Europe offers Google an antitrust ultimatum
Published 5:00 am Tuesday, May 22, 2012
BRUSSELS — The European Commission warned Google on Monday that it must move quickly to change four business practices or face formal charges for violating European antitrust law.
The ultimatum was made in a surprise news conference by Joaquin Almunia, Europe’s antitrust chief.
The commission, after a two-year inquiry, found that Google might have abused its dominance in Internet search and advertising, giving its own products an advantage over those of others while maintaining that it offers a neutral, best-for-the-customer result. Almunia said Google would need to propose a plan for changing those practices within weeks.
Google dominates Internet search in Europe, controlling 90 of the market in some of the Union’s biggest countries.
“I hope that Google seizes this opportunity to swiftly resolve our concerns, for the benefit of competition and innovation in the sector,” Almunia said.
Antitrust fines in Europe can reach up to 10 percent of a company’s annual global revenue. Google’s revenue was nearly $38 billion last year. Almunia’s office also can demand far-reaching changes to the way companies run their businesses.
Google, which is also under investigation in the United States, where its search service has a less than 70 percent market share, acknowledges that its prominence invites scrutiny, but points out that competing search services are a mouse-click away.
“We’ve only just started to look through the commission’s arguments,” said Al Verney, a spokesman for Google in Brussels. “We disagree with the conclusions but we’re happy to discuss any concerns they might have.”
Antitrust experts expressed surprise at the opportunity the European Union is giving Google to change its practices before it charges the company with antitrust violations. The rare offer reflects the delicate balance regulators are attempting to strike as they seek to fix problems in the fast-changing technology marketplace before any proposed remedies lose their relevance.
“My concern is that this form of highly unusual public encouragement in the full glare of the media puts even more pressure on companies like Google to settle early rather than contest charges that they really do think are groundless,” said Paul Lugard, the former head of antitrust at Philips, the giant Dutch electronics company, and now an assistant professor at the Tilburg School of Economics and Management in the Netherlands.
Before sending a letter formally outlining the offer, Almunia told Eric Schmidt, executive chairman of Google, by telephone last week that the company should respond “in a matter of weeks” to avoid the charges, which are known as a statement of objections.
Neither Google nor Almunia described what kinds of offers could lead to a settlement in the search case. Instead, each appeared to hold out the prospect that they were prepared to walk away from negotiations.
Both sides are likely to want to avoid the decade-long case the commission undertook against Microsoft, which ended up paying 1.7 billion euros, or $2.2 billion at the current exchange rate, in penalties and fines.
“These fast-moving markets would particularly benefit from a quick resolution of the competition issues identified,” Almunia said, adding that this would be preferable to “lengthy proceedings.”
U.S. regulators have been working closely with European antitrust officials to examine whether Google has abused its dominant position in Internet search, according to people who have been briefed on the U.S. investigation.
The U.S. Federal Trade Commission has consulted with and shared information with European officials about any finding of Google’s dominance in search, those people said. The EU is one of about 30 foreign entities with which the FTC and Justice Department coordinate antitrust and competition investigations.
The European investigation began in 2009 and followed complaints made from smaller Web businesses that Google downgraded their sites in its search results, or discriminated against them in other ways, to weaken potential competitors for advertising. Major publishers from Germany were brought into the case shortly after the commission formally opened an investigation in November 2010. Microsoft then complained in March 2011.
The complaints also assert that Google gave its own Web services preferential treatment in search results.
In his statement, Almunia listed four areas in which the commission said Google had unfairly exploited its market position, including displaying links to its services differently than those to competitors.
“We are concerned that this may result in preferential treatment compared to those of competing services, which may be hurt as a consequence,” he said.
Google’s acquisition of Motorola Mobility is closing soon; layoffs are expected
LOS ANGELES — Google’s acquisition of Motorola Mobility will close in the next two business days, according to a form filed by Motorola Mobility over the weekend.
The $12.5-billion takeover, which was announced in August, cleared its final hurdle last week when the Chinese government finally gave the deal a go-ahead, albeit with a condition: Android must remain free and open for the next five years.
The deal will give Google an in-house phone manufacturer as the company begins a strategy to fix Android fragmentation by making more unified Android phones and by selling phones directly to customers.
However, layoffs at Motorola Mobility are expected as a result of the deal.
Google’s next step is a scheduled “listening tour” of the company, which reportedly has about 19,000 employees, before beginning to make decisions.
TechCrunch reports that it has heard that layoffs are coming, and it cites a previous Google takeover as precedent for imminent staff cuts.
Motorola could not be reached for comment, and Google said it had no comments at this time.
— Salvador Rodriguez, Los Angeles Times