In European Antitrust Fight, Google Needs to Appease Competitors

The European Commission on Wednesday formally said for the first time that Google’s proposal for addressing antitrust concerns did not go far enough, and demanded that it come up with more far-reaching remedies or potentially face a fine of up to $5 billion.

It was a significant setback for Google, which in April struck a deal with the commission to settle its three-year antitrust investigation by making certain changes in the way it displays answers to search inquiries. But the deal was contingent on feedback from Google’s rivals. The commission determined that the proposal was inadequate, and said the company needed to do more to address rivals’ concerns.

The about-face followed an outcry from Google competitors during the market testing phase of the inquiry, in which the commission asked for feedback on the proposal.

“What they discovered in the market test was that overwhelmingly, everyone said the settlement was inadequate and doesn’t solve the problem,” said a person with knowledge about the feedback competitors gave the commission, but who spoke anonymously because the filings were not public.

Joaquín Almunia, the European Union competition commissioner, said at a news conference, “I concluded that the proposals that Google sent to us months ago are not enough to overcome our concerns.” He said he had written to Eric E. Schmidt, Google’s executive chairman, “asking Google to present better proposals.”

A Google spokesman, Al Verney, said on Wednesday that it would “continue to work” with the commission to settle the case. He added that Google was confident that its earlier proposal “clearly addresses” the commission’s concerns.

Mr. Almunia did not give Google a deadline for presenting a new set of concessions, according to a person with direct knowledge of Mr. Almunia’s letter who spoke anonymously. So the case, which both sides had hoped to close this year, could continue for several months or more.

The main issue is the way Google, which, according to comScore, handles 86 percent of Web searches in Europe, orders its search results. Regulators have been investigating whether Google favors its own services — like travel, local business, mapping and shopping — over those of competitors. Regulators have also examined whether it disadvantaged competitors by including material from other Web sites in search results and whether its advertising business complied with European antitrust law.

Google managed to avoid antitrust charges in the United States, where it has two-thirds market share, after a two-year investigation of similar issues. Google has faced a more hard-line approach in Europe, where critics have accused the antitrust authorities of relying too much on outside complaints from competitors rather than on evidence of consumer harm. That is somewhat of a sore point for European officials, who insist they share the same goals as the Americans when it comes to consumers.

In April, Google proposed to change its search results to clearly label results from some of its own properties, like Google Plus Local, and in some cases to show links from rival search engines. It also proposed giving competitors more control over how it used information from their sites in its vertical search results and making it easier for small businesses to transport their ad campaigns to other search engines.

The proposal was the first time Google had agreed to legally binding changes to its search results, and went much further than the minor concessions it made to the Federal Trade Commission in its inquiry.

Still, the proposal would not have required Google to change the algorithm that produces its search results. Also, if it had been accepted, Google would have escaped a possible fine of about 10 percent of its annual global revenue of about $50 billion and a formal finding of wrongdoing that could limit its ability to expand in Europe.

James Kanter reported from Brussels, and Claire Cain Miller from San Francisco.

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