European Competition Commissioner Margrethe Vestager addresses a news conference at the EU Commission headquarters in Brussels April 15, 2015. Photo: Reuters
The European Union accused Google Inc on Wednesday of cheating competitors by distorting Internet search results to favor its shopping service, and launched another antitrust investigation into its Android mobile operating system.
Competition Commissioner Margrethe Vestager said the U.S. tech giant, which dominates Internet search engines worldwide, had been sent a Statement of Objections – effectively a charge sheet – to which it can respond. She also said other probes into Google’s business practices would continue.
“I am concerned that the company has given an unfair advantage to its own comparison shopping service, in breach of EU antitrust rules,” she said. “If the investigation confirmed our concerns, Google would have to face the legal consequences and change the way it does business in Europe.”
The Commission, whose control of antitrust matters across the wealthy 28-nation bloc gives it a major say in the fate of global corporations, can fine firms up to 10 percent of their annual sales, in Google’s case up to $6.6 billion.
If it finds that companies are abusing a dominant market position, the EU regulator can also demand sweeping changes to their business practices, as it did with U.S. software giant Microsoft in 2004 and chip-maker Intel in 2009. Its record antitrust fine was 1.09 billion euros on Intel.
Asked whether she was ready to go as far as fining Google, Vestager told a news conference: “It is very important that every road is open – first when it comes to commitments but also when it comes to the other road, at the end of which is a fine.”
Google now had an opportunity to explain itself, she said, and the case might be settled by the company making further commitments to change its products.
Of the formal investigation into Android, used on smart phones and tablets, Vestager said: “I want to make sure the markets in this area can flourish without anticompetitive constraints imposed by any company.”
In its first reaction, the Mountain View, California-based company said in a blog post that it strongly disagreed with the EU’s statement of objections and would make the case that its products have fostered competition and benefited consumers.
“Android has been a key player in spurring this competition and choice, lowering prices and increasing choice for everyone (there are over 18,000 different devices available today),” it said of its free operating system for mobile devices.
Vestager, a Danish liberal who took over the politically charged EU competition policy dossier in November, announced the moves on the eve of a high-profile visit to the United States. Her findings following nearly five years of investigation and abortive efforts by her Spanish predecessor, Joaquin Almunia, to strike a deal with Google.
The focus on the ranking of searches for shopping sites – Google has its own service called Google Shopping – did not address all complaints lodged with the Commission by competitors, large and small, in Europe and the United States, which say Google has hurt their business.
Vestager stressed her antitrust staff would continue to investigate other areas of concern, including alleged “web scraping” to copy rivals’ content, and restrictive practices on advertising.
She stressed the EU regulator did not seek to change Google’s screen design nor the mathematical algorithms it uses.
Google initially has 10 weeks to respond to the charges and can demand a hearing. A final resolution – quite possibly involving court action if Google does not choose to settle – is likely to take many months and probably years.
Critics welcome
Google’s critics welcomed the decision to pursue the U.S. giant, though many industry experts believe the action is unlikely to markedly shift existing business their way. Rather, by firing a hefty shot across Google’s bows, it may favor competitors in new areas as technology develops.
That has been a priority for the new European Commission led by Jean-Claude Juncker, which wants to promote a more dynamic digital market in Europe and foster home-grown enterprises.
Juncker is also pressing for a free-trade treaty with Washington to bolster growth and Vestager has stressed she is not seeking to penalize American firms or large companies – merely to avoid abuses of dominant market positions.
Vestager’s action won cross-party endorsement in the European Parliament. In a statement headlined “Even Uncle Google must play fair”, German lawmaker Manfred Weber, floor leader of the largest conservative group, said: “Internet is not the Wild West – there are rules on the web that must also be respected.”
French Socialists Pervenche Beres and Virginie Roziere applauded the Commission for “at long last” taking action against “the threat posed to the European economy” and renewed their call for the breakup of Google.
President Barack Obama accused the EU in February of taking a protectionist stance against the U.S. tech industry.
American domination of the Internet and other new technology sectors has prompted a mixture of admiration and anxiety in Europe in an echo of similar mixed feelings about reliance on U.S. military might for security against a resurgent Moscow.
However, many of the firms that have complained to Brussels to challenge Google’s business practices in Europe are themselves U.S. companies, such as Microsoft and Expedia.
The Initiative for a Competitive Online Marketplace, an alliance of businesses, applauded the Commission for taking what it called “decisive action to end Google’s years of abusive behavior in its long-running antitrust case”.
Germany, backed by major companies in the EU’s biggest economy, has been particularly vocal in pressing the Commission to act against Google.
Axel Springer chief Mathias Doepfner told the German media group’s shareholders in Berlin on Tuesday that Almunia’s efforts to negotiate a deal with Google would have been a “shoddy compromise” and praised Vestager for being “more determined, quicker and more true to the facts”.
Almunia, who launched the initial probe in 2010, last year yielded to pressure from Germany and others to abandon a deal he had been favoring to settle the case.
Google has put forward three proposals to resolve the case. Most recently, just over a year ago, it offered to give competing products and services bigger visibility on its website, let content providers decide what material it can use for its own services and make it easier for advertisers to move their campaigns to rivals.
Almunia initially accepted that deal, only to reverse his decision six months later and demand more concessions, leaving the ultimate decision to his successor.
Microsoft has been hit with total EU fines of more than 2.2 billion euros ($2.34 billion) over the past decade.
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