Europe offers to let Google settle potential antitrust case
By James Kanter New York Times

Posted:   05/21/2012 05:51:10 PM PDT

BRUSSELS -- Google (GOOG) may have abused its dominance in Internet search by promoting its own businesses at the expense of competitors, the European Commission said Monday. The executive body of the European Union warned the company to propose changes in "a matter of weeks" to its method of answering user queries, or possibly face an antitrust lawsuit.

Search is the crucial tool that sends consumers to new restaurants and hotels, cheap airplane flights and local services as varied as plumbers or baby sitters. In issuing the ultimatum, European regulators sent their strongest signal yet that they believe Google, which has long said its search results are neutral, tips the scales in its favor.

"The Europeans are saying to Google: 'Time's up. Cave in or we'll sue,' " said Keith Hylton, an antitrust expert at Boston University School of Law.

A Google spokesman said the company disagreed with the commission's conclusions and said "innovation online has never been greater."

If Google decides to fight, the case could fuel a fledging Federal Trade Commission investigation. U.S. regulators have been working closely with the European officials, speaking by phone at least weekly.

Google is the dominant search engine in the United States and holds even greater sway in Europe,

accounting for four of every five searches on the Continent. Joaquin Almunia, the European antitrust chief, said at a news conference in Brussels that regulators had identified "four concerns where Google business practices may be considered as abuses of dominance."
He said Google might have unfairly exploited its market position by displaying links to its own services, like Google maps or images, when it answers a query, giving preference to them over those of competitors. He also said Google included material in its own search results that were copied from competitors' websites.

"In this way they are appropriating the benefits of investments of competitors," Almunia said, explaining that restaurant guides and travel sites were particularly affected.

The other two areas of concern involve how Google conducts its advertising business, including how it delivers search ads on partner sites.

Thomas Vinje, a lawyer for FairSearch, a coalition of 17 companies including Microsoft, said the group was "pleased that the commission has identified some serious concerns with Google's anti-competitive behavior." Antitrust experts expressed surprise at the rare public offer by the commission, which reflects the delicate balance regulators are trying to strike as they seek to fix problems in the fast-changing technology marketplace before proposed remedies lose their relevance.

Almunia's move, some said, was a new phase in aggressive European antitrust enforcement.

Neither Google nor Almunia described what kinds of offers or changes in search methods could lead to a settlement in the 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 $2 billion in penalties and fines.

"The Europeans are moving with the kind of speed you need to get these issues resolved," said David Balto, a former policy director at the Federal Trade Commission. "In five years, everyone might be searching through Facebook."

Al Verney, a Google spokesman, said competition on the Web had increased sharply in the two years since the commission began examining the company's practices. He said that showed "the competitive pressures Google faces are tremendous."

While Google has faced new rivals, most notably Microsoft, which has plowed billions of dollars into its Bing search engine, the company's share of the market has been surprisingly durable in recent years. In the United States during March, Google accounted for 66.4 percent of searches, up slightly from 65.7 percent in the same month in 2011, and 65.1 percent for that month in 2010, according to comScore.

In Europe, Google accounted for 79.3 percent of searches in March, compared with 79.8 percent the same month a year earlier, comScore estimates.

Some experts said a settlement might be an attractive prospect for Almunia, partly because of the complexities of the way search engines operate.


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