Inside Google

Eleven Internet Companies are pressing European antitrust regulators to take strong action against Google so that the Internet giant’s smaller rivals aren’t hurt. And what happens across the pond in this case could have an impact on possible antitrust action in the United States.

The companies, organized by the British shopping comparison website Foundem, sent a letter to European competition commissioner, Joaquin Almunia saying that they  “are becoming increasingly concerned that effective and future-proof remedies might not emerge through settlement discussions alone.”  They want a formal complaint to be filed. That has a way of focusing settlement talks.

The EU opened its antitrust probe of Google more than two years ago.  The regulators have been negotiating a possible settlement with Google and in January the company proposed steps it would be willing to take to respond the regulators’ concerns.

Supposedly Almunia and his staff are evaluating the settlement proposals.  If they think they go far enough they would be made public and “market tested” before the settlement was finalized.  The companies doubt Google will offer a serious remedy without a formal complaint.  They wrote:

“We will respectfully withhold judgement on Google’s proposed commitments until we have seen them, but Google’s past behavior suggests that it is unlikely to volunteer effective, future-proof remedies without being formally charged with infringement. Given this, and the fact that Google has exploited every delay to further entrench, extend, and escalate its anti-competitive activities, we urge the Commission to issue the Statement of Objections.”

The letter says that Google’s manipulation of search by promoting its own services while demoting the services of competitors hurt users by “degrading the user experience and limiting consumer choice, ” and “lay waste to entire classes of competitors in every sector where Google chooses to deploy them [search manipulation tactics].”

Our 2010 study, Traffic Report: How Google is Squeezing out Competitors and Muscling Into New Markets, demonstrated how with the launch of Universal Search, Google favored its own properties and services in search results to the detriment of its competitors.

Reuters, citing sources, says that Google “had offered to label its own services in search results to differentiate them from rival services, and also to impose fewer restrictions on advertisers” as part of a settlement with the EU.

That wouldn’t be enough for the 11 companies — or me for that matter.  They wrote:

“Google must be even-handed. It must hold all services, including its own, to exactly the same standards, using exactly the same crawling, indexing, ranking, display, and penalty algorithms.”

The EU investigation could have significant impact in the United States.  You’ll recall that after an 18-month antitrust investigation, the Federal Trade Commission gave Google a mere tap on the wrist. However, several states led by the Texas attorney general have an open antitrust investigation of Google. If the Europeans demand and get meaningful changes in Google’s behavior, the state attorneys general will almost certainly demand the same here.