By Sam Schechner and Natalia Drozdiak in Brussels and Alistair Barr in San Francisco
Google Inc. on Thursday rebuffed the European Union's demand
that it change the way it ranks online comparison-shopping services
in its search results, setting up a potentially drawn-out legal
battle between the search giant and a regulator empowered to levy
billions of euros in fines.
In a formal response Thursday to antitrust charges the EU filed
this spring against the California company, Google argued the
bloc's antitrust regulators erred in their analysis of the
fast-changing online-shopping business, misconstrued Google's
impact on rival shopping-comparison services, and failed to provide
sufficient legal justification for its demands.
In particular, the company argues that the EU's
charges--detailed in a document called a Statement of Objections,
or SO--fail to take into account the fast growth of companies like
Amazon.com Inc. and eBay Inc. Google executives have said these
firms pose a new competitive threat, which undercuts the case that
Google has harmed comparison-shopping companies like Nextag and
LeGuide.
"We believe that the SO's preliminary conclusions are wrong as a
matter of fact, law and economics," Google general counsel Kent
Walker said in a written statement.
Google also argues--in a report it commissioned to accompany its
filing--that the EU doesn't have the legal justification to demand
the firm include rivals in its comparison-shopping ads. To do so,
Google argues, the EU would need to show that such ads are as
essential as utility services.
The EU commission, the bloc's executive arm and central
antitrust authority, said it would carefully consider Google's
response before deciding how to proceed.
By taking aim at the framing and legal justification of the EU's
case, Google is setting the stage for a potentially drawn-out legal
challenge. The case, which stretches back to 2010, has led to three
tentative settlements that were later scuttled.
The continuing tussle could thrust Google's operations in Europe
into legal limbo for years to come. It also gives the company room
to keep operating as it currently does--without making big changes
to its search algorithms.
At issue in the case is whether Google uses its alleged
dominance in online search--where the EU says it controls some 90%
of the market in some countries--to hurt competitors in related
businesses where Google also operates.
According to a version of the charge sheet sent to some of the
complainants in the case, the EU alleges that Google's abuses
occurred in several countries and stretch back as much as a decade,
people familiar with the matter said in June.
News Corp, which owns The Wall Street Journal, is among the
complainants against Google.
Some opponents say Google's argument that the EU should take
account of new competitors, like Amazon, is a move straight from
the antitrust playbook.
"All dominant companies think that their position is precarious
and are about to be knocked off their perch," said Thomas Vinje, a
partner at law firm Clifford Chance, who represents companies that
have complained about Google to the European Commission, the EU's
antitrust authority.
"I would not doubt Google's sincerity on this. But I've never
seen any defendant in a dominance case win by changing the EU
Commission's stance on the definition of the market," he added.
Google's response comes as more technology companies are under
investigation or in legal conflict with EU regulators on subjects
ranging from antitrust to privacy.
Facebook Inc. is facing an array of privacy inquiries across
Europe, while Google is clashing with France's privacy watchdog,
which has ordered the company to expand the EU's new "right to be
forgotten" rule to its search engine globally.
Antitrust officials have been particularly active. EU antitrust
chief Margrethe Vestager recently opened a number of high-profile
investigations into how large Web companies like Google and Amazon
operate in Europe, and whether e-commerce companies are raising
barriers to competition, something the companies deny.
Her office has also opened inquiries into chip maker Qualcomm
Inc., including one into alleged predatory pricing tactics--a
charge the company described as without merit.
Google's response Thursday now puts the ball back in the EU's
court. The EU could decide to immediately impose injunctions
against Google, and announce fines as high as 10% of the company's
annual global revenue. Or it could seek to negotiate a new
settlement.
Google has decided not to seek an oral hearing at this stage.
But it could appeal any commission decision to EU courts in
Luxembourg, a process that could take years. EU courts have
traditionally sided with the bloc's antitrust regulators.
Google argues that the fast-changing online-shopping market,
with more competitors joining the market, shows that its behavior
hasn't harmed companies like the complainants--and rather says that
Google has significantly boosted the traffic it sends to such
companies in the time covered by the EU's complaint.
Google also recently added a buy button to some of its shopping
search results, turning the service into more of a marketplace like
Amazon. Google did this to make it easier for smartphone shoppers
to complete purchases on smaller screens, but that change could
also help its argument that its competition in online shopping
includes Amazon and eBay.
The shopping case isn't the only one Google faces. In addition
to a continuing probe into its Android operating system, the EU has
also stepped up a probe into the allegations that Google abuses its
dominance in advertising contracts with web publishers and that it
copies or "scrapes" content from rival sites, according to two
documents reviewed by The Wall Street Journal. Google has declined
to comment.
The EU has sent out questionnaires to companies to gather more
information into how Google operates in those areas, suggesting the
EU could potentially expand the formal charges or open a new case
against the company.
Write to Sam Schechner at sam.schechner@wsj.com, Natalia
Drozdiak at natalia.drozdiak@wsj.com and Alistair Barr at
alistair.barr@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 27, 2015 14:19 ET (18:19 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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