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Europe Wants More Concessions From Google In European Antitrust Fight, Google Needs to Appease Competitors
(about 5 hours later)
BRUSSELS — Google must offer significantly more concessions to European Union regulators to avoid huge fines linked to the way it runs its online search business, the bloc’s top antitrust official warned Wednesday. BRUSSELS — Google has so far emerged from its tangles with antitrust authorities virtually unscathed. But in Europe, regulators said on Wednesday, Google will not have it as easy.
The comments marked the first time the European authorities have formally said that a deal Google offered earlier this year to settle competition issues was not acceptable. That places the onus on Google once again to address rivals’ concerns that the company’s search rankings benefit its own services. The European Commission on Wednesday formally said for the first time that Google’s proposal for addressing antitrust concerns did not go far enough, and demanded that it come up with more far-reaching remedies or potentially face a fine of up to $5 billion.
“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, told a news conference here. It was a significant setback for Google, which in April struck a deal with the commission to settle its three-year antitrust investigation by making certain changes in the way it displays answers to search inquiries. But the deal was contingent on feedback from Google’s rivals. The commission determined that the proposal was inadequate, and said the company needed to do more to address rivals’ concerns.
Mr. Almunia said he had written to Eric E. Schmidt, the company’s executive chairman, “asking Google to present better proposals or improved proposals.” The about-face followed an outcry from Google competitors during the market testing phase of the inquiry, in which the commission asked for feedback on the proposal.
In his letter, Mr. Almunia did not give Google a deadline for offering further concessions, suggesting that the case could continue for several more months, said one person with direct knowledge of the contents of the letter. The person spoke on condition of anonymity because the letter was not made public. “What they discovered in the market test was that overwhelmingly, everyone said the settlement was inadequate and doesn’t solve the problem,” said a person with knowledge about the feedback competitors gave the commission, but who spoke anonymously because the filings were not public.
The European Commission, the union’s executive arm, opened a formal inquiry into Google in 2010 over concerns that the company was abusing its dominant position in search. The commission laid out its main points in May 2012, and Google early this year came back with an offer to change its practices in certain search categories, hoping to settle the case and avoid a protracted antitrust inquiry. Joaquín Almunia, the European Union competition commissioner, said at a news conference, “I concluded that the proposals that Google sent to us months ago are not enough to overcome our concerns.” He said he had written to Eric E. Schmidt, Google’s executive chairman, “asking Google to present better proposals.”
Google is trying to work out a deal with Europe that would cause the least disruption to its search business and the advertising it generates, which accounts for much of the company’s revenue. A Google spokesman, Al Verney, said on Wednesday that it would “continue to work” with the commission to settle the case. He added that Google was confident that its earlier proposal “clearly addresses” the commission’s concerns.
It also wants to avoid a possible fine of as much as 10 percent of its annual global revenue of about $50 billion and a finding of wrongdoing that could limit its ability to expand in Europe. Mr. Almunia did not give Google a deadline for presenting a new set of concessions, according to a person with direct knowledge of Mr. Almunia’s letter who spoke anonymously. So the case, which both sides had hoped to close this year, could continue for several months or more.
The company said on Wednesday that it would “continue to work” with the commission to settle the case. But Al Verney, a spokesman for Google, said the company’s package of earlier concessions “clearly addresses their four areas of concern.” The main issue is the way Google, which, according to comScore, handles 86 percent of Web searches in Europe, orders its search results. Regulators have been investigating whether Google favors its own services — like travel, local business, mapping and shopping — over those of competitors. Regulators have also examined whether it disadvantaged competitors by including material from other Web sites in search results and whether its advertising business complied with European antitrust law.
Google dominates Internet search in Europe, controlling about 90 percent of the market in some countries, compared with about 70 percent in the United States. Google managed to avoid antitrust charges in the United States, where it has two-thirds market share, after a two-year investigation of similar issues. Google has faced a more hard-line approach in Europe, where critics have accused the antitrust authorities of relying too much on outside complaints from competitors rather than on evidence of consumer harm. That is somewhat of a sore point for European officials, who insist they share the same goals as the Americans when it comes to consumers.
Instead of proceeding with formal charges last year, Mr. Almunia offered Google a chance to reach an amicable solution. But an outcry from competitors to the deal from Google, which the commission began reviewing in April, has put a brake on that effort. In April, Google proposed to change its search results to clearly label results from some of its own properties, like Google Plus Local, and in some cases to show links from rival search engines. It also proposed giving competitors more control over how it used information from their sites in its vertical search results and making it easier for small businesses to transport their ad campaigns to other search engines.
