Europe Likely to Be Harder on Google Over Search

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PARIS -- By some accounts, the United States let Google off the hook by finding that the technology giant had not abused its dominance in the Internet search market.

Few expect the European antitrust watchdog to be as lenient.

The Federal Trade Commission ruled Thursday that Google had not broken antitrust laws, after a 19-month inquiry into how it operates its search engine. But the European Commission, which is pursuing assertions that the company rigs results to favor its own businesses, operates according to a different standard.

The agreement with the American authorities, analysts and competition lawyers say, is unlikely to alter the demands of European regulators, led by the E.U. competition commissioner, Joaquín Almunia.

"We have taken note of the F.T.C. decision, but we don't see that it has any direct implications for our investigation, for our discussions with Google, which are ongoing," said Michael Jennings, a spokesman for the European Commission in Brussels.

Faced with nearly $4 billion in possible penalties and restrictions on its business in Europe, Google in July submitted proposals to remedy the concerns of the European Commission, which covered four areas. In its deal with the F.T.C., Google made concessions in two of those areas but was not required to do so in the rest.

A Google spokesman, Al Verney, declined to comment on the content of the company's proposals to Mr. Almunia but said it would "continue to work cooperatively with the European Commission."

The Google case underscores a basic difference between the European and U.S. approaches to monopoly power. American antitrust regulators tend to focus on whether a company's dominance is harmful to consumers; the European system seeks to maintain competitors in the market. Mr. Almunia has vowed to restore competition to the Internet search business in Europe.

"History shows that competition law is applied to monopoly power more stringently in the E.U. than in the U.S.," said Jacques Lafitte, head of the competition practice at Avisa Partners, a consultancy in Brussels, who brought one of the original complaints against Google. "Whether the E.U. is right or not is a different question."

Mr. Lafitte has some expertise in the matter. He is the former head of corporate affairs at Microsoft Europe and watched as that company did battle with regulators over its dominant computer operating system. Microsoft won a lenient settlement with the U.S. Justice Department in October 2001, he noted, only to be slapped with nearly €1.6 billion, or $2.1 billion, in E.U. fines and penalties from 2004 to 2008.

Google learned from Microsoft's mistakes, engaging in discussions with both the U.S. and European authorities to reach a deal rather than fighting a desperate legal action. That approach appears to have paid off: Last month, after a meeting with Eric E. Schmidt, Google's executive chairman, Mr. Almunia said that the sides had "substantially reduced our differences."

In its deal with the F.T.C., Google agreed to make concessions in two areas that concern European regulators. In one, it will allow rivals to opt out of allowing Google to "scrape," or copy, text from their sites. It is probable that Google will offer the same concession to European authorities.

But in a second area of European concern -- whether Google deliberately favors its own content in search results -- the F.T.C. did not require changes.

Mr. Almunia has also demanded that Google put fewer restrictions on advertising distribution deals, an area that his U.S. counterparts did not explore.

The company will make a detailed set of proposed remedies in January, after which the European Commission will allow the complainants to review them in a period of what is known as "market testing." Antitrust lawyers say a final denouement could arrive by spring, depending on how hostile Google's rivals are to the proposed remedies.

FairSearch, an alliance of Google rivals, accused the U.S. trade commission of rushing its decision. It said in a statement that closing the F.T.C. investigation "with only voluntary commitments from Google is disappointing and premature."

The outcome in Europe might also be affected by Google's dominance there. Google's share of the U.S. search market was 67 percent in November, according to comScore, a digital analytics company, while in Europe 83 percent of searches were made on Google that month.

The company's greater success in Europe results partly from the fact that Americans are more likely to use Web portals like Yahoo, MSN and AOL, and make a greater proportion of their searches on them.

U.S. regulators conducted a 19-month investigation into the claims against Google, during which the company vigorously pressed its case. Working relentlessly behind the scenes, executives made frequent flights to Washington, laying out their legal arguments and shrewdly applying lessons learned from the battle Microsoft had waged through the better part of the 1990s.

Regulators pored over nine million documents, listened to complaints from disgruntled competitors and took sworn testimony from Google executives, before concluding that consumers had been largely unharmed.

That is why one of the biggest antitrust investigations of an American company in years ended with a slap on the wrist, with Google voluntarily making only the two minor concessions.

"The way they managed to escape it is through a barrage of not only political officials but also academics aligned against doing very much in this particular case," said Herbert Hovenkamp, a professor of antitrust law at the University of Iowa who has worked as a paid adviser to Google in the past. "The first sign of a bad antitrust case is lack of consumer harm, and there just was not any consumer harm emerging in this very long investigation."

The F.T.C. put serious effort into its investigation of Google. Jon Leibowitz, the agency's chairman, has long advocated that the commission flex its muscle as an enforcer of antitrust laws, and the commission hired high-powered consultants, including Beth A. Wilkinson, a former Justice Department prosecutor, and Richard J. Gilbert, a well-known professor of economics.

The main thrust of the investigation was into how Google's search results had changed since it expanded into new search verticals, like local business listings and comparison shopping. A search for pizza or jeans, for instance, now shows results with photos and maps from Google's own local business service and its shopping product more prominent than links to other Web sites, which has enraged competing sites.

But while the F.T.C. said that Google's actions might have hurt individual competitors, over all it found that the search engine helped consumers, as evidenced by Google users' clicking on the products that Google highlighted and by competing search engines' adopting similar approaches.

Google outlined such arguments to regulators in many meetings over the past two years as it intensified its courtship of Washington, with Google executives at the highest levels appearing in the capital along with lawyers, lobbyists and engineers.

To underline these arguments, Google spent $13.1 million on lobbying in the first three quarters of 2012, up from $5.9 million in the same period in 2011.

Microsoft, joining a chorus of unsatisfied Google competitors, said it was disappointed by the F.T.C.'s decision.

"The F.T.C.'s overall resolution of this matter is weak and -- frankly -- unusual," David A. Heiner, a Microsoft vice president and deputy general counsel, wrote in a blog post. "We are concerned that the F.T.C. may not have obtained adequate relief, even on the few subjects that Google has agreed to address."

Claire Cain Miller contributed reporting from San Francisco, Nick Wingfield from Seattle.

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This article originally appeared in The New York Times.


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