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Google and Europe Near Deal E.U. Deal Could Mean a Victory for Google
(about 5 hours later)
BRUSSELS — Google’s antitrust troubles in Europe moved closer to a settlement Tuesday after the European Union’s antitrust chief said he had accepted the online giant’s latest offer to settle a long-running investigation of its search and advertising businesses. BRUSSELS — Google is looking three times lucky.
But Joaquín Almunia, the E.U. competition commissioner, said Google’s rivals should be given an opportunity to respond to the proposals. That means that the process of reaching a final agreement with Google would probably last until spring 2014 — nearly four years after the inquiry began, and long after Google’s $50 billion business has evolved well beyond basic Web search. The search giant escaped serious antitrust action in the United States early this year, and in April it dodged a hefty penalty in Europe.
And Mr. Almunia said it was still possible that efforts to reach a negotiated agreement could break down, leaving him with no choice but to send Google formal charges. The third piece of good fortune — from Google’s standpoint, at least — came on Tuesday.
“The settlement route remains the best choice,” Mr. Almunia said at a meeting of digital companies and lobbyists at the European Parliament in Brussels. The European Union’s antitrust chief, Joaquín Almunia, announced that he had tentatively reached a deal he could live with that would require Google to give higher visibility to competitors’ listings on its Web search service. Once Mr. Almunia gives the company’s rivals one more chance to comment on the settlement, he said, he intends to have the final deal in place by next spring.
A settlement in Europe would allow Google to escape a potential fine of up to $5 billion and a finding of wrongdoing that could limit its activities in the future. The company has already settled a similar case in the United States. The European deal would go much further than a settlement early this year with the U.S. Federal Trade Commission, which required only minor concessions from Google. The European settlement would allow Google to avoid a potential fine of up to $5 billion and a finding of wrongdoing that could limit its activities in the future.
Google’s competitors raised immediate concerns about the latest effort by Mr. Almunia to settle with Google. And yet, the deal with Mr. Almunia, if completed in the spring, would come nearly four years after he opened his investigation. During that time the company’s business model — and all its various ways of making its billions of dollars — changed considerably.
For some experts, there are serious doubts about whether Mr. Almunia has achieved a substantial victory for European consumers — or if Google will end up winning a protracted waiting game. Not covered by the investigation and tentative settlement, for example, are all the ways that Google can mine and monetize data from services like Gmail and maps that are separate from its search engine but integrally linked to it.
The latest deal “appears to be a major success for European enforcers when you compare them to how timorous their American counterparts have been with Google,” said Nicolas Petit, a professor of competition law and economics at the University of Liège in Belgium. “But can you really talk of success when the resolution of the case comes four years down the line?
“In the digital economy, that’s an eternity,” he said.
Google’s competitors on Tuesday raised immediate concerns about the proposed settlement.
“It is far from clear from Commissioner Almunia’s description of the revised package of proposed commitments that they go nearly far enough,” said David Wood, the legal counsel for Icomp, an industry group backed by Microsoft and a number of other companies that have complained about Google to European authorities.“It is far from clear from Commissioner Almunia’s description of the revised package of proposed commitments that they go nearly far enough,” said David Wood, the legal counsel for Icomp, an industry group backed by Microsoft and a number of other companies that have complained about Google to European authorities.
Mr. Wood said the latest offer by Google should be carefully tested in the marketplace to assure that the remedies addressed complaints that the company favored its own products in search results. Mr. Almunia met briefly last Friday in New York with Eric Schmidt, Google’s executive chairman, to take stock of the negotiations on a deal, according to one person with direct knowledge of the meeting and who spoke only on condition of anonymity because the meeting was not meant to be public. Discussions between lawyers and officials at Google, and officials at the European Commission then continued until late on Monday, commission officials said.
The case, which the European Commission formally opened in November 2010, revolves around claims that Google has abused its dominance in the Internet search and advertising field by, among other things, favoring its own products and services in search results. Google powers 90 percent of searches in many European markets; its share in the United States is closer to 70 percent. Mr. Almunia said Tuesday that he “cannot describe the details” of the latest offer by Google, and the company said it would not release them yet, either.
Among the latest elements that Google has offered to open up competition was “an option to bid for each specific query so smaller search operators can be displayed,” Mr. Almunia said Tuesday. But in the area of search, Mr. Almunia said that links to rivals would be made “significantly more visible” and that a “larger space of the Google search result page is dedicated to them.” The rivals “have the possibility to display their logo next to the link, and there will be a dynamic text associated to each rival link to better inform the user of its content,” he said.
