Print 16 comment(s) - last by flatrock.. on Oct 30 at 11:26 AM

Last time complaints sunk potential Google antitrust deal

In September, Google Inc. (GOOG) reached out to the EC and promised to make serious changes to address allegations made by EU antitrust regulators, in hopes of avoiding one of the EU's massive fines. Hefty fines have been leveled against Intel Corp. (INTCand Microsoft Corp. (MSFT) for past offenses.

I. Google's Latest Offer to be Scrutinized

Google has been accused of using standards patents -- which come with obligatory licensing -- in patent lawsuits related to smartphones.  It's also accused of manipulating its search results to give its own services more prominent placement than services from its competitors (so called "vertical search" tampering).  And some have also accused it of making it unduly difficult to transfer advertising to other platforms and asking ad partners not to advertise services which compete with its own services.

In May 2012 the EU's antitrust regulatory body, the European Commission (EC), gave Google one "last chance to settle" over antitrust accusations.  In Feb. 2013 Google released a full response, which promised big changes as to how it was scraping and ranking search results.  The EC initially accepted that proposal.  But after Microsoft and others claimed that the punishments weren't severe enough, the EC went back on its approval of the Google settlement and demanded more flesh from Google.

Search on Google
Competitors accuse Google of manipulating search results to boost its own services.
[Image Source: Google Images/Unknown]

Google complied, promising what it claims are even bigger concessions. Now comes the tricky part -- the EU has called upon Google's critics to examine those concessions and give feedback on whether they consider them sufficient.  Remember this is a crucial phase -- the EU was previously ready to settle with Google, but a similar review sunk Google's last proposed settlement offer.

EU books antitrust
 In July the EU "changed its mind" about Google's settlement offer. [Image Source:]

At this point some may be wondering why Google is being so closely scrutinized.  To understand why the EU considers Google to have a "very dominant" position in the search market, you must be aware that Google has traditionally held a much larger piece of Europe's search market than the U.S. and Asian search markets.  In the EU, Google has held as much as 86 percent of the search market; currently it has around an 80 percent market share, according to Reuters.  This is much higher than in the U.S., where its market share is currently around 67 percent, according to market research firm Comscore.

The latest settlement argument will be reviewed by two coalitions of rival online service providers, both of which are led by Google's archrival Microsoft.  The first is The FairSearch Coalition, whose members include Expedia Inc. (EXPE) and TripAdvisor Inc. (TRIP), and Microsoft; the second is named ICOMP, which includes Foundem, Hot-map, Streetmap, and NexTag, and Microsoft as members.  Both organizations had filed complaints against Google, claiming that Google boosts the ranks of its own services when consumers use its search engine.  These complaints helped to initiate the EU probing and later settlement demands.

In a press release the EU comments:

[Google's] commitments are now subject to a market test of one month. Complainants, third parties and members of the public are therefore able to comment on the commitments, and the extent to which they address the Commission's four concerns.

If following the market test, the commitments form the basis for a satisfactory solution to the Commission's competition concerns, the Commission may make them legally binding on Google by way of a Commitments Decision (so-called "Article 9 procedure"). Such a decision does not conclude that there is an infringement of EU antitrust rules, but would legally bind Google to respect the commitments offered. If a company breaks such commitments, the Commission can impose a fine of up to 10% of its annual worldwide turnover [revenue].

Given that Google pulled in over $50B USD in annual revenue globally in 2012, it could face a fine of up to $5B USD, if the EC feels it's not cooperating with antitrust compliance.

II. EC's VP of Competition Says Settlement is "Best Choice" for Consumers 

It's possible Google may yet escape the fine.  EC Competition VP Joaquín Almunia in a speech to the European Parliament on Oct. 1 remarked:

Google has now improved the commitments it has offered. We have negotiated improvements until yesterday.

