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Google Risks More Antitrust Probes as Europe's Patience Wears Thin

Thursday, 16 April 2015 07:24 AM

Google Inc.’s antitrust complaint from the European Union may provide a template for more cases targeting online travel or mapping, as EU regulators escalated a four-year-old probe into the search-engine giant.

The EU is still “actively looking” at how Google treats searches for hotels, flights and mapping to check allegations that the company also favors its own service over competing results from companies such as Expedia Inc. and TripAdvisor Inc., EU Competition Commissioner Margrethe Vestager told reporters in Brussels on Wednesday.

“A case focusing on comparison shopping could potentially establish a broader precedent for enforcing EU competition rules in other instances of Google favoring its own services,” she said.

Vestager raised the prospect of further cases after accusing Google of cheating users looking for products by unfairly placing results from its Google Shopping product ahead of other services since 2008.

“What we have seen from the information and the data we have gathered is that it’s not based on the merits of Google Shopping that Google Shopping always comes up first,” Vestager said.

The EU’s patience with Google ran out after three settlement bids failed to satisfy critics, who said the Mountain View, California-based company was wielding its power over search results to unfairly promote its own services and paid ads.

‘Strongest Case’

“Perhaps” the EU “views shopping as the strongest case and seeks an outcome there that can or will be applied to these other vertical search categories,” said Greg Sterling, vice president of strategy and insights at the U.S. Local Search Association, a U.S trade group.

“For the time being competitive travel providers and local search firms in Europe must be somewhat disappointed by this narrower statement,” said Sterling, who’s not involved in the probes.

Regulators, who have the power to impose fines, are also looking at Google’s Android mobile software to check on possible contract restrictions for smartphone or tablet makers. They will check whether Google contracts block manufacturers from making their own versions of Android or force them to put Google’s Chrome, Maps and YouTube on devices.

Amit Singhal, senior vice president of Google Search, said that the company “strongly” disagrees with the need to issue an antitrust complaint and will make that case in response to the EU statement of objections.

On shopping, “there’s a ton of competition” such as Amazon.com Inc. and EBay Inc., Singhal said in a blog posting.

New Territory

Sending antitrust objections, which lay out where the EU thinks Google is breaking the law, pushes the investigation into new territory. Apart from the risk of fines, it may result in demands for Google to change its behavior. Any order for it to change how search results are generated or how advertising is displayed may affect revenue.

“Every road is open,” Vestager said, stating that Google can still escape fines if it manages to put together a settlement offer addressing the EU’s concerns.

The EU said it’s concerned Google doesn’t subject its shopping service to its algorithm that ranks search results on quality and relevance to the user. Vestager said Wednesday’s decision sets a precedent if regulators find Google also favors its own services in other areas.

Online Mapping

Al Verney, a spokesman for Google in Brussels, declined to comment about possible future EU cases.

The EU has received at least 20 complaints over Google’s search practices from software companies such as Microsoft Corp., publishers’ groups that represent Axel Springer SE and Lagardere and smaller companies involved in online mapping or shopping comparison.

Vestager said she thought it was important to take the EU’s case forward and shopping was one of the first complaints to the EU “and in our preliminary findings, it means that” Google’s problematic behavior “has been going on for some time.”

“We do not wish to interfere with screen design, how things are presented on the screen or how the algorithm works,” Vestager told reporters. “This is not what we are thinking about. What we would like to see is that shoppers are able to see the best shopping results.”

Its probe into other concerns about Google’s search advertising, such as exclusivity requirements and “undue restrictions” on advertisers, continues, it said. The EU is also looking at the legality of Google’s copying of rivals’ web content.

U-Turn

The European market contributes about 35 percent of Google’s revenue, according to Carlos Kirjner, a New York-based analyst at Sanford C. Bernstein & Co. Its market share in search exceeds 90 percent in most European markets, compared with about 65 percent in the U.S.

The EU’s move is a U-turn from earlier efforts to seek a settlement, which would have seen officials drop the investigation if Google made minor changes to its search pages. Negative feedback from companies, as well as criticism from French and German politicians, forced the EU to ditch an accord last year.

While EU antitrust fines are capped at 10 percent of global yearly revenue, they are calculated on revenue from the market where the company is found guilty of violating competition rules.

Google doesn’t say how much it makes from Google Shopping.

The EU has a record of expanding cases against big companies. A probe into Microsoft Corp. spiraled as regulators targeted different business areas and fined the company a total of 2.24 billion euros ($2.4 billion) in four installments over a decade. Intel Corp.’s first statement of objections in 2007 was swiftly followed by another a year later and a 1.06 billion euros fine in 2009.

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Google Inc.'s antitrust complaint from the European Union may provide a template for more cases targeting online travel or mapping, as EU regulators escalated a four- year-old probe into the search-engine giant. The EU is still "actively looking" at how Google treats...
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2015-24-16
Thursday, 16 April 2015 07:24 AM
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