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EU Gives Google Another Do-Over

By Peter Suciu
Jul 17, 2013 4:43 PM PT

Google's search results have been the subject of ongoing concern in the European Union for some two years already, and on Wednesday the company was warned that it must offer more concessions in the way it runs its online search business in Europe or face additional fines.

EU Gives Google Another Do-Over

"I concluded that the proposals that Google sent to us months ago are not enough to overcome our concerns," Joaquín Almunia, the European Union competition commissioner, reportedly said at a news conference.

At stake is a possible fine of as much as 10 percent of Google's annual global revenue, which was roughly $50 billion last year.

Google currently accounts for some 90 percent of the Internet search market in some European countries, compared with only about 70 percent in the United States.

The company did not respond to our request for further details.

Competitor Feedback

The EU's case against Google began back in 2010, when the European Commission launched a formal inquiry into Google over concerns that the company was abusing its dominant position in search.

This past April, the Commission released public documents that discussed the proposals Google made in response. At the time, it looked likely that the EU would be placated by those concessions.

The proposals were also provided to Google's competitors for review, however, during a period that just concluded at the end of June.

Included among Google's concessions were the labeling of promoted links, an opt-out option for its vertical search services and even an end to obligations for partners to source ads exclusively via Google. The proposal also removed restrictions that would prevent advertisers from managing search campaigns across competitors' ad platforms.

Google's proposals were "meaningful and comprehensive," providing additional choice and information while also leaving room for future innovation, Google senior vice president and general counsel Kent Walker said last month.

"We focused on addressing the Commission's specific concerns, and we think we did a pretty good job," he added.

'Google's Remedies Were Trivial'

Not everyone agrees, however.

"Google's remedies were trivial," said David Franklyn, director of the LLM Program in IP and Technology Law at the University of San Francisco School of Law. "Google needs to be clear that it isn't playing favoritism to its own search results."

So central has search become to modern life, in fact, that it is really no longer just about search.

"What they are is top in search, and this is not any old industry that exists in the world," Franklyn told the E-Commerce Times. "It is the center of commerce on the Internet. This would be akin to owning the streets and roads. It has become an essential business, much like a public utility.

'The Only Region'

It isn't entirely clear what sanctions Google might face now that this attempt at concessions has failed, or what it should do next.

"Google's situation in the EU is obviously a cause for concern, since not providing an ad ranking system that achieves regulator approval increases the likelihood of legal sanctions and fines, Charles King, principal analyst at Pund-IT, told the E-Commerce Times.

"The changes the company has made to previous requests from regulatory bodies including the FTC have been approved, leaving the EU as the only region demanding further action," King added. "In addition, the EU acted in part due to complaints from Google's competitors, including Microsoft and Nokia. Not to put too fine a point on it, but it seems worth asking whether any further changes Google makes could garner those companies' support."

Google Shopping

Still, it's not just the EU that is displeased with Google. In a recent FairSearch Europe survey, for example, the group found that search is still far from a level playing field.

One in five of those surveyed clicked on Google Shopping links, for example, but only one in 200 did so on rival links. More than half of the 1,888 surveyed didn't know that Google Shopping is paid content.

"The study shows that Google's proposal to label paid specialized services like shopping when it favors them in display of results, and to link to three rival sites, would be a total failure, because the Google links would get 40 times the click-throughs of the three rival sites," FairSearch spokesperson Ben Hammer told the E-Commerce Times.

'It Needs to Be Clear'

If anything's clear, it's that the fight is likely far from over.

"It does go with the territory," Franklyn suggested.

"It needs to be clear to the consumer what is paid and what isn't paid," he added.

At the same time, though, "when you regulate search there is the argument that it shouldn't hamper innovation," he said. "The counter-argument is that it isn't just search anymore -- it is also advertising."

For now, "this is like a tennis match," Franklyn concluded. "The ball has been hit back into their court."

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