By Tom Fairless in Brussels, and Rolfe Winkler and Alistair Barr in San Francisco
The European Commission took direct aim at Google Inc.
Wednesday, charging the Internet-search giant with skewing results
to favor its comparison-shopping service. But the formal complaint
may only be the opening salvo in a broader assault that prompts big
changes at Google.
European antitrust chief Margrethe Vestager said she continues
to examine other domains, such as travel and local services, where
Google is accused of favoring its own services over those of
others. She also opened a second front, intensifying a separate
probe of Google's conduct with its Android mobile-operating
system.
If history is a guide, the European case against Google will
grow. The bloc's last big case against a U.S. tech firm began with
charges against Microsoft Corp. in 2000 related to computer
servers. The commission later added charges against Microsoft for
bundling its media player, and Web browser, with its Windows
operating system.
The charges could lead to billions of euros in fines and
requirements for Google to change its business practices. Microsoft
ultimately paid EUR2.2 billion ($2.3 billion). But people inside
and outside Microsoft say the case also altered the company's
culture, making it less brash and more cautious.
"There are certain things you know you can't do that other
companies can do," said Jean-François Bellis, a lawyer who
represented Microsoft against the EU. Being labeled "dominant," as
the EU labeled Google on Wednesday, means executives now must worry
about pleasing regulators, as well as users.
Inside Google on Wednesday, "the amount of concern over
[antitrust enforcement] is enormous," said one person close to the
company.
In a statement posted online, Google said it strongly disagreed
with the need to issue formal charges, and it looked forward "to
making our case over the weeks ahead."
"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.
It said there is "a ton of competition" in online shopping from
sites such as Amazon.com Inc. and eBay Inc. Google said the
traffic, revenue and profits of companies such as Expedia Inc. and
TripAdvisor Inc. "tell a different story" than their complaints
that Google practices have hurt their businesses.
The complaint marked the first time a regulator has filed formal
antitrust charges against Google. U.S. regulators closed their own
investigation into Google's search practices two years ago after
the company agreed to voluntary changes.
That European regulators decided to move against Google when
their U.S. counterparts held back reflects in part the company's
higher market share on the continent, but also different legal
standards. Unlike the U.S., European antitrust law protects
competitors, as well as consumers. And the complaint will initially
be argued before the European Commission, rather than a judge.
"If you are dominant in Europe, you have a special
responsibility to respect competition," said Ioannis Lianos, a
professor of global competition law at University College London.
"I think there will be more" charges, he added.
At issue is whether Google uses its overwhelming 90% share of
online searches in Europe to squeeze competitors in related markets
where it also competes.
The European Commission said Google systematically favors its
shopping service, displaying its results in search queries ahead of
rival comparison shopping services. The regulator didn't name
rivals but companies including Foundem, Nextag Inc. and Twenga SA
have complained to the commission about Google's practices.
The narrow complaint, focused exclusively on shopping, was a
surprise, following a five-year investigation that touched numerous
parts of Google's business. But lawyers said the move may have been
tactical.
Limiting the scope means "the commission can bring [the case] to
a conclusion more rapidly," said Thomas Vinje, an antitrust lawyer
with Clifford Chance who represents a group of complainants against
Google.
Ms. Vestager said that a finding that Google violated
competition law in comparison shopping "could potentially establish
a broader precedent" that would also affect other fields, such as
travel websites.
She said the commission continues to investigate the way Google
displays search results in other areas where it offers services,
such as travel, mapping and local guides. As well, the commission
is probing three other Google practices: allegations that Google
copies or "scrapes" content from rival sites; the exclusivity of
contracts with Web publishers; and advertisers' ability to use
competing advertising platforms.
Three previous efforts to settle the case failed, after Google
rivals complained that the proposed settlements wouldn't have
required significant changes in Google's practices.
At a news conference in Brussels, Ms. Vestager said "every road
is open, " including a settlement. But she indicated that any fresh
proposal would need to differ substantially from the three earlier
attempts.
Google now has about three months to respond to the charges, and
could request a hearing before the commission to better explain its
case. After that, the EU could immediately impose injunctions
requiring Google to stop any behavior deemed anticompetitive, and
announce fines. Google could appeal to the EU's appeals courts in
Luxembourg, a process that typically takes years, during which time
any fines would be held in a separate account. Those courts in
Luxembourg have traditionally been sympathetic to the
commission.
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.
In opening a formal investigation of Android, Ms. Vestager is
targeting the operating system that powered roughly 80% of
smartphones shipped world-wide in 2014, according to market
researcher Strategy Analytics.
The probe focuses in part on concerns that Google effectively
forces smartphone makers that use Android to install many of
Google's own apps, and to set some, including Google Search, as
defaults. Device makers need to use those apps if they want access
to other Google services, such as Google Maps or the Play store for
apps. Details of those contracts, known as the "Mobile Application
Distribution Agreement," were first reported by The Wall Street
Journal last year.
Rivals have complained that this makes it hard for them to
strike deals for their services on Android smartphones.
Sam Schechner in Paris contributed to this article.
Write to Tom Fairless at tom.fairless@wsj.com, Rolfe Winkler at
rolfe.winkler@wsj.com and Alistair Barr at
alistair.barr@wsj.com
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