The criticism poses problems for Mr. Almunia. If a settlement fails to placate Google’s rivals, they could try to unwind any agreement by suing the European Commission at the General Court of the European Court of Justice in Luxembourg. The proposal was the first time Google had agreed to legally binding changes to its search results, and went much further than the minor concessions it made to the Federal Trade Commission in its inquiry.
“There is the danger for the commission that Google’s rivals will appeal, and that would be a serious headache for Mr. Almunia’s successor,” said Nicolas Petit, a professor of competition law and economics at the University of Liège in Belgium. “But appealing could still be a long shot for the rivals because judges generally look favorably on antitrust settlements, so the rivals really need to do as much lobbying now as they can.” Still, the proposal would not have required Google to change the algorithm that produces its search results. Also, if it had been accepted, Google would have escaped a possible fine of about 10 percent of its annual global revenue of about $50 billion and a formal finding of wrongdoing that could limit its ability to expand in Europe.
He added, “Mr. Almunia’s approach is to try to make everyone happy as possible, and he has some time left before the end of his mandate next year to try to achieve that.” That was not enough for Google’s competitors, they told the commission during market testing. In May, as Mr. Almunia came under increasing pressure to give Google a tougher punishment, he hinted that it would need to improve its proposals.
The announcement by Mr. Almunia on Wednesday was not entirely unexpected. In May, Mr. Almunia strongly hinted, after reviewing feedback from companies and organizations involved, that Google would need to improve its proposals. The main complaint issued by rivals was that the most prominent changes, labeling Google’s own services and showing links to rivals, would have had minimal effect on traffic to competitors and would continue to favor Google properties. Google could use prime placement and rich graphics to attract viewers to Google products, and the problem would be worse on mobile devices, competitors told the commission.
One of Google’s main concessions was that it would display links to the Web sites of competitors that offer specialized search services. In cases where Google sells advertising adjacent to search results for specific industries like restaurants and hotels, Google said it would provide a menu of at least three results that were not related to its own services. “Google’s proposed commitments intended to resolve the search bias concerns are ineffective by design, and we have asked the commission to reject them in their entirety,” Thomas Vinje, a spokesman for FairSearch Europe, said in a statement on Wednesday. FairSearch includes Google competitors like Microsoft, Expedia, Nokia, Oracle and Foundem, a European comparison-shopping site. “They are worse than nothing,” he added of Google’s proposals.
In addition, Google offered to label results that pointed to its own services — like Google Maps — as its own properties and to separate them from general search results with a box. Under the proposed settlement, Google would be legally bound to follow the procedures for five years, and a third party, approved by the commission, would be put in place to monitor compliance. Some rivals have suggested that regulators force Google to sometimes place their sites at the top of its search results, since consumers most often click on the highest results.
Google’s rivals, including publishers, mapping services and travel companies, have published a number of studies intended to show that the remedies offered by Google would be ineffective. “In Europe, they think that consumers need to be more than told what the situation is, they need to be steered in a different way so that they’ll make a different set of choices,” said Herbert Hovenkamp, a professor of antitrust law at the University of Iowa. “Simply telling people that YouTube is owned by Google might enable the customers to make informed choices, but informed choices won’t necessarily help out competitors if customers have a favorable view of Google to begin with.” (Mr. Hovenkamp did a project for Google several years ago but has not worked for the company since.)
“Google’s proposed commitments across the board retard rather than promote competition,” Thomas Vinje, a spokesman for Fairsearch Europe, a group of Google’s competitors that include the cellphone maker Nokia and the software titan Microsoft, said in a statement on Wednesday. The case has high stakes for the commission, where efforts to find a solution that appeases both sides have faltered. If a settlement fails to placate Google’s competitors, they could try to unwind the deal by suing the European Commission at the General Court of the European Court of Justice in Luxembourg.
Mr. Vinje said that a survey his group had commissioned from two professors at the University of Illinois and University of San Francisco showed that Google’s proposals would attract the vast majority of searchers to the company’s own products and discourage them from visiting competitors. “There is the danger for the commission that Google’s rivals will appeal and that would be a serious headache for Mr. Almunia’s successor,” said Nicolas Petit, a professor of competition law and economics at the University of Liège in Belgium. “But appealing could still be a long shot for the rivals because judges generally look favorably on antitrust settlements.”
Some rivals have been pushing Mr. Almunia to demand more radical solutions than the current concessions. They want to force Google to place their own sites at the top of its search results, in an attempt to reach consumers who click most frequently on the first offering.

James Kanter reported from Brussels, and Claire Cain Miller from San Francisco.

“Google must be evenhanded,” they stated in a letter to Mr. Almunia in March that was signed by 11 organizations, including TripAdvisor and the Federation of German Newspaper Publishers.
Google “must hold all services, including its own, to exactly the same standards, using exactly the same crawling, indexing, ranking, display and penalty algorithms,” the letter continued.