After Microsoft Complains, EU Rejects Google’s Search Settlement for Second Time

Joaquin Almunia, the competition commissioner for the European Commission — the business regulatory wing of the European Union (EU) — announced on Tuesday in a speech that Google Inc. (GOOG) wasn’t off the hook yet in its Article 9 investigation into Google’s dominant position in the search and mobile markets.

The Commissioner states:
As part of our standard practice in an Article 9 procedure – which leads to a commitments decision – and in response to our pre-rejection letters sent before the summer, some of the twenty formal complainants have given us fresh evidence and solid arguments against several aspects of the latest proposals put forward by Google.

At the beginning of the month, I have communicated this to the company asking them to improve its proposals. We now need to see if Google can address these issues and allay our concerns.  If Google’s reply goes in the right direction, Article 9 proceedings will continue. Otherwise, the logical next step is to prepare a Statement of Objections.

But regardless of the course this case will take, the European Commission – and in particular the Commissioner for Competition – must stand firm to preserve the independence, impartiality and objectivity of our procedures and decisions.  
Competition in the European Union is regulated on an international scale under the rules of Regulation 1/2003, which was drafted in 2002.  The rule forbids corporations — both local and from outside the EU — from violating Articles 81 and 82 of the European Commission Treaty.  These articles prohibit a variety of methods of “abuse of a dominant position.”

Joaquin Almunia layin’ down the law. [SOURCE: 9 to 5 Mac]
In principle, the goals set forth in these rules sound practical.  In actuality, however, the EU can at times appear a bit biased towards domestic firms or overzealous in imposing large fines against antitrust offenders.  Microsoft Corp. (MSFT) and Intel Corp. (INTC) both earned fines totaling more than one billion (U.S.) dollars in recent years.
 
Appeals of such fines have largely proven futile.  And companies that have been subject to fines are often carefully scrutinized for further offenses.  Microsoft, for example, was recently fined an additional €561M EUR ($721M USD) after its browser ballot screen mysteriously “disappeared” due to what Microsoft claimed was a “technical error”.
 
Commissioner Almunia seems to acknowledge that these large fines have drawn the ire of some foreign firms, remarking in his speech:

The case has attracted a lot of attention from the media, the industry, and political circles – including this Parliament.  Of course, everyone is entitled to have their opinions and views on the issues included in this investigation or on other aspects.

However, when it comes to conducting antitrust investigations and preparing decisions capable of removing competition concerns – in this as in any other case – the facts and arguments that really matter are those that fall within our formal proceedings.

I am sure you will agree with me when I strongly reject attempts to transform competition enforcement into an ordinary political debate… [However] we are the most respected competition authority in the world precisely because of the way we guarantee these principles.
Google ran afoul of EU officials over accusations that it — among other offenses — manipulated the results of its search engine to lower the rank of competitors’ services and raise the rank of its own services.  Given that it controls the majority of search traffic in the EU, that possible abuse was taken very seriously by local antitrust officials.  Officials were also concerned about Google “scraping” (data mining) competitors data and potentially accessing open Wi-Fi networks without permission.
 
A major investigation into Google’s behavior has been ongoing since 2013.

Google has been accused of manipulating search results and other offenses. [Image Source: unknown]
However, despite all its concerns and noisy cries from some rivals who want to see fines levied against Google, the American internet giant has yet to be dealt any fines in the EU.  Thus far it has avoided following Intel and Microsoft’s footsteps by agreeing to adopt a series of binding self-regulations, under the Article 9 mediation rules of Regulation 1/2003.

After having its initial settlement offer shot down, Google came back to the table more petulant and ready to cut a deal.  Among these promises Google promised to forget customers data sooner and to not manipulate its search results to block customer access to competitors.  The settlement drew praise from regulators who considered making it binding.  But at the last minute the declined to do that, opting instead to hear new concerns from the settlement’s detractors.

EU officials almost approved Google’s last antitrust settlement offer, before eventually deciding to demand more concessions for a third time. [Image Source: BetaNews]
It appears that Microsoft and others weren’t satisfied with Google’s proposals.  Now the EU is dragging Google back into court to try to address these demands.  For Google surely it’s wondering when this legal nightmare will finally be over.  But so far it can at least be thankful that it hasn’t been viewed as non-cooperative.  As long as it can keep trying to cut a deal with local antitrust officials, it stands a chance of escaping the possibility of billions in fines.