditions are both restored quickly and maintained over the next years."

As the EC notes, Google in previous proposals had already made significant concessions regarding Commission concerns. These included:

  • Google will give content providers an extensive opt-out from the use of their content in Google's specialized search services if they so wish, without being penalized by Google.
  • Google will remove exclusivity requirements in its agreements with publishers for the provision of search advertisements; and
  • Google will remove restrictions on the ability for search advertising campaigns to be run on competing search advertising platforms.

The Commission says it will inform complainants why it believes Google's improved offer is now acceptable, and afford the chance to be heard before the Commission takes a final decision on whether to make Google's commitments legally binding on Google.

Important to also note in terms of the EC’s now seeming to be amenable to not having to fine Google is the provision that Google’s compliance with these commitments will be supervised by an independent monitoring trustee, and that they would cover the European Economic Area (EEA) for 5 years.

Each reaction from complainants seems to be that they remain unimpressed.  Obviously they are going to avail themselves of the opportunity to comment, but while the proposals appear to put the outstanding regulator concerns to rest, court action by complainants remains an alternative which is likely to be pursued.   

Making a list and Background on the Commission's concerns

For those keeping score, a brief rundown on what caused the EC angst about Google’s business practices regarding search, should be helpful.

In March 2013, the Commission informed Google of its preliminary conclusion that the following four types of business practices might  violate EU antitrust rules prohibiting the abuse of a dominant position (Article 102 of the Treaty on the Functioning of the European Union – TFEU).  The EC has a more detailed discussion of each point and the nature of the concern, but in summary they were:

  1. The prominent display, within Google’s web search results, of Google’s own specialized web search services as compared to competing specialized web search services.
  2. The use by Google without consent of original content from third party web sites in its own specialized web search services.
  3. Agreements that oblige third party web sites (“publishers”) to obtain all or most of their online search advertisements from Google.
  4. Contractual restrictions on the transferability of online search advertising campaigns to rival search advertising platforms and the management of such campaigns across Google's Adwords and rival search advertising platforms.

In matching the concerns against the suggested remediation of such practices, it is clear why the EC feels it has done its job.

While it may be a legal nicety, it is significant to appreciate the context for this action.  Under Article 9 of the EU's Antitrust Regulation (Regulation 1/2003) the EC can end antitrust proceedings by making commitments offered by a company legally binding. As the Commission notes, “Such a decision does not conclude on whether EU antitrust rules have been infringed but legally binds the company to respect the commitments. If the company breaches these commitments, the Commission can impose a fine of up to 10 percent of its annual worldwide turnover, without having to find an infringement of the antitrust rules.” 

For those of us like me who are not lawyers, the above means that Google from the regulator’s perspective is not admitting guilt to violating the antitrust laws. Rather, assuming the Commission votes to made the company’s proposals legally binding, without finding a violation of the antitrust laws but with a finding that they are not in compliance with the practices they had agreed to follow, the very stiff fines associated with an antitrust violation could be imposed. 

Avoiding the EC’s big stick is precisely why Google has continued refining its proposals to find common ground with regulators. The goal was to satisfy the four concerns of the Commission. To be frank, it also was to provide Joaquín Almunia and the EC a vehicle for looking tough while still assuring European users they could enjoy Google services now and in the future if Google plays well with others. 

There is a popular saying that, “The opera is not over until the fat lady sings!” The EC still has to hear from competitors and make a final decision.  And, even this might not be the final curtain on this production if competitors follow through on intentions to “See you in court!”, it certainly should calm investor fears, and its implementation can serve as a model for keeping a watchful eye on Google in the rest of the world.

Edited by Cassandra Tucker
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