Antitrust Charges

Google, E.U. Clash Over Competition

google-eu
Google CEO Eric Schmidt and E.U. competition commissioner Margrethe Vestager will be seeing a lot of each other in the months ahead.

The European Union on Wednesday filed formal charges against Google for allegedly breaching antitrust rules, opening the door to one of the biggest competition battles since Brussels took Microsoft to task a decade ago.

The charges marked a new phase in a five-year investigation into the U.S. search giant’s practices in Europe, with some arguing the European Commission has already dragged its feet for too long.

“The Commission’s objective is to apply E.U. antitrust rules to ensure that companies operating in Europe, wherever they may be based, do not artificially deny European consumers as wide a choice as possible or stifle innovation,” the European Union’s new competition commissioner, Margrethe Vestager, said in a media conference announcing the charges.

Ms. Vestager served the U.S. technology giant a formal charge sheet, called a statement of objections, for abusing its dominance of the Internet search market by, specifically, favoring its own shopping service. If proven, the charges could set a precedent for investigating the company’s other products, she said, noting that dominance in one market could be used “to cheat in others.”

She also announced the launch of a separate antitrust investigation into Google’s Android operating system for smart phones.

“I’m glad the European Union has finally agreed to take action, but the decision comes far too late.”

Ramon Tremosa, Member of the European Parliament and of the parliamentary competition committee

Google, which controls 90 percent of the Internet search market in Europe, has 10 weeks to respond to the allegations and can call a hearing to defend itself.

“I invite Google to use all opportunities to present its case,” Ms. Vestager said.

The European Union’s antitrust case against Google could prove to be as epic as its decade-long battle against Microsoft, which forced the company to unbundle its Internet browser and ultimately cost the company €2 billion, or $2.1 billion, in fines.

Google could face fines of up to €6 billion, or 10 percent of its net income.

Ms. Vestager didn’t rule out the possibility that the Google case could also end up in court and take years for a decision to be reached. The Microsoft case was held up for years in European courts.

European policymakers welcomed the move as long overdue.

“I’m glad the European Union has finally agreed to take action but the decision comes far too late,” Ramon Tremosa, a Catalan member of the European Parliament and a member of the parliamentarian competition committee, told Handelsblatt Global Edition. “Over the past five years of the investigation, Google has been able to further strengthen its monopoly in Internet search engines.”

Google confirmed the imminent charges in an internal email sent to staff on Tuesday, according to the Financial Times, which obtained a copy of the memo. In a blog post on Wednesday it rejected the charges, arguing that consumers had a wide choice of where to shop on line – independent of search engines.

“While Google may be the most used search engine, people can now find and access information in numerous different ways – and allegations of harm, for consumers and competitors, have proved to be wide of the mark,” the company said in its blog post. “While in many ways it’s flattering to be described as a gatekeeper, the facts don’t actually bear that out.”

Ms. Vestager emphasized that the Commission’s charges were based on facts and that it had proof of Google distorting Internet search results in favor of its own service.

 

Vestager-AFP
Ms. Vestager announced the charges on Wednesday. Source: AFP

 

“Our preliminary view in the statement of objection is that in its general Internet search results, Google artificially favors its own comparison shopping service and that this constitutes an abuse,” the E.U.’s competition chief, a Dane, said. “Our investigation so far shows that when a consumer enters a shopping-related query in Google search engine, Google’s shopping comparison is prominently displayed at the top of search results.”

Aware of how quickly Internet technology evolves, Ms. Vestager said she is not asking Google to change its web design or even its algorithms but rather is seeking “to work with principles that can be future-proof.”

“To be clear, we do not wish to interfere with screen design, with design choices with how things are represented on the screen as such, or how the algorithm works,” she said. “Rather what we would like to see is that consumers are certain to see the best comparison shopping results.”

“Dominant companies have a responsibility not to abuse their powerful market position by restricting competition either in the market where they are dominant or in neighboring markets”

Margrethe Vestager, EU competition commissioner

Although the initial charges center on Google Shopping, Ms. Vestager noted that an infringement in that service could “potentially establish a broader precedent” to look at the company’s other map, hotel and flight services.

“Dominance as such is not a problem, not in general, and not under E.U. law,” Ms. Vestager said. “However dominant companies have a responsibility not to abuse their powerful market position by restricting competition either in the market where they are dominant or in neighboring markets,” she noted.

The competition commissioner added that Brussels will also look at other allegations against Google, such as its scraping content from rival websites, striking agreements with advertisers that may exclude rival search-advertising services and forcing contracts that limit marketers from using other platforms.

“We’re not here to create markets or pick winners but to enforce E.U. competition law,” Ms. Vestager emphasized, adding that it is not the role of the Commission to “take the side of rivals” but to ensure innovation through competition.

Of the companies that filed complaints against Google, one of the four was American, she said.

Günther Oettinger, the German E.U. commissioner for the digital economy and a sharp critic of the U.S. company, said at the industrial fair in Hannover earlier this week that Europe’s online businesses were “dependent on a few non-E.U. players worldwide.” He warned that the “data economy should not develop into locked environments and platforms.”

Andreas Schwab, a German conservative member of the European Parliament, said in an emailed statement that “European competition law needs to be used to establish an open market with equal opportunities for all,” he said.

 

John Blau is a senior editor at Handelsblatt Global Edition. He reported on high-tech for more than 20 years. To contact the author: blau@handelsblatt.com

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