Effort to Nudge Google to Resolve Antitrust Issues Informally Wins Praise from U.S. Lawmakers, Google Rivals

The first problem is that in its general search results, the company displays links to its own vertical search services, Almunia said. Vertical search services are specialized search engines that focus on specific topics, and alongside its general service, Google also displays vertical searches that compete with other players, he said. The second concern relates to the way Google copies content from rival vertical services and uses it in its own offerings, he said. It may be copying original material from competitors’ websites, such as user reviews, and using it on its own sites without prior permission, he said. That amounts to appropriating the benefits of rivals’ investments, which could lead to preferential treatment compared to those of competing services, he said.

The third anticompetitive practice is that Google’s agreements with partners on whose websites it delivers search advertisements result in de facto exclusivity because they require the partners to get all or most of their requirements of search ads from Google, shutting out competing providers of search advertising intermediation services, Almunia said. This could affect advertising services purchased, for example, by online stores or broadcasters, he said.

The final issue relates to restrictions the search engine places on portability of online search advertising campaigns from AdWords to rivals’ platforms, Almunia said. AdWords is Google’s auction-based ad platform, where advertisers can bid for placement of search ads on search result pages Google provides, he said. The EC is concerned that Google puts contract restrictions on software developers which prevent them from offering tools to allow seamless transfer of search advertising campaigns across AdWords and other platforms for search advertising, he said.

Almunia said he laid out his concerns in a letter to Google Executive Chairman Eric Schmidt, offering him the chance to come up with proposals in a few weeks. The letter wasn’t available Monday. If Google does make proposals, he said, his staff will initiate talks in the hopes of avoiding formal action. Complainants and interested parties will be brought into the process, and any final Google proposal will be market-tested before the EC makes it legally binding, he said. If talks don’t resolve the situation, formal proceedings will continue, he said. “I hope that Google seizes this opportunity to swiftly resolve our concerns,” he said.

Google said it’s just started to review the EC arguments but disagrees with the conclusions. Competition on the Web has grown dramatically in the last two years since the EC begin looking at this, and the “competitive pressures Google faces are tremendous,” a spokesperson said: “Innovation online has never been greater."

Sens. Herb Kohl, D-Wis., and Mike Lee, R-Utah, the chairman and ranking member of the Antitrust Subcommittee, said they hope Google will be a “willing partner” with the EU in identifying voluntary solutions to its “problematic practices.” They urged the FTC to probe concerns they raised at a September hearing in order to ensure a “competitive search market where consumers can fairly pick the winners and losers in our online economy."

Almunia’s handling of the case has “thus far been very impressive,” said ACT President Jonathan Zuck. His group’s members include Google rival Microsoft, and ACT has sided with Microsoft in previous EC antitrust disputes. In a fast-moving market, it’s better to outline concerns and give a company the ability and flexibility to address them on their own before launching a formal proceeding, he said. “We hope that Google takes the opportunity seriously to find effective solutions,” he said.

Almunia’s concerns directly affect small business competitors, Zuck said. Google has admitted to scraping content from rivals’ sites and featuring it in its own vertical search engines, he said. The use of its dominant market position robs competitors of traffic and advertising revenues, he said. That concern is shared by challengers of all sizes, from small companies to Twitter, Facebook and others, he said.

Google also leaves small players without viable online advertising options, Zuck said. Its exclusive search advertising agreements with many online properties allow the search engine to limit placement opportunities for advertising competitors, he said. Because those issues hit small businesses the hardest, it’s critical that the EU take decisive steps to address Google’s antitrust behavior, Zuck said.

Google will have to show more cooperation during the EC talks than it did with the FCC, which recently found the company to have “deliberately impeded and delayed” a probe, said FairSearch EU Counsel Thomas Vinje. It will also have to be more persuasive than it was to the FTC which, after many months of talks, took the “extraordinary step” of appointing former Justice Department prosecutor Beth Wilkinson as a special counsel to lead the agency’s investigation into the search engine’s potential antitrust and consumer protection violations, he said. FairSearch agrees that a quick resolution to Google’s harmful practices will be best for innovators and consumers, he said. The group’s mission, according to its website, is to convince policymakers to stop Google from “abusing its search monopoly.” FairSearch includes Microsoft, Expedia and Hotwire among others.

The EC is right that the fast-moving search markets will benefit from a quick resolution of Google’s competition issues, said TechFreedom President Berin Szoka. But it’s not clear what to do about them, which could explain why the EC asked Google to suggest remedies rather than just suing, he said. The best remedy for digital competition issues “may be time itself -- and the technological change and unanticipated sources of competition that come with it,” he said.