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EU antitrust regulators open third front against Google

Stock MarketsJul 14, 2016 20:52
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© Reuters. EU Competition Commissioner Vestager holds a news conference in Brussels

By Foo Yun Chee

BRUSSELS (Reuters) - EU regulators have brought a third antitrust charge against Alphabet Inc's (O:GOOGL) Google, accusing it of blocking rivals in online search advertising, a move that raises the pressure on the company to modify its practices or face hefty fines.

The European Commission on Thursday also reinforced anexisting charge against the world's most popular Internet search engine that its search results favour Google's own shopping service over those of rivals.

"Google has come up with many innovative products that have made a difference to our lives. But that doesn't give Google the right to deny other companies the chance to compete and innovate," European Competition Commissioner Margrethe Vestagertold a news conference in Brussels.

The Commission said it had sent two charge sheets known as"statements of objections" to Google.

The first accuses Google of having abused its 80 percent market share in the placement of search advertising on third party websites.

This relates to Google's "AdSense for Search" platform, inwhich Google acts as an intermediary for websites such as thoseof online retailers, telecoms operators or newspapers, with searches producing results that include search ads.

"We have also raised concerns that Google has hindered competition by limiting the ability of its competitors to place search adverts on third-party websites, which stifles consumer choice and innovation," Vestager said.

The second accusation, which built on a charge sheet sent toGoogle in April last year, rejected the company's claim that theEU watchdog had failed to take into account competition from online retailers Amazon (O:AMZN) and eBay (O:EBAY).

Google has 10 weeks to respond to the AdSense charge and eight weeks to the shopping service case.

The company could face fines up to 10 percent of its global turnover for each case if found guilty of breaching the bloc's antitrust rules.

Google said it believed its innovations had increased choice for European consumers and promoted competition.

"We'll examine the Commission's renewed cases and provide adetailed response in the coming weeks," a Google spokesman said.

U.S. CONCERNS

British price comparison site Foundem, whose complaint triggered the EU investigation, urged the Commission to take speedy action.

"We are concerned that if it does not act conclusively inthe near future there may be little competition left toprotect," Foundem CEO Shivaun Raff said in a statement.

Lobbying group FairSearch, whose members Expedia (O:EXPE)and Trip Advisor (O:TRIP) complained about Google, said the issueis global.

"At stake is fair competition across Europe and beyond, because the on-line market and innovation are global,"FairSearch lawyer Thomas Vinje said in an email.

The EU's pursuit of Google, along with probes into otherU.S. multinational over tax issues and control of personal data, has caused irritation in Washington, with President Barack Obama last year accusing Europe of veering toward protectionism.

Vestager, a former Danish economy minister who took over asthe EU's powerful antitrust commissioner in late 2014, insists she is simply applying the law and promoting free competition.

Google's AdWords and AdSense programmes have been on the Commission's radar since 2010, under Vestager's predecessor, after rivals complained about unfair advertising exclusivity clauses and undue restrictions on other advertisers.

They form the core of Google's business which posted about$75 billion in revenue last year, generating 90 percent ofAlphabet's total annual revenue.

The latest round of charges underscores the European Commission’s commitment to the case and signals that serious penalties against Google are likely, said Albert Foer, a senior fellow at the American Antitrust Institute.

“My sense is that we are talking about something more substantial than a slap on the wrist, and also that’s why this has been going on for so long,” he said.

The investigation has been dragging on for so long that more serious action will be needed to restore competition in the market, said Gary Reback, an of counsel at Carr & Ferrell LLP, who represents complainants in the EU case.

“If you step in rapidly, you can take a rifle shot, you can make a surgical incision and stop the bad behavior before it causes enormous harm,” he said. Now, he said, “just stopping the harm is not good enough.”

Enough competition remains that rivals could step in to deliver ads alongside search results on third party sites, Reback said. But there are few European alternatives for comparison shopping, he added.

EU antitrust regulators open third front against Google
 

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