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Is Google Stuck in EU Antitrust Locomotive's Headlight?

Is Google Stuck in EU Antitrust Locomotive's Headlight?

Google may be in for a long and drawn-out antitrust battle in Europe unless it can quickly devise some alternative ways of doing business that would appease regulators there. The EU's antitrust chief, Joaquin Almunia, has given the search giant an ultimatum, and it's unlikely Google will meet it. Still, "you do have to consider the possibility [Almunia] is more interested in compliance than a fine at this point," said technology attorney Peter Vogel.

By Erika Morphy
05/22/12 9:02 AM PT

The European Union's antitrust ax is about to fall on Google, but the company can still avoid the worst repercussions. That is the essence of the message from EU antitrust chief Joaquin Almunia.

After a year-and-a-half investigation into Google's activities in the market, there are four areas of concern that need to be rectified, he said.

However, in the interest of restoring competition for users, the search engine can take advantage of one last chance to change its ways. This would be preferable to lengthy proceedings, "although these sometimes become indispensable to competition enforcement," Almunia noted.

However, the deadline for Google is vague -- a few weeks. It is also highly impractical, leading one to speculate that the EU doesn't expect Google to actually fall in line.

"I think it is inevitable that the EU will initiate a filing of a Statement of Objections," Keith Hylton, a professor at the Boston University School of Law, told the E-Commerce Times. "I don't see how it is possible that these issues could be resolved in so short a period of time."

Still, the fact that Almunia even gave Google any time to avoid an investigation and possible sanctions is a departure from how the antitrust office usually operates, said Peter S. Vogel, partner with Gardere Wynne Sewell.

"You do have to consider the possibility [Almunia] is more interested in compliance than a fine at this point," he told the E-Commerce Times.

That said, it's doubtful that a resolution will be reached, said Vogel, given the areas of concern and how closely they touch upon the core of Google's operations.

Sore Spots

The four areas of concern highlighted by the EU are how Google displays vertical search results, how it uses competing content, its search advertising policies, and how advertisers are restricted from using rival search engines.

In its general search results on the Web, Google displays links to its own vertical search services, which compete with other providers, Almunia said. The links to these vertical search services are displayed differently.

"We are concerned that this may result in preferential treatment compared to those of competing services, which may be hurt as a consequence," he added.

The second concern is that Google copies content from competing vertical search services and uses it in its own offerings. The problem is that Google may be copying original material from the websites of its competitors, such as user reviews, and using that material on its own sites without their prior authorization.

In this way it is appropriating the benefits of the investments of competitors. This practice could reduce competitors' incentives to invest in the original content and be especially detrimental to travel sites or sites providing restaurant guides, Almunia said.

Agreements between Google and partners on the websites where Google displays search advertisements is the third area of concern.

These agreements result in de facto exclusivity, requiring them to obtain all or most of their requirements for search advertising from Google, Almunia said.

The fourth concern has to do with restrictions that Google places on the portability of online search advertising campaigns from its AdWords platform to the platforms of competitors.

Google imposes contractual restrictions on software developers, Almunia said, preventing them from offering tools to transfer search advertising campaigns from AdWords to other platforms for search advertising.

Google's Privacy Policy

Google controls about 90 percent of search traffic in Germany and France alone, noted Vogel -- which is certainly enough of the market to get the antitrust authority's attention.

However, Google likely sealed its fate with the rollout of its new privacy policy earlier this year, he added. The EU was not pleased with the changes.

"I think the combination of these allegations, which competitors have been making in Europe for some time, with that change to Google privacy policy has pushed events forward," said Vogel.

Almost certainly, there is a backstory to this announcement, said Hylton. "I think it is safe to assume that there has been bargaining and negotiating between Google and the EU going on for months in private, and Google has not put forward solutions that are satisfactory to the EU.

"Now the EU has decided the time for negotiations is up," he said, "and is publicly declaring so. If Google doesn't come up with something soon, it will force the EU's hand to file a Statement of Objections."

Google and the EU did not respond to our requests for further details.


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