Google Makes Nice to EU

Google has sent a letter to European antitrust regulators proposing to address the Commission’s concerns about competition. The widespread assumption is that Google is seeking to head off formal proceedings that may be pending to avoid a long, drawn-out investigation and hefty fine.

Google’s overture was preceded by EU antitrust commissioner Joaquin Almunia’s announcement in May that an investigation over the past year-and-a-half had uncovered four general areas of problems that needed to be rectified.

The statement signaled the probable launch of the next stage of legal proceedings against Google, but Almunia held out one hope: He would give Google one more chance to change its ways in the interest of restoring competition. It appeared unlikely, however, that Google could meet the vague deadline — a matter of weeks.

However, there was also the possibility that much was occurring behind the scenes, and that Almunia’s odd public statement was an indication that a resolution was brewing.

Google said that its offer addresses the four areas that the EC has highlighted as potential antitrust concerns and that it continues to cooperate with the Commission.

The EC did not respond to our request to comment for this story.

Google’s Best Interests

Certainly it was in Google’s best interests to head off formal proceedings, Peter Toren, an attorney with Weisbrod Matteis & Copley, told the E-Commerce Times.

“The uncertainty of an investigation, the worries about what it may do to the stock, the fine Google would be liable for — all of that is best to be avoided,” he said.

The potential fine alone would be enough to make Google push for a settlement or at least make promises to keep the EC at bay, Peter S. Vogel, a partner with Gardere Wynne Sewell, told the E-Commerce Times.

“The risk of being fined 10 percent of annual revenues is a huge stick to settle,” he said — not to mention the cost of legal services.

Another factor behind Google’s offer, Vogel speculated, is that the company wants to clear the way so it can explore other areas of growth. Android, for example, would fall in that category.

“At a certain point, a drawn-out government investigation becomes a distraction from other business endeavors,” noted Vogel.

This is not to say that Google would have been found to have violated antitrust regulations in Europe, he added. “It seems that Google simply is weighing the risks of losing and the cost of fighting against the cost of settling.”

Indeed, the benefits of settling a potential government case in the early stages are so great it is a wonder it doesn’t happen more often — but there is a reason for that, Toren said.

“The settlement has to be reasonable to both parties,” he pointed out, “and it can take a while for both parties to decide what is reasonable, especially at the beginning stages of an investigation where it is not clear what will be at issue.”

Also, keep in mind the definition of an ideal settlement, he added. “It is when both parties walk away unhappy.”

What Did Google Offer?

To be clear, Google and the EC are not yet at the settlement stage — early or not. Rather, Google’s offer puts them a few steps behind that phase.

Neither Google nor the EC is revealing the details of Schmidt’s letter. In May, Almunia cited four specific areas of concern: how Google displays vertical search results; how it uses content from competing content; its search advertising policies; and how advertisers are restricted from using rival search engines.

Presumably the company is offering some type of accommodation in each of those areas.