Google faces years of EU scrutiny on top of record antitrust fine

By Foo Yun Chee and Eric Auchard BRUSSELS/FRANKFURT (Reuters) – Beyond the 2.4 billion euro (2.1 billion pound) fine that EU antitrust regulators have imposed on Google, the internet giant is likely to be hobbled for years by Tuesday’s landmark decision to designate the company as a monopoly. The ruling opens the door to further regulatory action against key parts of Google’s business – mobile phones, online ad buying and specialist search categories such as travel – while making it easier for rivals to bring civil lawsuits alleging that Google has harmed them. Investors have so far shrugged off EU threats of reprisal, with shares in Google holding company Alphabet falling 1.8 percent in early U.S. trading amid a sell-off in technology stocks. The shares have doubled in the two years since European regulators aggressively stepped up investigations into the matter. It is ranked just behind rival Apple as the world’s most valuable stock, with a market capitalization of $666 billion. The real sting is not the fine for anticompetitive practices in shopping searches, but the way the EU has passed the problem back to Google to fix, meaning the company won’t be able to comply with easy technical steps. In effect, the Commission is forcing Google to show that competitors have made significant progress on its business before it has a good chance of being exempted from regulatory liability. EU competition chief Margrethe Vestager has promised that Google will be monitored for years to guard against further abuses. “The notification itself could limit Google’s strategic options in the future,” said Matti Littunen, a digital media and online advertising analyst at Enders Analysis in London. The 2004 EU ruling that Microsoft Corp. abused its dominant market position in Windows and other markets, is now seen as a constraint on the software giant’s ability to expand more rapidly into emerging markets such as online advertising over the next decade, paving the way for Google’s growth. Shifting the burden onto the company underscores regulators’ limited understanding of modern technology and its complexities, said Fordham Law School professor Mark Patterson. “The decision highlights the difficulty of regulating algorithm-driven internet companies,” he said. “Antitrust remedies typically require companies that have violated antitrust laws to cease certain behaviors or, less often, implement specific fixes. “This decision simply orders Google to apply ‘equal treatment,’ not how to do it.” WARNING SHOT The EU ruling is a warning shot for two ongoing EU investigations into Google’s Android mobile operating system and AdSense advertising system that could turn out to be more serious, said Richard Windsor, an independent financial analyst who tracks competition among major U.S. and Asian online and mobile players, including Google. “If the EU were to reverse itself and say that Google can no longer include its Google Play app store as a default feature on many Android smartphones, that would open up the market for other handset manufacturers to put their own software and services front and center on their phones,” he said. Littunen of Enders Analysis agreed, saying that while Google might be able to meet the EU’s objections to AdSense by making relatively modest changes to its advertising systems to allow website clients to display ads from Google’s advertising rivals, the Android case has many complicated factors that can’t be easily resolved. More importantly, Google must find ways to change its business practices without damaging its highly profitable advertising business model, which accounted for about 85 percent of parent Alphabet’s $90.3 billion in revenue in 2016. “The EU’s identification of ‘superdominance’ in internet search across the European Economic Area is confirmed and will be a cornerstone for assessing other ongoing cases, particularly those involving Android and AdSense,” said Jonas Koponen, head of competition at the law firm Linklaters in Brussels. “This could lead to a profound change in the company’s business models,” he predicted. Another concern for the company could be a wave of lawsuits in the future. “We can expect a series of damages claims from rivals who have been excluded from the market by Google’s conduct,” said Peter Wills, co-head of competition law at Bird & Bird in London, setting the stage for domestic legal battles. With the EU’s Vestager refusing to budge on her record-breaking demand last year to recoup €13 billion in unpaid taxes from Apple and stop Google from ousting rivals, other tech giants are likely to think twice before testing her further. (Editing by David Evans)