Is Google’s Antitrust Settlement Offer To Europe Dead On Arrival?

The European Union has “accepted” Google’s formal antitrust settlement proposal — subject to “market testing.” As a practical matter, that means EU Competition Commissioner Joaquín Almunia is circulating it among Google’s critics and competitors for reaction. However, there has already been plenty of (negative) reaction based on the information that came out last week in news reports.

That leads to the question: is Google’s settlement proposal dead on arrival? And if so, what will Almunia and the Europeans do? Is litigation inevitable?

The issue that Google’s competitors and critics care most about is the so-called “search bias” question (also known as Universal Search), where Google shows content from its “other properties” to answer the query. There’s a philosophical difference between Google and its critics on this point. Google doesn’t see Maps, news or travel search results as separate products. Google’s competitors view them, however, as distinct products or verticals.

Regarding “vertical search,” Google-proposed remedies include the following:

• Google labeling its own properties as such
• Google agreeing to “prominently show at least three links to rival, non-Google sites that have information relevant to a user’s query”
• Third party verification of Google’s compliance

Almost immediately after these details were leaked, Bloomberg ran an article, citing competitor reaction. That reaction characterized the proposal as a “non starter.” However, critics are just now getting a close look at the substance of the settlement proposal.

Today, anti-Google lobbying group FairSearch.org — a consortium of 17 companies including Microsoft, Kayak, Oracle, Nokia and others — issued a statement that attempts to put additional pressure on Almunia and his commission to “hold the line” and/or obtain further concessions from Google:

Since it has taken a year to extract a final proposal from Google, FairSearch believes the ‘market test’ should last three months to ensure that interested parties have enough time to carefully provide the European Commission with their expertise on the effectiveness of Google’s proposal. As we have said, we will comment on Google’s proposed remedies after the Commission shares them.

European Commission Vice President Joaquin Almunia has set a high bar that any proposal from Google must meet to pre-empt formal proceedings against the company, including:

1. Will it end Google’s diversion of traffic away from other sites through preferential treatment for Google’s own properties?
2. Will it swiftly restore consumers’ access to a truly competitive marketplace for search and related online services?
3. Will an independent third party be able to verify that Google is not circumventing its own proposed commitments?

The members of FairSearch plan to study the effects of Google’s proposal, and call on Google to release any test results it has provided the Commission to show how its proposal will fix the abuses of dominance the Commission’s own investigation revealed.

Applying a real ‘market test’ to Google’s proposal is an important step to ensuring that the Commission’s long history of leadership in international antitrust enforcement continues for many years to come.

This idea of “diversion of traffic” is a key phrase in the above statement and reflects a kind of “entitlement mentality” among the consortium. One could persuasively argue that Google qualifies as a “monopoly” in Europe with its 94 percent search market share. If one accepts this, the question becomes what to do about it. Consumers do have choices and have chosen Google; there are alternatives, but they’re largely not being used.

It may be unrealistic (and unworkable) for Google’s rivals to ask for further concessions on vertical search. The “three prominent links” is a striking concession, although how it will operate in practice is unknown and potentially problematic. Will there be a separate algorithm or will these just be the top three organic links called out? Competitors will want insight and access to those slots.

FairSearch and other Google critics argue they simply want to see competition and “fairness” restored to the market. In practice, they want traffic and near-guarantees that they will not be displaced by current and future Google products (e.g., Maps/Travel). That’s like asking the EU to freeze the market in time. As the FTC said, antitrust rules should protect competition, not individual competitors.

It may be possible to obtain a few additional concessions from Google. However Almunia will need, like a good mediator, to put pressure on FairSearch and its allies to accept that they’re not going to get everything they want out of the process. They don’t yet seem ready to accept that possibility.

And if Google’s rivals are unified in their opposition to the settlement proposal — and Almunia wants to appease them — the only next step may be litigation, which neither Almunia nor Google ultimately want.

Postscript: I was corrected by a FairSearch spokesperson who said that the phrase “diversion of traffic” used in the group’s statement is taken verbatim from earlier remarks by Commissioner Almunia and not the coalition’s language. He also strongly disputed my characterization of an “entitlement mentality” among the membership in my discussion above.