EU's Almunia Admits Google a Bigger Problem Than Was Microsoft

EU's Almunia Admits Google a Bigger Problem Than Was Microsoft

Oh the shame

Consistently criticized for being far too soft on Internet search giant and serial monopoly abuser Google, outgoing EU competition commissioner Joaquin Almunia this week finally admitted the obvious: Google is a far bigger antitrust problem than Microsoft ever was, and the EU is only at the start of what should be an "epic" regulatory battle with the company.

"Microsoft was investigated 16 years, which is four times as much as the Google investigation has taken, and there are more problems with Google than there were with Microsoft," Mr. Almunia told the European parliament during his last official testimony. "During this legislative term we will continue to talk about Google ... and your colleagues will continue to do so in the next legislative term."

Mr. Almunia's revelation is appreciated—but it's also a few years too late for Google's competitors, and also too late to save any trace of respectability for his five-year term and his dealings with the search giant.

Microsoft, as you may recall, wasted a decade battling ridiculous EU antitrust charges that saw the software giant fined over $2 billion and forced it to create special, partially-denuded versions of Windows that were predictably shunned by customers. More important, this ongoing distraction helped Microsoft competitors like Google and Apple gain a foothold in crucial new markets in which the software giant is now playing catchup. If the goal was to rob Microsoft of its market power, the EU succeeded nicely.

Microsoft's battles with the European Commission started in 1993, when Novell complained about anticompetitive licensing practices, but didn't reach a head until 2003, after the United States also had found the company guilty of antitrust violations. The EU issued an $800 million fine at the time and ordered Microsoft to open up its documentation and ship Windows versions without media player software. Mr. Almunia's predecessor, Neelie Kroes, then kept Microsoft busy with new charges, new fines, and new regulatory requirements during her 2004 to 2009 term. Kroes also fined Intel $1.5 billion for antitrust violations in the EU.

And then Mr. Almunia happened.

Facing a similar era of antitrust battles with an even more virulent tech foe—Google's potential customer base in the EU is all 500 million people who live there, not the fraction of EU residents who used Microsoft or Intel products—Mr. Almunia examined the many obvious complaints against Google and its anticompetitive business practices and took a different tack than his predecessors. He offered Google the chance to settle the case before it was even formally charged with violating EU antitrust laws.

"If Google comes up with an outline of remedies which are capable of addressing our concerns, I will instruct my staff to initiate the discussions in order to finalize a remedies package," he said in May 2012. "Should this process fail to deliver a satisfactory set of remedies, the ongoing formal proceedings will of course continue."

The process did fail to deliver a satisfactory set of remedies, as it turns out, but the formal proceedings came to a screeching halt. Google took its time delivering a set of three ineffective remedies over two long years, and Mr. Almunia—to the shock of both Google's competitors and other EU regulators—actually accepted the third. He planned to complete the settlement in time for the end of his term in November and declare victory.

And then the complaints started pouring in: No antitrust case has ever garnered this many complaints, the EU now says. So earlier this month, a dejected Almunia said that the EU would need to request additional concessions from Google because of the "very, very negative" complaints from Google's competitors and from other antitrust regulators and European Parliament members. He wouldn't be able to put the Google case behind him before he stepped down.

This week's admissions by Mr. Almunia are a major flip-flop, and an embarrassment. He says he wasn't influenced by the uproar of complaints from European Parliament members and others, but rather by "fresh evidence" that Google's half-hearted settlement offer really wouldn't fix the underlying problem: That Google artificially orchestrates its search results to promote its own services and demote rival services.

"The investigation has changed in form over four years," Mr. Almunia told what I can only assume was a frustrated European Parliament. "It is changing all the time. It is a moving target we are trying to hit. It is not easy, I can assure you of that."

Almunia also said that Google is now improving its settlement offer. Given the speed at which this case has moved, I expect to read about their fourth offer by early 2015. But here's the kicker: As with the original 2012 offer, Google still won't face any formal charges if it can just provide an acceptable settlement offer.

But the European Parliament is clearly waking up to the Google risk. Before Almunia's testimony completed, one Parliament member actually said it was time to consider breaking up the software giant. But that is a task—along with other more stringent remedies—that falls to Almunia's successor, former Danish economy minister Margrethe Vestager.

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