Google faces fines, search constraints as EU decision nears

After more than four years of regulatory scrutiny by the European Union (EU), Google Inc. may finally be facing fines and new constraints on how it delivers Internet search in a region that makes up an estimated one-third of the company’s revenue.

Google and rivals are preparing for a decision as soon as this week on how the EU will proceed with an antitrust investigation, people familiar with the matter have said. Under the new leadership of competition commissioner Margrethe Vestager, the EU stepped up the probe into Google in December, when regulators sought additional information from rivals involved in Internet maps, travel and other services.

With Google commanding almost all of the search market in some European countries, critics including Microsoft Corp. and Expedia Inc. are fed up with the company, which they say highlights its own Web services in query results at the expense of rivals. While a decision hasn’t been announced and many legal hurdles would remain, Vestager has several levers she could use to penalize Google, including hefty fines and potential changes to how it presents its own services in search results.

“It’s a serious investigation with serious consequences if the EU chooses to bring a case and has evidence,” said Spencer Waller, an antitrust professor at Loyola University School of Law in Chicago. “What happens in almost every case involving the abuse of a dominant position is some combination of a fine and an order to change the behaviour in different ways.”

Gina Scigliano, a spokeswoman for Google, declined to comment.

The firm had sought to avoid fines and sidestep any finding that it violated antitrust laws by trying for two years to reach a settlement with the EU. Negative feedback from rivals forced the EU to abandon such a pact. Competitors objected to Google’s proposal that they pay for their services to be displayed next to Google’s above search results.

Vestager took a fresh look at the case and pledged to meet with Google and its opponents before deciding the way forward. Guenther Oettinger, the EU’s digital commissioner, expects “far-reaching” steps from her soon, he told Die Welt newspaper in an interview on Sunday.

For Google, the European market contributes about 35% of its revenue, according to Carlos Kirjner, a New York-based analyst at Sanford C. Bernstein & Co. Its market share in search exceeds 90% in most European markets, compared with about 65% in the US.

One instrument that the EU wields is the right to fine the company as much as 10% of its annual revenue.

Fining Google 10% of its annual sales would cost it $6.6 billion, based on last year’s revenue. That would be among the largest levied against a firm in this type of case. The EU has never demanded the maximum, however, and such a fine would be easily absorbed by the company’s $64.4 billion in cash, equivalents and short-term investments.

The EU may also insist that Google reduce the screen real estate reserved for paid ads to give more website providers a chance to appear among the top results without paying. Bloomberg