By Sam Schechner and Valentina Pop
Europe's aggressive pursuit of antitrust cases against Alphabet
Inc.'s Google was long a beacon for detractors of the search giant
world-wide. Now they see it as a cautionary tale.
European Union regulators have dedicated more than a decade to
curbing Google's alleged quashing of competitors, imposing $9
billion in fines and orders to change business practices. But
mechanisms Google introduced to comply with EU decisions have done
little to pare its market position. Since the first of the EU's
three decisions landed in 2017, the company's revenue and stock
price have risen by about half.
Some of Google's competitors say the EU's decisions were too
late and too weakly enforced to have a real impact. Now they hope
the U.S. Justice Department will strike a more significant blow
with its lawsuit filed Tuesday alleging Google used anticompetitive
tactics to maintain the dominance of its search engine.
Google says it faces intense competition and that its products
benefit consumers. "Our success is based on providing the best
results, and if we're not, users can quickly and easily switch to
rivals," the company said in a blog post noted by a spokeswoman.
Google has appealed the EU's decisions even as it has implemented
remedies to comply with them.
At issue is a hard-fought debate about whether competition
enforcement can -- or should -- go beyond a narrow focus on
consumer welfare, or attempt more radical interventions to redraw
the balance of market power in cases of abuse.
Competition officials can't "guarantee a specific market
outcome, and I don't think we should even try to," said Olivier
Guersent, a top EU antitrust official, at a recent conference. He
added that "it's not the task of remedies policy to provide
compensation for the damages suffered by individual companies."
That hasn't stopped competitors from asking for more invasive
remedies.
"Europe's lesson for Washington is to go for the jugular -- to
require changes to Google's business that make a real difference in
the market," said Thomas Vinje, a partner at law firm Clifford
Chance who represented FairSearch, a lobby group led by Oracle
Corp. in the EU's case against Google.
Tech lobbyists say, however, that the U.S. case is a misuse of
antitrust law, brandished in part to score political points,
similar to their objections to the EU cases. The Computer &
Communications Industry Association said in response to Tuesday's
lawsuit that the U.S. tech sector has boomed until now because its
antitrust policy "encourages dynamic markets that reward innovators
and disrupt sluggish competitors."
While the EU has defended its decisions, the European
Commission, the bloc's executive arm, is also proposing new
legislation that would allow it to act more quickly in cases
involving so-called "gatekeeper" companies like big internet
firms.
"With size comes responsibility," said Margrethe Vestager, the
EU's competition and digital-policy czar, in a news conference
Sept. 18. "It's important we don't let a handful of companies
define the rules of the game."
The Google blog post says the company supports "thoughtful
regulation" and engages with governments "on ways to promote good
outcomes, encourage innovation and protect consumers."
The EU's disputes with Google date back more than a decade. The
commission initially tried to settle allegations of Google
misconduct. But political opposition, particularly from France and
Germany, scuttled three successive attempts. When Ms. Vestager took
over, she reversed course and began filing formal charges.
The EU's investigations into Google stem in part from complaints
lodged by U.S. companies, such as Microsoft Corp. and Oracle, over
conduct that American authorities had decided not to pursue. News
Corp, owner of The Wall Street Journal, has also officially
complained to the commission about some of the internet company's
conduct.
In June 2017, the commission ruled on its first case, finding
that Google had abused the dominance of its search engine by
putting its own product advertisements -- dubbed Google Shopping --
at the top of many search-results pages, pushing down other
websites that offer product comparisons and ads from online
merchants.
Another decision in July 2018 presages in some ways the U.S.
complaint filed Tuesday. In it, the EU argued Google had illegally
muscled its search engine and Chrome web browser onto mobile phones
by abusing its control of its Android mobile-operating system. The
commission ruled that it was illegal for Google to require phone
makers to install the search engine and browser if they wanted to
include Google's Play Store, the dominant way to get Android
apps.
A third case focused on advertising Google sold on customized
versions of its search engine, a smaller business that the company
was already winding down.
The fines, while large for most companies and a record for the
EU antitrust enforcer, were small compared with Google's overall
revenue. But the EU also forced Google to create a new element atop
search results pages that features product advertising from rival
companies, and to introduce a mechanism to allow Android smartphone
users in the EU to choose a rival search engine and browser.
Google competitors have complained, however, that Google
structured both of those remedies as auctions, meaning that
competitors must pay the company to appear in its search
results.
"The end result is that they're getting most if not all the
profits from the other search engines" that are selected via the
screen, said Gabriel Weinberg, founder and chief executive of
DuckDuckGo, a privacy-tech company that runs a search engine and
has complained about the Google auctions. He said the Android
auctions also haven't given any boost to competitors' market
share.
"An auction is a fair and objective method to determine which
search providers are included in the choice screen," Google has
said of the company's remedy in the Android case. "It allows search
providers to decide what value they place on appearing in the
choice screen and to bid accordingly."
Perhaps the most widely held complaint is that EU antitrust
proceedings often take too long to have much impact on markets.
That is in part because companies are able to argue every step of
the way, but also because novel cases may use more untested legal
theories that are ripe for court challenges.
"It should be possible to get a decision done faster," said
Lesley Hannah, a lawyer at law firm Hausfeld who represented Google
complainants in the EU.
Write to Sam Schechner at sam.schechner@wsj.com and Valentina
Pop at valentina.pop@wsj.com
(END) Dow Jones Newswires
October 21, 2020 11:32 ET (15:32 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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