'Google Trying to Avoid Antitrust Fight in Europe'

BRUSSELS -Make Money Blog$ — At the annual World Economic Forum in Davos, Switzerland, the hottest ticket in recent years has invariably been an invitation to Google’s lavish private party, and 2011 was no exception.
Eric E. Schmidt, soon to leave the post of chief executive, was avidly working the crowd amid free-flowing liquor and pulsating dance music.

But in recent months, Google has been attracting a different kind of attention. As its ambitions have grown, stretching into businesses far beyond Internet search and advertising by the click, so has the scrutiny of antitrust agencies on both sides of the Atlantic.

So Google extended an even more exclusive invitation to another Davos attendee, Joaquín Almunia, the European Union antitrust chief, asking him to meet face-to-face with Mr. Schmidt.

The details of the investigation are not public, and Google has not disclosed its responses to the European Commission. A Google spokesman, Al Verney, said recently that “there’s always going to be room for improvement” and that Google would “continue to work closely with” E.U. regulators to address any concerns.

But with investigations by the U.S. antitrust authorities piling up — including questions about Google’s proposed acquisition of ITA Software, a flight information company — and with complaints growing louder on other issues ranging from privacy to copyright, the last thing Google wanted was to get bogged down in a lengthy antitrust battle in Brussels.

The case could also be costly for Google, and not just in tarnishing its “don’t be evil” motto. If found in violation of European law, Google could be fined as much as 10 percent of its annual worldwide revenue, which topped $29 billion last year. It could also be required to adjust its business model as part of a remedy.

Google has some reason to be hopeful — to a point.

Mr. Almunia is portrayed by those who know him as more of a consensus-seeker than his immediate predecessors, who imposed huge fines on Microsoft and, in another case, on the U.S. chip giant Intel, a ruling that is still under appeal.

Another reason for caution in Brussels is the danger, in the fast-moving world of the Internet, that any antitrust investigation would fail to keep pace with changes in technology and markets, a challenge that Europe faced during the Microsoft case and that threatens to arise again with Google.

“Very, very often, it turns out that dominance doesn’t have a very long life,” said Philip L. Verveer, the U.S. State Department coordinator for international communication and information policy, speaking about the European investigation this month in Brussels. “It’s important from an antitrust perspective to have a certain humility about whether or not activities involving major interventions are necessary.”

Indeed, the commission was wary of rushing into another high-stakes battle with another U.S. corporate powerhouse. But its members could not ignore the clamoring — from struggling start-ups, major newspaper publishers and telecommunications companies, among others — for them to take a look at Google’s ever-reaching operations.

Yet now that the investigation has gotten under way, the wheels of justice are likely to turn more slowly than Google would like. In part, that is because of the complexity of such issues, but in Brussels, the problem is also exacerbated by the commission’s limited resources.

In recent weeks, Mr. Almunia’s department began seeking bids on a four-year contract worth €6 million, or $8.2 million, for consultants to help with cases, including Google, in the technology sector.

On Nov. 30, Mr. Almunia’s office issued a news release saying it had opened a formal investigation into “allegations that Google Inc. has abused a dominant position in online search, in violation of European Union rules.”

The decision was a risky one. Despite Google’s market share in Internet searches of more than 90 percent in parts of Europe — bigger even than in the United States — the evidence in hand was limited. The E.U. case team had formal complaints from only three companies — one French, one British and another German — and each was a minnow in the technology world.

In addition, the commission’s old antagonist, Microsoft, was among those pushing hardest for an investigation; two of the three complainants had ties, one directly, the other indirectly, to the company.

Yet during the course of 2010, the case team received signals that if a formal investigation were started and official questionnaires sent industrywide, they would get plenty more evidence.
Source: nytimes.com

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