Three years after the European Union began a probe into Google’s European strategy, the Silicon Valley giant has escaped a fine capable of denting even its own stratospheric profits. But how did Google dodge its biggest bullet to date – and what were the problems to begin with?
Three years is a long time in tech. But that’s how long it took Google and the EU to reach an agreement over the former’s search engine tactics. In 2010, 18 companies complained to the EU that Google was promoting its own services at their expense. EU competition commissioner Joaquin Almunia agreed – and so began a long legal road that has ended today in a promise by Google to change its ways.
The EU had four major concerns with Google’s activities. Its first was that vertical searches were favouring Google products, and the second was that Google copies material from other sites, such as user reviews, and ties it to its own content. “We are worried that this could reduce competitors’ incentives to invest in the creation of original content for the benefit of internet users,” wrote Almunia.
The third concern was that Google shut out opposing search engines by offering search advertisements to companies. And the fourth and final concern related to the “restrictions that Google puts to the portability of online search advertising campaigns from its platform AdWords to the platforms of competitors.”
A ban and fine were on the cards – a $5bn one to be precise, which even by Google’s own lofty standards would have been a huge blow. The figure represents 10 per cent of the company’s 2012 profits.
But today it was announced that Google had evaded sanction by agreeing to change its search engine layout. The firm will highlight when its own services are being promoted, and display links and logos to three rival search engines. “We will be making significant changes to the way Google operates in Europe,” said Google lawyer Kent Walker. “We have been working with the European Commission to address issues they raised.”
“I consider that at this point we don’t need a market test,” said Almunia of the verdict, while stressing that his duty is to the consumer rather that competing companies.
Palo Alto-based Google currently commands 75 percent of the European web search market.
The ruling is no doubt a boost to the firm after a difficult period in which it posted adjusted earnings of $12.01 per share on January 30th, on a revenue of $16.86bn. This fell short of analyst expectations that measured $12.20 per share. Google’s Motorola Mobility also suffered with a revenue of $1.24bn, down from $1.51bn the previous year. Yet that portion of the business is soon to be acquired by Chinese firm Lenovo for $2.9bn.
Google’s legal woes may continue well into 2014, however: reports suggest that it will soon be called to defend a probe into the way its Android operating system is used on smartphones.