Google Makes Last Ditch Pitch to EU, With "Big" Concessions, $5B Fine Looms
September 13, 2013 3:37 PM
Even if Google can settle it faces numerous more antitrust probes on other topics in the EU and U.S.
On Monday, Jonathan Todd, spokesman for the European Commission (EC) -- the European Union's (EU) market regulatory watchdog -- revealed that Google Inc. (
) had reached out to the EC and promised to make serious changes to address
allegations made by EU antitrust regulators
I. EU Receives Google's Last Ditch Pitch
in a statement:
The Commission received a proposal from Google and is assessing it.
Google's spokesperson, Al Verney added:
Our proposal to the European Commission addresses their four areas of concern. We continue to work with the Commission to settle this case.
For Google -- who makes the world's most use mobile operating system, search, and internet advertising platforms -- it's been a bewildering ride with European antitrust regulators. The company has been probed and threatened by the EU for over three years now.
Google has been warding off antitrust accusations from Microsoft, who runs the smaller rival "bing" search service. [Image Source: Fast Company]
The company can largely thank Microsoft Corp. (
) for its EU antitrust woes. Microsoft has led two key coalitions --
The FairSearch Coalition
, whose members also include Expedia Inc. (
) and TripAdvisor Inc. (
, whose members also include Foundem, Hot-map, Streetmap, and NexTag -- both of which filed complaints about Google, claiming that Google boosts the ranks of its own services when consumers use its search engine.
While this might sound like smart business, Microsoft alleges it's illegal, and it could be right due to Google's dominant position in the search market and the way EU antitrust laws are structured.
Also, Google is accused of "scraping" or gathering results from its competitors’ services using automated scripts to improve the quality of its own results. Google does not deny doing some scraping; pointing out that Microsoft does the same. However, given that scraping is a gray area in current antitrust laws, it is possible that Google could be viewed as committing antitrust abuses when it scrapes smaller competitors.
Google has also been accused of abusive scraping [Image Source: Google Images/unknown]
Part of the problem is that in the EU Google has traditionally held a much larger piece of the market. 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
. This is much higher than in the U.S., where its market share is currently
around 67 percent
, according to market research firm Comscore.
II. More Antitrust Woes Loom for Google
But whether or not Google has abused its dominant position to further its own services like Gmail, Google Docs, Google Flights, and Google Shopping, it's hard not to feel a bit of sympathy for the chaotic way in which antitrust punishments for Google have been handled in the EU.
After being given
a "last chance to settle"
in May 2012, Google in Feb. 2013 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.
The EU "changed its mind" about Google's settlement offer. [Image Source: nrw.nl]
The EC is a pretty fearsome regulator. It has nailed Microsoft Corp. (
with multiple fines
around $2.8B USD
over Windows antitrust abuses, plus pounded Intel with
a $1.45B USD fine
for allegations of CPU price fixing. Its policies have been so aggressive that Apple, Inc. (
) opted to
settle in the EU over e-book price fixing accusations
, while fighting similar accusations in the U.S.
Google is clearly prepared for the worst. It has
set aside $500M USD
to pay for potential antitrust fines in the EU.
To make matters worse for Google, the U.S. debate over Google's search engine tactics has yet again resurfaced. After
U.S. Federal Trade Commission
(FTC) agreed to a proposal where Google promised to make minor changes and
would not face any fines
. The FTC even
defended that decision
criticism by Microsoft and others
who felt that the punishments were too light. But recently the FTC has been rumored to be cooking up a fresh probe examining a new angle -- looking at whether Google's
engaged in anticompetitive tactics in the search market.
Google is also accused of using abusive tactics to promote its free Android operating system, which accounts for four out of every five smartphones and two out of every three tablets sold.
Google also faces
allegation 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
Privacy is another major issue Google is being grilled on. [Image Source: Inquistr]
In short, even if Google manages to win over the EU with its settlement proposal and escape fines, it still faces at least two more major topics of antitrust investigation in the EU, U.S., and elsewhere.
"You can bet that Sony built a long-term business plan about being successful in Japan and that business plan is crumbling." -- Peter Moore, 24 hours before his Microsoft resignation
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