By Tom Fairless
BRUSSELS--The European Union escalated its five-year antitrust
probe into Google Inc. Wednesday, accusing the U.S. search giant of
violating the bloc's antitrust laws and opening a formal probe
aimed at Google's Android operating system for mobile phones.
The charges from the EU's competition regulator are a blow for
Google, reopening the prospect of large fines and injunctions that
could severely restrict how the U.S. firm does business in
Europe.
It is the first time any regulator has filed formal antitrust
charges against Google, putting the EU in the vanguard of a global
debate over the regulation of giant Internet platforms.
The charges "just put [Google] in a worse position, by reducing
their leverage in bargaining" with EU regulators, said Keith N.
Hylton, a law professor at Boston University.
However, the charges based around Google's comparison shopping
services were more limited than complainants had demanded.
Both sides appeared to sharpen their rhetoric on Wednesday,
indicating that the case could be headed for the courts rather than
a fresh settlement proposal--though that remains a possibility.
At a crowded news conference, Margrethe Vestager, the EU's new
antitrust chief, said she had reached the preliminary conclusion
that Google abuses its dominant position in online search to
systematically favor its own comparison shopping service, Google
Shopping, over rival services on its general search page. That
conduct started in 2008, the EU said.
"I'm concerned that Google has artificially boosted its presence
in the comparison shopping market with the result that consumers do
not see what's relevant for them," Ms. Vestager said.
In a statement posted online, Google said it strongly disagrees
"with the need to issue a statement of objections and look forward
to making our case over the weeks ahead." A statement of objections
is the formal name for EU antitrust charges.
"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. In fact, people have more choice than ever
before," Google said in an online blog.
It said there was "a ton of competition" in online shopping
sites such as Amazon and eBay. And while complainants like Expedia
and TripAdvisor have claimed Google's practices have hurt their
results, it said their traffic, revenues and profits "tell a very
different story."
By focusing the charges exclusively on comparison shopping, the
EU significantly narrowed the scope from its previously expressed
concerns around Google's business practices.
If the EU proves that Google has violated competition law in
comparison shopping, that "could potentially establish a broader
precedent" that would also impact other fields, such as travel
websites, Ms. Vestager said.
She said her agency would continue to look at Google's conduct
in other areas, such as its treatment of specialist search services
for "hotels or flights or maps", allegations that Google copies or
"scrapes" content from rival sites, its exclusivity contracts with
advertisers, and advertisers' ability to use competing
platforms.
"I will carefully consider [Google's] response before deciding
how to proceed," she said.
Asked whether a settlement with Google was likely, Ms. Vestager
said that "every road is open at this point, both when it comes to
commitments, but also when it comes to the other road...which is a
fine."
But she indicated that any fresh proposal would need to differ
substantially from three earlier settlement attempts, all of which
failed and caused lengthy delays.
Early last year, Google came tantalizingly close to a deal with
regulators, only to watch it unravel over the summer in the face of
huge political pressure and opposition from the companies it was
designed to protect.
Google's previous attempts to settle the EU's concerns were
based on tweaks to its search page, such as reserving space near
the top of the page for competitors to serve specialized search
results for things like hotel rooms alongside Google services that
did the same thing.
That type of solution, Ms. Vestager said, was unlikely to cut it
this time.
"I'm looking for something based on principle and hopefully
future-proof, " she said. "For me, the design of the screen that
meets you is also an innovative process. For me, it would be better
to have a solution based on principle rather than a particular look
of the screen."
Formal charges against Google seemed far-fetched as recently as
last summer, after the EU's former antitrust chief Joaquín Almunia
publicly backed a settlement with the U.S. company early last year
over strong objections from complainants.
Mr. Almunia subsequently announced an about-face in September,
following intense political pressure from powerful actors including
German publishing houses and the economy ministers of France and
Germany.
"They were so close [to a deal] and suddenly it fell apart," Mr.
Hylton said.
News Corp, publisher of The Wall Street Journal, on Tuesday
joined a group of companies that have filed formal complaints with
the commission regarding Google's competition practices, a
spokesman said. He declined to disclose further details.
Experts said it would be difficult to strike a settlement that
satisfies complainants and doesn't present a real hindrance to
Google.
"Google are revising their algorithms all the time and made
clear that any kind of regulatory solution would be complicated and
get in the way of their business," Mr. Hylton said.
A final EU decision could follow later this year after Google is
given time--probably about three months--to make its case to
regulators, and could influence regulators in other jurisdictions,
experts said.
The decision to investigate Google's conduct in relation to
Android is important as an ever-greater share of Internet usage
shifts to mobile devices, Ms. Vestager said.
The investigation will focus on whether Google leveraged its
market power to illegally hinder rival mobile operating systems and
mobile applications, for instance by requiring manufacturers to
pre-install its own applications and by bundling its products with
other Google services.
EU regulators have received a number of complaints relating to
Google's business practices around Android, and had been carrying
out an informal investigation.
"My wish is that consumers benefit from the broadest possible
range of mobile services," Ms. Vestager said.
Google said its partner agreements with Android were
voluntary--you can use Android without Google--but provide real
benefits to Android users, developers and the broader ecosystem. It
also said its app distribution agreements with manufacturer made
sure "people get a great 'out-of-the-box' experience with useful
apps right there on the home screen."
Write to Tom Fairless at tom.fairless@wsj.com
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