In July, Mr. Almunia rejected a preliminary settlement he had struck with Google after industry groups complained that aspects of the deal could strengthen, rather than loosen, Google’s hold in Europe. That proposal would not have required the company to change the algorithm, or formula, that produces its search results.
But it would have been the first time Google had agreed to legally binding changes to its search results, and it went much further than the minor concessions it made to settle a case before the U.S. Federal Trade Commission.
Mr. Almunia said Tuesday that he was not seeking to regulate “a specific algorithm” or prevent the company from improving its services.
Google on Tuesday portrayed its latest offer as something it agreed to only under considerable pressure from the European authorities.Google on Tuesday portrayed its latest offer as something it agreed to only under considerable pressure from the European authorities.
The European Commission had “insisted on further, significant changes to the way we display search results,” Kent Walker, a senior vice president at Google, said in a statement that was issued shortly after Mr. Almunia finished speaking. “While competition online is thriving, we’ve made the difficult decision to agree to their requirements in the interests of reaching a settlement.” The commission had “insisted on further, significant changes to the way we display search results,” Kent Walker, a senior vice president at Google, said in a statement. “While competition online is thriving, we’ve made the difficult decision to agree to their requirements in the interests of reaching a settlement.”
To be sure, Mr. Almunia has been under pressure for years from Google’s rivals to prolong its legal entanglements in Europe and toughen the terms of any deal. Yet since the European Commission’s investigation began in November 2010, Google has expanded a number of its Web services like cloud data — or storing information like calendars and address books on online servers that can be accessed by any computer or cellphone connected to the Internet — as well as improving the way it sells lucrative advertising to potential customers. As a result, industry analysts said any settlement with the European authorities would be unlikely to topple the American tech giant from its dominant position in Europeans’ use of the Internet.
Apparently seeking to tamp down those demands, Mr. Almunia suggested the latest offer was the best deal he could get for the European consumer in a sector as complex and rapidly evolving as online commerce and digital media. “There’s a fundamental misconception over how Google operates as a company,” said Daniel Knapp, director of advertising research at the consultancy IHS Screen Digest in London. “It’s moved away from a pure search business model,” he said.
“Since we started the investigation, the way search results are presented and the kind of services provided have changed many times,” he told the lawyers and lobbyists. “European users want undistorted competition and choice in online search and search advertising.” Mr. Almunia added that users “want it now and, if possible, deserve it now, and not after many years of litigation.” Rivals like Microsoft also offer similar data and advertising products, though Google’s leading market position has helped the tech giant mine the data collected from its other services to gain a better understanding of how consumers use the Internet, which helps Google improve the underlying algorithms that underpin its search engine.
Whatever its limits, the deal may also be the most that Mr. Almunia would be able to get from Google, without resorting to years of litigation. By incorporating the huge amount of user data that it collects into its other products, like when it users a consumer’s information from its free Gmail e-mailing service to provide more individually tailored advertising when that person uses Google’s search engine, the company has cemented its presence in Internet search, according to analysts, as it can offer more better results compared with other companies without access to the same information.
Executives at the company have grown frustrated in recent months, particularly after being asked to tweak their offer a second time. Each of those changes required careful analysis by teams of engineers and experts in advertising in California — several time zones away from the company’s legal team in Brussels where much of the negotiation has taken place. “Search can no longer be seen as an isolated activity,” said Ed Barton, a director at the consultancy Strategy Analytics in London. “All of Google’s other services form part of a wider platform. That’s where it gets its advantage.”
Mr. Almunia said Google improved its previous offer in four areas that he said in May 2012 “may be considered as abuses of dominance.” The case, which the European Commission formally opened in November 2010, revolves around claims that Google has abused its dominance in the Internet search and advertising field by, among other things, favoring its own products and services in search results. Google powers 90 percent of searches in many European markets; its share in the United States is closer to 70 percent.
These original four areas of concern included whether Google might have unfairly exploited its market position by displaying links to its own services, like Google maps or images, when it answers a query, giving preference to them over those of competitors. In April of this year, Mr. Almunia began so-called market testing to see whether the remedies in the company’s first offer addressed complaints that Google favors its own products in search results. But by July, Mr. Almunia had rejected that deal with Google after industry groups complained that aspects of the deal could strengthen, rather than loosen, Google’s hold in Europe. That proposal would not have required the company to change the algorithm, or formula, that produces its search results.
