News / Economy

    Rivals Smart After EU Plays it Safe in Google Case

    A Google sign is seen at a Best Buy electronics store in Encinitas, California, Apr. 11, 2013.
    A Google sign is seen at a Best Buy electronics store in Encinitas, California, Apr. 11, 2013.
    Reuters
    What's the best way to deal with a complex legal case that threatens to drag on for years while leaving unchecked a dominant player in an economically important market?

    For EU antitrust chief Joaquin Almunia, the answer in the case of Google Inc. was clear. Not the long and winding road of formal charges and a potential fine for the world's most popular search engine, but the quicker route of a settlement.

    Google formally submitted its concessions to the European Commission last week, aiming to end the 30-month long case. The regulators said they would "market test" the proposals soon, indicating they were content with the offer.

    While the Commission, the EU's competition authority, and the U.S. company may be happy with the result, some of Google's rivals are not so convinced.

    They see it as a missed opportunity by regulators to tackle what they regard as a dominant player determined to crush smaller rivals and thwart any chances they have to grow.

    For his part, Almunia defends the approach he has taken, which was designed to secure a resolution of the case without having to prove guilt and adjudicate a fine.
    In that way, consumers benefit more quickly from the resolution, rather than having to wait for years as in past EU cases against Microsoft Corp. and Intel Corp.

    "We ... prefer to conclude cases swiftly when this brings the most benefits to the markets. In certain industries - such as high-tech and fast-moving markets - it is important that competition is restored quickly and effectively," the EU commissioner said earlier this month.

    Almunia had been concerned that Google may have broken the rules by promoting its services over those of rivals, copying competitors' travel and restaurant reviews without permission and restricting advertisers from moving to competing services.

    In trying to settle the case, the EU competition commissioner has a point, given the length of earlier proceedings against Microsoft and Intel, said Nicolas Petit, law professor at the University of Liege in Belgium.

    "The first Microsoft case took six years and even then the remedies were only applicable two years later. The Intel case took nine years from when the complaints were filed to the prohibition decision," he said.

    Not clear cut

    Given the complexity of the EU case and the fact that U.S. regulators found no wrongdoing in their own investigation of Google's core search business, Almunia is just being pragmatic, said Edmon Oude Elferink at law firm CMS Derks Star Busmann.

    "From the legal and strategic point of view, it's the thing to do. If a case is not clear-cut, going for a hardline approach is risky. The risk of losing face is very serious," he said, referring to the Commission's settlement procedure. "Article 9 is a comfortable road. The Commission can claim that it has dealt with the case without running too many risks."

    But for lobbying group and Google complainant ICOMP, which counts Microsoft and four other rivals among its members, such arguments hold little water.

    "The complaints started to be made five years ago. Almunia should have issued a statement of objections two years ago," said ICOMP lawyer David Wood, referring to the documents spelling out the regulator's concerns.

    "There is no reason to think why an Article 7 would not be more effective and quicker than an Article 9, even now." Article 7 decisions allow EU regulators to ban anti-competitive behavior and levy fines - as opposed to Article 9, under which companies can offer concessions to end an antitrust probe without any finding of wrongdoing.

    Critics may still demand a more extensive investigation into Google and time may not be on Almunia's side.

    "The Commissioner's mandate expires somewhere in the fall of 2014. Under an Article 7 procedure, he might no longer [be] ... in office to sign the prohibition decision," Petit said. "In short, to put the Google case on his hunt list, Almunia needed a settlement."

    There are, however, drawbacks.

    Some say Almunia's eagerness to wrap up the case could eventually undermine antitrust law enforcement and also leave companies in the dark.

    "From an antitrust policy perspective, it creates legal uncertainty, as the legal principles ... are not clear, neither for the parties, not for third parties," said Anne Vallery, a partner at law firm VVGB in Brussels.

    Still, there are more ways than one to go after technological companies suspected of flouting rules and blocking competition, said Albert Foer, head of the American Antitrust Institute think-tank.

    "What is important to remember is that governments retain many tools (for example, procurement policies and privacy protection policies) with which they will be able to nudge, not only Google but the whole internet industry, in ways that appear to make sense even as the industry changes," Foer said.

    "We need to be thinking about additional ways to maintain competition in the field of search. A long perspective is needed."

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