Although I cannot describe the details, I can tell you that the new proposal more appropriately addresses the need for any commitments to be able to cover future developments. Therefore, the new proposal relates to queries entered in Google in whatever form - whether they are typed or spoken – and irrespective of the entry point or the device.  One of the most significant improvements relates to the vertical search concern, which was the point that received the strongest critical comments during the market test.

Many respondents during the market test said that in this Google proposal the links to rivals that would be displayed for certain categories of specialised search services were not visible enough.

In my opinion, the new proposal makes these links significantly more visible. A larger space of the Google search result page is dedicated to them. 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

I think that the settlement route remains the best choice. I hope the answers we will receive to our questions will confirm this.

European users want undistorted competition and choice in online search and search advertising.  They want it now and, if possible, deserve it now, and not after many years of litigation.

Apple, Inc. (AAPL) notably escaped an EU fine over e-book price fixing and collusion accusations by offering major concessions to the EU.  Google hopes to follow that example, and avoid the fates of Microsoft and Intel.

EU flags
The EU says that it would prefer to settle with Google, rather than fine it. [Image Source: AFP]

In addition to the current search probe, Google will still have to grappled with the allegations of abuse in the U.S. and EU of so-called "standards essential patents" (SEPs), which are supposed to be licensed under the "fair, reasonable, and non-discriminatory" (FRAND) rules.  Last, but not least, Google also faces a privacy probe in the EU, in which EC regulators have demanded Google make changes by the end of this month.

Sources: Europa [press release], [EC VP speech]

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By sprockkets on 10/28/2013 6:48:40 PM , Rating: 2
Was there any real proof of manipulation or is this just really a case of Microsoft btching about how it sucks to have its ass handed to them?

Sorry, I doubt Microsoft will be "happy" about the agreement. And why should they? By the way you worded your article, them not agreeing to the concessions can cost them $5 billion.

RE: So....
By Reclaimer77 on 10/28/2013 7:09:56 PM , Rating: 2
Microsoft founded a "coalition" to lobby the EU to slam Google. The only harmed party here is Microsoft butthurt about Google wrapping Bing up in a cloth sack and beating it with a lead pipe.

Microsoft wants to force Google to use their resources to prop up their competition. Which is ironically similar to the EU forcing a browser ballot on Windows.

RE: So....
RE: So....
By KurgSmash on 10/29/2013 3:17:00 AM , Rating: 2
Good. Google deserves it, they piled on MS in pretty much the same way. Payback is not a nice lady, as they say.

RE: So....
By Reclaimer77 on 10/29/2013 8:29:51 AM , Rating: 2
How did they pile on MS this way? Link plz.

RE: So....
By bug77 on 10/29/2013 9:37:16 AM , Rating: 2

It's obvious Google resorted to mind controlling both Novell and Sun, because Google was yet to be born back then. ;-)

RE: So....
By cashkennedy on 10/28/2013 9:46:20 PM , Rating: 3
In Feb. 2013 Google released a full response, which promised big changes as to how it was scraping and ranking search results.

Yes they were altering search results, or they wouldnt have promised to change.

The major issue is with google "giving extra points" / promoting google services in the results over other companies results simply because its a google service and not because it truely would have been the highest result based on search algorithms that do not add extra weight to google's own products / services.

A side issue is google limiting access to data from some of their services (such as youtube) to other search engines in order to scuttle the other search engines.

Whether you think these are legal ways for google to use the power it holds as the dominant player in search, or think its illegal is up to you. Obviously the EU feels its illegal / and surprisingly does not want to actually fine google in this instance since they continue to allow google to make settlements to just fix the problems.

RE: So....
By sprockkets on 10/28/2013 10:36:01 PM , Rating: 2
The major issue is with google "giving extra points" / promoting google services in the results over other companies results simply because its a google service and not because it truely would have been the highest result based on search algorithms that do not add extra weight to google's own products / services.

