Fri | Dec 9, 2016

EU alleges Google hurts consumers, innovation

Published:Thursday | April 16, 2015 | 12:00 AM
Eric Schmidt, chief executive officer of Google Inc.

The European Union's (EU) escalating legal attack on Google is likely to ignite a debate about whether the Internet search leader makes life more convenient for consumers or abuses its power to squeeze out rivals who might have something better to offer.

The contrasting views of Google's business practices came into sharper focus Wednesday after Europe's antitrust regulators challenged the Mountain View, California, company on two different fronts.

Drawing upon a nearly five-year probe, the regulators filed a complaint alleging that Google has been improperly favouring its own shopping comparison service in its own search results. The charges could still be expanded to include other services highlighted in Google's search results, such as travel recommendations and merchant reviews, mounting a challenge to the digital advertising system that generates most of the company's revenue.

As if that blow wasn't enough, Europe's regulators also announced they are opening a separate inquiry into whether Google has been illegally using its popular Android software to bully smartphone and tablet makers to feature Google's products on their mobile devices.

Google staunchly denied any wrongdoing, setting up a showdown that could still take years to resolve. The company has 10 weeks to respond to Wednesday's complaint.

If regulators can prove Google has been breaking the law in the European Union's 28-country bloc, it could be costly even for a company as rich as Google.

The EU can impose fines of 10 per cent of annual revenue, or some US$6 billion in Google's case, and force the company to overhaul its system for recommending websites in Europe.

The EU executive commission said it found that Google "gives systematic favourable treatment" to its Google Shopping at the expense of others in its general search results.

popular search engine

Margrethe Vestager, the EU's competition commissioner, said that was a problem because Google is so dominant in Europe. It has a market share of over 90 per cent of Internet searches in the EU, compared with around 70 per cent in the United States (US).

"It is not based on the merits of Google Shopping that Google Shopping always comes up first," Vestager said. "Dominant companies have a responsibility not to abuse their powerful market position."

Though Wednesday's charges centred on the shopping service, the EU said it is pursuing other antitrust issues against Google, including a probe of its online ad business.

That suggests the EU's case against Google could become as big as the decade-long battle it waged with Microsoft, which ended up paying a total of about €2.2 billion (currently US$2.3 billion) in fines.

"Clearly, every company needs to obey the same legal rules of the road," Microsoft said in a Wednesday statement. The software maker is among the companies that spurred the EU's investigation of Google.

Vestager said her chief goal is to make sure multinationals do not artificially deny European consumers as wide a choice as possible or stifle innovation. She noted that one in four companies complaining about Google were US rivals.

In the separate probe into Android, the EU alleges that Google is breaking the rules by obstructing rival operating systems, applications and services, hurting both consumers and innovators.

Amit Singhal, the senior vice-president for Google Search, said that "While Google may be the most used search engine, people can now find and access information in numerous different ways - and allegations of harm, for consumers and competitors, have proved to be wide of the mark."

Germany and France, which had been strongly arguing against any soft EU settlement with the US company, welcomed Wednesday's move.

German Economy Minister Sigmar Gabriel said that "We need clear European rules so that fair competition is possible in the age of digitalisation."

- AP