Google Likely to Face Charges in Europe for Antitrust Violations

Efforts to Reach Settlement Fail to Produce Results as EU Could Levy Fines

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Credit: Krisztian Bocsi/Bloomberg

Google Inc. has been told it will face charges by the European Union that it violated antitrust rules, people with knowledge of the matter said.

A decision will probably be announced this week, said the people, who asked not to be identified since the matter isn't public.

Google and rivals are preparing for a decision after more than four years of regulatory scrutiny, raising the prospects of fines and constraints on how it delivers internet search. Under the new leadership of Competition Commissioner Margrethe Vestager, the EU stepped up the probe into Google in December, when regulators sought additional information from rivals involved in internet maps, travel and other services. Google gets about one-third of its revenue from the region.

With Google commanding almost all of the search market in some European countries, critics including Microsoft Corp. and Expedia Inc. are fed up with the company, which they say highlights its own web services in query results at the expense of rivals. While a decision hasn't been announced and many legal hurdles would remain, Ms. Vestager has several levers she could use to penalize Google, including hefty fines and potential changes to how it presents its own services in search results.

"It's a serious investigation with serious consequences if the EU chooses to bring a case and has evidence," said Spencer Waller, an antitrust professor at Loyola University School of Law in Chicago. "What happens in almost every case involving the abuse of a dominant position is some combination of a fine and an order to change the behavior in different ways."

Gina Scigliano, a spokeswoman for Google, didn't immediately comment on whether Google was told it will face charges.

The Mountain View, Calif.-based company had sought to avoid fines and sidestep any finding that it violated antitrust laws by trying for two years to reach a settlement with the EU. Negative feedback from rivals forced the EU to abandon such a pact. Competitors objected to Google's proposal that they pay for their services to be displayed next to Google's above search results.

Ms. Vestager took a fresh look at the case and pledged to meet with Google and its opponents before deciding the way forward. Guenther Oettinger, the EU's digital commissioner, expects "far-reaching" steps from her soon, he told Die Welt in an interview on Sunday.

For Google, the European market contributes about 35% of its revenue, according to Carlos Kirjner, a New York- based analyst at Sanford C. Bernstein & Co. Its market share in search exceeds 90% in most European markets, compared with about 65% in the U.S.

One instrument that the EU wields is the right to fine the company as much as 10% of its annual revenue. It previously fined Intel Corp. 1.06 billion euros ($1.1 billion) and ordered that it abandon price rebates to computer manufacturers that used only its chips. Microsoft Corp. was fined more than 2.24 billion euros in its decade-long antitrust battle with the EU.

Fining Google 10% of its annual sales would cost the company $6.6 billion, based on last year's revenue. That would be among the largest levied against a company in this type of case. The EU has never demanded the maximum, however, and such a fine would be easily absorbed by the company's $64.4 billion in cash, equivalents and short-term investments.

Fines may not be Google's most difficult challenge.

The EU also can demand that the company change how search results are generated or displayed. That would not only impinge on Google's autonomy in how it runs its core business but could also slash revenue.

A search today for coffee bars in London on Google's U.K. service, for example, will highlight results for the company's Google+ feature, which includes information on regional shops. Yelp Inc. and TripAdvisor Inc. say the Google+ results are unfairly promoted above better information from their own services.

Google needs to change search results that lift the ranking of its own services, said Christoph Klenner, secretary general of the European Technology and Travel Services Association in Brussels. The EU may insist that Google reduce the screen real estate reserved for paid ads to give more website providers a chance to appear among the top results without paying.

Regulators should consider forcing Google to better index other websites to display higher-quality results for rival mapping or news services, said Michael Weber, chief executive officer of, which was among the original complainants in 2010. Competing visual services like video and maps could be afforded fairer treatment by rotating providers or offering users thumbnails to select their preferred service, he said.

"I would hope that Google reverts to fostering a multitude of web-service providers, rather than seeking to eliminate anyone with a competing product," Mr. Weber said. "Maybe it would eat into their profit for a year or two, but in the long run, it can only be good for them if they're not the only player around."

If Google receives a statement of objections, which may be several weeks away, it can defend itself in writing or at a hearing. That process may take months, and a final decision isn't likely to arrive before next year.

A 20-month U.S. antitrust probe that wrapped up in 2013 concluded that the company was motivated more by wanting to improve its search results and user experience than by a desire to stifle competition. More-aggressive action by the EU may spur similar activity elsewhere, said James Cakmak, an analyst at Monness Crespi Hardt & Co.

"The bigger risk is the potential impetus to other jurisdictions in going after Google," he said. "If Europe sees any level of success, you could see other jurisdictions try to piggyback off Europe's efforts."

Yet the result of the U.S. Federal Trade Commission case also shows that Google can convince regulators of the value of its services over potential harm to rivals. A possible settlement allows Google to determine its own fate, and even a binding order can be challenged in EU courts.

"The complaint would be an important milestone in the Google investigation, but it's not the end of the road," said Allen Grunes, an attorney at Konkurrenz Group in Washington and a former antitrust lawyer with the Justice Department. "They can certainly contest it. I wouldn't expect them to fall on their sword."

--Bloomberg News

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