GOOG Alphabet Inc

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)

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