This article is part of our special report Innovation and the Digital Economy.
Joaquín Almunia, the EU's Competition Commissioner, has laid down an ultimatum for US search giant Google to meet competition concerns as both sides signalled a desire to avoid a repeat of tech giant Microsoft’s mammoth legal dispute with the EU executive.
The Commission yesterday (21 May) set out four potential "abuses of dominance" in Google’s business. These include the key concern that Google favours search services – such as restaurant or holiday listing agencies – owned by the company itself.
Other problems identified by Almunia included fears that Google may be copying material from rival websites which it then uses without authorisation, and concerns over the company’s contractual agreements with clients.
A chance to talk
Almunia has written to Google chairman Eric Schmidt, offering the company the chance to present proposed remedies in “a matter of weeks” to address the issues. If Google’s proposal is deemed reasonable, Almunia will start discussions with a view to a remedies package being put in place.
This will enable the Commission to deal with issue by commitments from Google, rather than bringing formal proceedings against the company, under Article 9 of the EU Antitrust Regulation.
The initial response from Google seemed frosty. A statement said that it disagreed with the Commission's conclusions, although the details had not yet been fully explained. “But we're happy to discuss any concerns they might have,” it added.
However, the mood music from both sides suggests a deal might be possible, because neither side has an interest in a complex, long and fraught court action of the sort that saw Microsoft involved in a decade of tussles with the regulator.
Both sides stand to lose from lengthy court fight
Although the Commission won big points against the US-based tech giant, the legal disputes revealed the shortcomings of an EU judicial system moving at snail’s pace compared with the tech industry under scrutiny. The dispute also stretched manpower within the EU executive.
Almunia stressed that “these fast-moving markets would particularly benefit from a quick resolution of the competition issues identified”, and emphasised the “repeated willingness” Google had expressed to avoid a dispute.
For Google the stakes are high too. Although it could potentially stall the proceedings and play for time, company insiders are wary of being dragged into a dispute redolent of the Microsoft saga.
A source close to the company told EURACTIV that it is in the nature of Google to believe that “there’s always room for improvement”, claiming that they would be happy to sit down and talk.
Google wants to avoid comparison with Microsoft – an arch rival and one of the companies that lodged complaints with the Commission against the software giant. And a lengthy tussle with regulators could redound on Google’s carefully nurtured reputation as a creative, off-beat, West Coast company.
“They are not going to get involved in the kind of all-guns blazing dispute, with accusations flying to and fro, that Microsoft had. Its not the way they do things,” the source said.
"In this case, Google Inc. has repeatedly expressed to me its willingness to discuss any concerns that the Commission might have without having to engage in adversarial proceedings. This is why I am today giving Google an opportunity to offer remedies to address the concerns we have already identified," said Competition Commissioner Joaquín Almunia.
"I hope that Google seizes this opportunity to swiftly resolve our concerns, for the benefit of competition and innovation in the sector," Almunia said.
FairSearch, a group of companies led by Microsoft who lodged a formal complaint with the Commission relating to Google, said it "would welcome a rapid and permanent change in Google’s business practices that could potentially result from a settlement between the European Commission and Google,” the group said in a statement.
“We agree that a quick resolution to the harms that Google's practices cause would be best for innovators and consumers,” the statement added.
“Commissioner Almunia's handling of this case has thus far been very impressive,” said the Association for Competitive Technology’s president, Jonathan Zuck. “In a fast moving market, it is better to outline concerns and give a company the ability and flexibility to remedy them on their own before launching a formal statement of objections. We hope that Google takes the opportunity seriously to find effective solutions.”
In November 2010, the Commission launched an antitrust investigation into allegations that Google had abused a dominant market position in the internet search market.
Microsoft ratcheted up its rivalry with Google by filing its first-ever complaint to the EU watchdog in March last year, claiming that Google systematically blocked internet search competition.
The Commission can fine companies up to 10% of their global turnover for breaching EU rules. It has in recent years imposed billion-euro penalties on Microsoft and Intel for anti-competitive behaviour.
- By August 2012: Google likely to draft some form of response to Almunia.
EU official documents
- European CommissionAlmunia statement on Google