The four original concerns also covered whether Google put material in its own search results that was copied from competitors’ Web sites. The other two areas involved how Google conducts its advertising business, including how it delivers search ads on partner sites. Mr. Almunia underlined on Tuesday that he was not seeking to regulate “a specific algorithm” or prevent the company from improving its services.
Mr. Almunia said on Tuesday that he “cannot describe the details” of the latest offer by Google, and the company said it would not release them yet, either. Yet, from a strictly legal perspective, the battlefield looks more level for the main parties: Mr. Almunia, Google and key rivals like Microsoft that complained in the case.
But in the area of search, Mr. Almunia said links to rivals would be made “significantly more visible” and that a “larger space of the Google search result page is dedicated to them.” The rivals “have the possibility to display their logo next to the link, and there will be a dynamic text associated to each rival link to better inform the user of its content,” he said. Smaller specialized search companies also would be given a better chance of being found on Google’s powerful search engine. Under the proposed settlement, Mr. Almunia and, to some degree, Microsoft could claim to have forced Google for the first time to accept binding legal commitments on its search business, said Emanuela Lecchi, a partner at the law firm Watson, Farley & Williams in London.
To placate publishers and advertisers, Mr. Almunia said he had accepted terms from Google that tightened the terms of the company’s previous concessions. And even though Google “appears to get away with light touch requirements,” the company also may “be concerned that this should not become a paradigm for intervention in other jurisdictions,” Ms. Lecchi said.
Even with a settlement Mr. Almunia would be able to do what the United States has not, and reach a legally binding deal on the way the company runs its search business. As for consumers, they “probably do not lose out,” she said.
That showed that Brussels, where the European Commission is based, is becoming the powerhouse for regulating multinational companies, said Luke M. Froeb, who teaches competition policy at the Vanderbilt University business school and formerly worked on antitrust at the F.T.C. Mr. Almunia also suggested on Tuesday that some of the concessions he had extracted from Google would apply to the world of mobile devices. The “new proposal more appropriately addresses the need for any commitments to be able to cover future developments,” said Mr. Almunia, adding that it “relates to queries entered in Google in whatever form, whether they are typed or spoken, and irrespective of the entry point or the device.”
“In the U.S., the agencies try to make a big deal of, ‘We are enforcers, not regulators.’ In the E.U., they are not concerned with that distinction,” said Mr. Froeb. Mr. Almunia said he was still investigating a separate complaint about Google’s Android operating system for mobile devices that was filed this year by Fairsearch Europe, a group of Google’s competitors, including the mobile phone maker Nokia and the software titan Microsoft, and by other companies, like Oracle.
Mr. Almunia can fine and order companies to change their business practices directly, unlike in the United States, where agencies need a court order first. Companies can appeal such penalties, but such cases can take years to make their way through the European Court of Justice, the highest tribunal in the bloc. Mr. Almunia, speaking at meeting of digital companies and lobbyists at the European Parliament in Brussels, that it was still possible that efforts to reach a negotiated agreement could break down, leaving him with no choice but to send Google formal charges. But he has tried along to settle the case, rather than become bogged down in potentially lengthy litigation that would delay things even further. And he insisted on Tuesday that, “The settlement route remains the best choice.”
But experts also cautioned that this might come too late in a fast-changing industry like technology. For instance, much of the digital world has moved to mobile phones, where Google and its competitors face different issues.

Mark Scott reported from London. Claire Cain Miller contributed reporting from San Francisco.

“By the time this decision comes down, the world will have moved on to something else,” Mr. Froeb said.
Even some of Google’s competitors that have in the past complained about Google’s behavior to regulators said the time had come and gone for a decision in the European Union to make a big difference to them. They have already been forced to adapt to living in Google’s world, they said, and have in most cases been growing despite the hurdles that Google erected. Those competitors spoke on condition of anonymity because they did not want to comment publicly on a rival and because they still support efforts to rein in Google’s power.
On Tuesday, Mr. Almunia suggested that some of the concessions he had extracted from Google would apply to that world of new, mobile devices.
The “new proposal more appropriately addresses the need for any commitments to be able to cover future developments,” said Mr. Almunia, adding that it “relates to queries entered in Google in whatever form, whether they are typed or spoken, and irrespective of the entry point or the device.”

Claire Cain Miller contributed reporting from New York.