Google rival slams EU Commission over antitrust settlement proposals

One of the complainants in an antitrust case against Google has slammed the European Commission for apparently adopting wholesale Google’s proposal to settle the case, while giving complainants no fair chance to express their views on the settlement. Meanwhile, the Commission is considering revising the terms of the settlement, according to media reports.

Lead complainant Foundem sent an open letter to competition European Commissioner Joaquín Almunia on Wednesday, urging him to read a July 11 response the company made to the Commission’s plan to adopt Google’s settlement proposal in the suit,. That letter concerned Google’s treatment in search results of specialized search services that rivalled its own products, among other matters.

The Commission sent complainants a letter in June outlining its reasons for accepting Google’s proposals, which Foundem said was its first opportunity to see and respond to the Commission’s reasoning. And according to Foundem’s open letter on Wednesday, there are many glaring errors, omissions, and inconsistencies in that reasoning.

“Whatever sequence of events led you to accept Google’s misleading arguments without displaying any of the healthy scepticism that would normally be applied to ‘evidence’ from a defendant in a competition case, we trust that the attached comprehensive rebuttal of these arguments will persuade you to think again and change course,” Foundem’s founders Adam and Shivaun Raff said in the letter sent to Almunia.

In the rebuttal sent to Almunia earlier this month, Foundem argued that all of the Commission’s key arguments for adopting Google’s proposals are erroneous and directly contradict the fundamental conclusions of the Commission’s own preliminary assessment.

The Commission declined to comment on Foundem’s letter and findings on Wednesday, nor would it respond to media reports late Tuesday that it is preparing revised settlement terms.

Google did not immediately respond to a request for comment.

The company has been under investigation by the Commission since November 2010, after competitors complained that Google favored its own services in search results while reducing the visibility of competing sites. To mitigate antitrust concerns, Google has proposed to show three clearly labeled rival links for every query that results in links to Google’s services. Some of these links will require the rivals to pay Google.

Almunia, the Commissioner responsible for competition matters, said in February that these settlement proposals were acceptable. He has been working since to convince the complainants and his fellow commissioners of this, and expects to close the case later this year.

However, Foundem said Wednesday, contrary to the Commission’s claims, the proposed rival links will consume the majority of rivals’ profits and will not be selected according to “relevance”, “merit”, or “quality”.

Further, it said, the paid links will not be less expensive than existing advertisements, will not ensure that innovative new entrants can participate on non-disadvantageous terms and most certainly will generate billions of dollars of additional revenue for Google that will come at the direct expense of the European businesses and consumers the Commission is duty bound to protect.

“It is now apparent that many of the spurious arguments the Commission has been making in defence of Google’s proposals were adopted wholesale from Google arguments,” it said.

The Commission’s letter makes clear the only concession regarding search manipulation was the introduction of additional paid search links, while the Commission in its preliminary assessment found that paid search cannot be a substitute for natural search, Foundem said. However, the Commission now tries to claim that paid rival links are somehow a substitute for the free natural search traffic Google is anti-competitively diverting, it said.

As a direct result of these proposals, Google would take sole possession of the free, relevance-based, natural search traffic that has always been the lifeblood of the Internet, it said. Meanwhile, Google’s competitors would still have to contend with the systematic self-preferencing and anti-competitive demotions and exclusions that the Commission instructed Google to remedy, it added.

Foundem also slammed the Commission for giving it only four weeks to respond to the letter.

“The gratuitously brief period complainants have been granted to respond is in stark contrast to the seemingly endless extensions and amended deadlines the Commission has granted to Google over the last five years,” Foundem said, adding that this inequity is particularly troubling because Google has exploited every delay to entrench, extend, and escalate its abuse.

Moreover, the Commission repeatedly refused to provide complainants with any insight into its reasoning or thinking during the settlement negotiations, Foundem said.

In contrast, said Foundem, it provided Google with an extraordinary degree of access to documents during the negotiations.

This access appears to have included handing Google complainant’s responses to the Commission without concealing the companies’ names, Foundem said. This was “particularly reckless” given the fear of retaliation expressed repeatedly by complainants throughout the investigation, it said.

Because of the “extraordinary volume of fundamentally inaccurate or entirely baseless assertions contained in the Commission’s letter,” Foundem said the Commission has no choice but to abandon Google’s “counterfeit remedies.” Instead it suggested the Commission chalk up the last two years to experience, and pursue remedies based on the rationale and principles set out in the Commission’s preliminary assessment or its earlier statement of objections.

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