For the U.S. technology giant the EU antitrust case is serious indeed, and potentially extremely expensive.
By Vivienne Walt ~ PARIS
The E.U.’s case against Google made big news on Wednesday—so big, in fact, that the countless millions of Europeans who click on Google every day did not have to Google the company’s name to learn about it. In an announcement splashed on front pages across the continent, the E.U.’s competition commissioner Margrethe Vestager said Google was abusing its huge dominance in the E.U.’s search market in order to elbow out competitors in the prized online-shopping industry. Vestager’s so-called Statement of Objections is a prelude to the E.U. laying formal anti-trust charges against the company. “Google has artificially boosted its presence in the comparison shopping market,” Vestager told reporters in Brussels. “Competitors may not get the commercial opportunity that their innovative services deserve.”
For Google, this is serious indeed, and potentially extremely expensive. Leaving aside the legalese, Vestager’s announcement means that Google is now thrust headlong into a protracted legal wrangle in Brussels, which could well result in the company having to pay hefty fines. More seriously, Google might be forced to change its immensely profitable shopping-revenue model in the world’s biggest consumer market, the E.U., which has 500 million people. And perhaps even more serious, the outcome could set a precedent for other investigations against Google, some of them in Brussels, and others as far afield as South Korea and Australia.
Google still has 10 weeks to respond to Vestager. But the counter-attack has already begun. On Wednesday, Google Search senior vice president Amit Singhal wrote in a blog post that Europeans now had a wider choice of online-shopping sites than ever, including big European players like Germany’s Zalando SE, and that Google was not preventing them from patronizing those companies.
“It’s clear that: (a) there’s a ton of competition… and (b) Google’s shopping results have not the harmed the competition,” Singhal wrote, seemingly brushing off Vestager’s announcement. He said the company would “look forward to making our case over the weeks ahead.”
But making Google’s case will not be easy.
According to one leading U.S. attorney in Brussels, who is deeply involved in E.U. cases involving American corporate giants, Google is highly like to lose its battle with the E.U. “I have been watching these cases for 25 years. I think [Vestager’s case] is strong,” Thomas Vinje, an anti-trust and intellectual property lawyer for Clifford Chance in Brussels, told Fortune on Thursday. Vinje represents FairSearch Europe, a consortium of smaller E.U. tech companies, who has campaigned for years against Google’s unfair model, but he also represents two U.S. corporate giants in ongoing, unrelated cases that the E.U. has brought; he said he was contractually forbidden from naming them, but E.U. officials are currently investigating, among others, Starbucks, Amazon, and Apple for possible tax-avoidance.
Based on decades of experience with E.U. cases, Vinje believes the Google case is close to a slam-dunk for the E.U. and that Vestager would probably not have issued a Statement of Objections against the company without being confident that she could win in court. “I would be very surprised if the [European] Commission backed down,” he says, speaking by phone from Brussels. Given that, Vinje sees only two possible outcomes: Either Google voluntarily agrees to a “serious settlement,” involving a change of its business model—which currently seems unlikely—or “there will be formal charges of anti-trust infringement, confirmed by the courts.”
Simply put, Google’s legal headaches in Brussels might only just be beginning.
On Wednesday, Vestager announced she has opened an investigation into Google’s Android, to determine whether it funnels tens of millions of Europeans to Google products by bundling Google apps on its smartphones. And aside from that probe European officials have scrutinized Google over a raft of other issues for nearly six years, including whether its posting of news articles broke copyright rules, and whether Google Maps and Google Travel effectively rendered competitors virtually invisible online.
For years, Europe’s probes against Google have languished in Brussels, as the continent’s former competition czar Joaquin Almunia tried for years to persuade Google to settle the case amicably, and then simply seemed to stall in his pursuit of the case.
Now the sudden flurry of legal action has taken many by surprise. The change appears to have come with Vestager herself, a change Vinje describes as “night and day.” Previously the deputy Prime Minister of Denmark—and barely known outside that tiny Scandinavian country—Vestager was appointed as the new competition commissioner in November, following last year’s E.U. elections. With stunning swiftness, she quickly sliced off most of the E.U.’s sprawling case against Google, and zoomed in on one definable, and in her mind winnable, issue: Online shopping. Sadly for Google, Vestager appears to be just warming up.
Read this story on FORTUNE Magazine.