But can you prove that? Google might just change their policies just to avoid a billion or so in fines, not because they are wrong. But given the popularity of gmail vs. the then horrible hotmail, it is no surprise people switched. Same goes for their maps and search services.

I've already done this several times and others confirmed it - search a city on google and bing respectively; neither of them link to the others competitors map service.

RE: So....
By Reclaimer77 on 10/29/2013 12:54:46 AM , Rating: 1
Read my link, there's ZERO evidence Google is altering anything. Also in my link is incontrovertible proof that Google's competitors have not been harmed. Rather they've seen explosive profits and marketshare.

There's absolutely no anti-trust shenanigans going on here at all.

This is pure politics. Microsoft created "FairSearch" because it could not compete in the open market against Google, so they seek to lobby the EU and other Governments to "level the playing field" for them, I.E fine Google billions for no good reason.

RE: So....
By flatrock on 10/30/2013 11:18:42 AM , Rating: 2
Google is trying to offer a consistent, integrated service that combines other services with search. Microsoft has tried doing the same thing with search as well as with their OS.

Microsoft got smacked down with antitrust because of doing things like Google is doing, and now they are insisting that the government be consistent.

I don't think that it is really good for consumers to try and force barriers between products that integrate well together. This includes the integration of a browser into an operating system, but if they let Google get away with it the EU owes Microsoft around $1 billion or more in fines due to their past foolish and counterproductive actions.

It may seem a bit hypocritical of Microsoft, but they do have a right to demand that the government be consistent in their application of the law.

EU nightowl
By coburn_c on 10/28/2013 7:05:42 PM , Rating: 2
I am so sick of the EU using American companies as their private ATM. They want to be a world power, let them fund themselves and stop stealing from American companies to fund their failure members.

RE: EU nightowl
By MechanicalTechie on 10/29/2013 1:15:30 AM , Rating: 2
Oh please there is no conspiracy here... want to do business with the EU then follow their rules its just that simple.

We're all aware of the influence large corporations have in US on domestic laws/regulations but don't expect other foreign countries to capitulate.

RE: EU nightowl
By bug77 on 10/29/2013 5:30:13 AM , Rating: 2
want to do business with the EU then follow their rules its just that simple

Except the EU don't what their rules are. They have to go ask Microsoft et. al.

RE: EU nightowl
By BZDTemp on 10/29/2013 3:55:37 PM , Rating: 2
LOL - it is nothing special that the competitors are consulted.

Firstly that is not the same as those being consulted getting to determine the rules and secondly at it is an open process so there is no hiding what goes on.

RE: EU nightowl
By flatrock on 10/30/2013 11:26:03 AM , Rating: 2
I agree with you in theory, but a number of their rulings haven't made much sense, and have made no noticeable difference. In one case Microsoft was fined a very large amount for a violation regarding IE that appeared to be accidental and no one had noticed for about a year, because no one cared.

If very much looked like Microsoft was punished because the incident showed how useless and pointless the restrictions were, and there does seem to be a lot of evidence that the EU uses these laws as a form of tax on being successful in the EU. They don't seem to do much other than lay another progressive tax on the successful, and they don't seem to go after EU countries often if at all.

RE: EU nightowl
By BZDTemp on 10/29/2013 4:16:23 AM , Rating: 3
This coming from someone in a nation with so much foreign debt it is tragic. With US debt per capita almost double that of the EU then I think you best shut up about failures.

As for using US companies for cash then please get some sense of scale. With a population of more than half a billion the fines slapped on companies for not following the laws amounts to nothing more than pocket change so get some sense of perspective. Instead you should wish the laws in the US was protecting consumers from companies abusing their market positions in the same way that happens in EU. Oh, and finally it is not just US companies that are being handed fines - the law is the same for all so it is both EU and non-EU companies.

"Google fired a shot heard 'round the world, and now a second American company has answered the call to defend the rights of the Chinese people." -- Rep. Christopher H. Smith (R-N.J.)

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