Inside Google

Details of Google’s proposed settlement with the European Union to avoid antitrust charges have been leaking out of Brussels over the weekend. And while EU competition authorities appear to have accomplished more that the gentle tap on the wrist meted out by the U.S. Federal Trade Commission, the deal as so far revealed doesn’t do enough to end Google’s anti-competitive practices.

The provisions of the EU agreement still have to be publicly released, but based on what’s emerged so far, here’s the good news: Unlike the deal with the FTC, which wasn’t even a consent agreement, the EU is demanding that the settlement would be legally binding for five years.  A third party would ensure compliance and Google would face fines of 10 percent of its global annual sales if it fails to keep its promises.

The bad news is that instead of requiring Google to change its algorithm and treat all services the same, the deal will apparently allow Google to continue favoring its own services in search results so long as it labels them as its own.

Google essentially has been using its dominant position as gatekeeper of the Internet to unfairly promote its own service at the expense of competitors and consumers.  In Europe it has about 90 percent of the search market.  In the U.S. it’s around 70 percent. About all this agreement appears to do is require Google to be transparent about the way it unfairly abuses its market position.

Indeed, labeling could actually leave the impression with some consumers that the Google-branded result was a better one, rather than one that received a better position because Google had its thumb on the scale.

Another problem with the deal is that it doesn’t seem to do anything to rectify the damage to the market that Google has already wreaked.  I’d have thought some sort of  disgorgement of the Internet giant’s ill-gotten gains would have been appropriate.

The next step in the EU process is for the Google deal to be “market tested.”  The competition authorities will make the settlement public and receive comments on whether it solves the problems or not.  I suppose it’s possible there may ultimately be stronger sanctions than currently appear to be the case in what’s been leaked or that the authorities will do more after the “market testing,” but frankly I doubt it.

Bottom line:  Google has had its wings clipped a little bit.  Google will be legally bound to follow labeling rules in Europe for five years and have a third-party enforcer to ensure that happens.  It also means that European search results will look different than in the U.S. unless Google decides to take the same approach here or someone forces the company to do so.  That could happen.  Several state attorneys general led by the Texas attorney general have an open antitrust probe.  I’d hope that they would settle for nothing less than what the Europeans got.

And further down the road?  Fairsearch Europe has recently filed another antitrust complaint with the EU accusing Google of using Android software “as a deceptive way to build advantages for key Google apps in 70 percent of the smartphones shipped today.” Now that mobile is becoming more important than the wired Internet, Google is flexing its muscles there. The more things change, the more they stay the same…