Google Should Fret About EU, Not Italy

Antitrust Inquiry by European Union Commission Could be the Beginning of a 'Microsoft Moment'

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NEW YORK ( -- Google's vast size has always made it a target -- and nowhere was that more evident last week than in Europe, where it got walloped hard by antitrust and legal woes. The question is, will troubling the search giant there spread beyond that region's borders?

On Tuesday, the European Commission, part of the European Union, opened a preliminary antitrust inquiry into Google. The inquiry was brought to the EU by three competitors: Ciao in Germany;, a French legal search-engine; and Foundem, a price-comparison site in the U.K. The following day an Italian court convicted three Google executives of violating privacy laws because in September 2006 a video of an autistic child being bullied by other kids was uploaded to the now-defunct Google Video site. The video, was taken down in November 2006.

While both issues made for unpleasant headlines for Google, the antitrust issue is much more likely to affect its business, according to most internet watchers.

Europe has been known for a tougher antitrust stance than the U.S., and Google has increasingly found itself in the crosshairs of several European countries for a variety of reasons -- France has attacked Google's book-search project, and Germany and the U.K. have taken issue with its street-view mapping endeavor. In the end, though, much of the scrutiny is likely due to the fact its search share is higher in Europe than it is even in the U.S., and competitors want to slow it down.

"Google does seem to be of the view that all of its 'non-evil' services would be appreciated by the world over," said Niku Banaie, managing director of Aegis Group's Isobar Global. "But ... we've seen stiff opposition in France in regard to their copying of texts and cases in Germany in regard to street view. Europe is still made up of several strong, independent cultures and political systems, and we are witnessing a clash of cultures."

Echoes of Microsoft
Some, including longtime Google watcher and author John Battelle, have even suggested the inquiry might be Google's "Microsoft moment," in which it becomes the subject of heavy government scrutiny. Not surprisingly, Microsoft, a longtime Google foe, is associated with several of the sites behind the preliminary EU inquiry into Google.

Christopher Vollmer, a partner at Booz & Co., suggests it may not quite be a Microsoft moment yet, but acknowledges that "the volume of Google-critical rhetoric in Europe is certainly now much louder than ever before, and the business consequences could be significant for Google."

The antitrust inquiry may try to get Google to shed more light on its search-ranging algorithm, arguably its most important asset.

"There are many in the ad community [competitors, agencies, publishers] that will welcome any inquiry into Google's profitable search business -- in part because they want greater transparency into Google's business practices," Mr. Vollmer said. Google "will cooperate as much as they can without publicly disclosing to competitors what they view as their 'secret sauce' for search."

The Italian conviction was reflective of challenges Google has faced in undemocratic countries but is a rare challenge in a Western country and unlikely to create widespread problems in Europe. And the U.S. European Union law gives internet hosting providers safe harbor from liability for the content posted to their sites as long as they remove illegal content upon notification.

"If Google's business is affected by the Italian case, the whole of the internet as we know it today will be affected," said Isobar's Mr. Banaie. But so far, he said, "most clients I've spoken to think it's ridiculous."

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Contributing: Laurel Wentz

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