Google has come under increasing pressure from both sides of the Atlantic to offer robust proposals to address what is seen by many as potential abuse of its market dominance. However, with only meager proposals being put forward by Google, the European Commission must determine whether the proposals should be accepted to reach a settlement rather than face a protracted legal battle.

The European Commission’s investigation

In November 2010, following various complaints from rivals about Google’s practices, the European Commission launched a formal inquiry into whether Google had abused its dominance in internet search and advertising, breaching Article 102 of the Treaty on the Functioning of the European Union. Joaquín Almunia, Vice President of the European Commission and responsible for competition policy, has raised various concerns relating to Google’s business practices, including the possibility of Google manipulating its search algorithms to give preferential treatment to its in-house services on its search results pages. As 95 per cent of internet searches in Europe are conducted using Google, prominent placement in its search rankings is imperative to success for online companies. Further, there was a concern that Google may be “scraping” content from its competitor’s websites and using that material without prior authorisation, removing any incentive for its competitors to invest in creating original content.

Various proposals to improve Google’s practices have been suggested, such as subjecting Google’s in-house services to the same search criteria as those applied to other online sites, as well as a more systematic complaint system. Competitors have put forward more drastic proposals, for example, a division of Google’s business to separate searches from other services.

In October, Google offered to incorporate its brand on any of its in-house services that are displayed in its search results, including maps and stock quotes. As Google’s alleged manipulation of searches to promote its own services would still exist under this proposal, competitors have criticised this proposal as lackluster. It remains unclear whether Google’s concessions offered so far will appease the European Commission.

Across the pond

Whether Brussels pushes for more extensive restrictions to Google’s practices has attracted a global audience including interest from “tech-centric” nations like South Korea. In America, the Federal Trade Commission (“FTC”) has also begun investigating Google’s potential abuse of dominance on the American market. Any settlement reached in Europe could be adopted as a model if the FTC determines that Google breaches US law after its own investigation is concluded.

With initiative being taken on both sides of the Atlantic, the pursuit of Google is the most far reaching antitrust investigation since Microsoft was investigated following allegations that the company was using its Windows operating system monopoly to drive its Internet Explorer browser in the 1990s.

It was thought that the FTC’s inquiry would prompt Joaquin Almunia to issue a formal charge against Google.  However, no formal action has been taken yet; rather the parties are still attempting to reach a settlement.

Comment

Google will need to decide whether further concessions should be offered to reach a settlement and avoid the possibility of litigation, or adopt a riskier strategy and not provide further concessions in the hope that both investigations will fail to identify clear acts of anti-competitive behaviour.  Due to the lack of substantive proposals being offered by Google, the company’s reluctance to act subserviently is becoming increasingly apparent.  However, given the potential liability for Google, with its two largest markets being investigated, there is a huge risk that the initiative could, if formalised, prevent or at least curtail any further growth of Google.  Further, losing a litigious dispute over this matter would make Google highly susceptible to claims from its competitors.  Therefore, a settlement will certainly be the most desirable option for Google.

The European Commission is also between the horns of a dilemma in deciding whether Google’s concessions should be accepted, despite the fact that they do not address all of the Commissions concerns, or alternatively, whether the Commission should become more forceful in constricting Google’s expansive approach. Given the expeditious nature of this sector, a quick resolution will be beneficial for competition and innovation in the sector.  To that end, settlement does appear to be more desirable. As search rankings can determine the fate of a business in a matter of days, internet services are perhaps too fast-moving for a normal litigation process, and it is certainly the case that restoring competition at an early stage is beneficial to users and preferable to lengthy proceedings. However, for users to reap the benefits of a quick resolution, a bargain needs to be struck between Google and the investigating bodies as soon as possible.