December 1, 2011 11:24 pm

The EC to slam Google with 400+ page SO

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Story The European Commission (EC) is expected to issue a statement of objections (SO) spanning more than 400 pages that will spell-out allegations of Google’s (NASDAQ:GOOG) abuse of dominance early next year, sources close to the case told dealReporter.

The EC launched an antitrust investigation into Google’s alleged abuse of dominance in the online search market last November, following complaints from search engines Foundem, eJustice and Ciao!

One source close to the case noted that it is not surprising that the SO will be lengthy given the level of complexity of this case and, indeed, the number of complainants. It may also indicate that the EC is preparing for a decision of a similar length, the source added. The file is actually a combination of several cases as Google is being blamed for multiple and multifaceted abuses, another source close indicated. All of those cases could count for a couple of hundreds of pages each.

Google’s chairman Eric Schmidt is expected to pay a “courtesy visit” to the Commissioner Almunia at the beginning of next week, two sources told this news service. The DG Competition’s spokesperson offered no comment. The chairman is likely coming to discuss Google’s acquisition of Motorola Mobility (NYSE:MMI) to make sure it goes through smoothly. It is somewhat early to talk about the dominance case before the SO is out and it would not be wise now that the “whole of Brussels is aware of Schmidt’s visit and is carefully watching”, one of the sources close said.

This would not be the first meeting between Schmidt and Almunia since the antitrust probe was launched. Google’s chairman met the Commissioner in February and reportedly requested to give Google a chance to offer a solution before the EC imposes a fine.

It is in Google’s interest to try and settle. And it is more likely than not that Google will try to do so to avoid a fine of up to 10% of its annual turnover, one of the sources close noted. For example, in 2009, Microsoft (NASDAQ:MSFT) settled the internet browser tying case, a competition lawyer noted. Microsoft then undertook to provide a “Choice Screen,” enabling users of Windows XP, Windows Vista and Windows 7 to choose which web browser(s) they want to install in addition to, or instead of, Microsoft’s Internet Explorer browser. However, the source close expressed certainty that the internet search giant will not get away easily as there are too many complainants, most of whom will not be satisfied with mere promises.

Since the EC formally opened the proceedings, a number of online market players joined the initial complaints: French website publisher 1plusV and a German association of business listings providers VfT – in February; Microsoft, Elfvoetbal, Hotmaps, Interactive Labs, and nnpt.it – in March; and dealdujour.pro – in August. French new-generation search engine Twenga is expected to submit its formal complaint within the next couple of weeks, a source close told this news service. In fact, the list of complainants is much longer and many are not disclosed, a competition lawyer following the case said. It is important to note, the lawyer added, that Germany’s Bundeskartellamt also referred parts of two complaints against Google to the EC.

Google responded to the complainants’ allegations in September and is “cooperating with the EC and responding to its information requests.”

The EC’s probe is driven by a range of allegations. Google is accused of lowering the ranking of unpaid search results of competing services specialised in providing specific online content such as price comparisons, also known as ‘vertical search services’. Google also allegedly accords preferential placement of its own vertical search services in order to shut out competing services. Google is also said to impose exclusivity obligations on advertising partners, preventing them from placing certain types of competing ads on their websites, as well as on computer and software vendors. Finally, the EC is investigating whether Google lowered the ranking of sponsored links by competing search services; the rating is one of the factors determining the price paid to Google by advertisers.

The internet search engine provides two types of results when people run searches on its engine: (i) unpaid search results, also known as “natural” or “algorithmic” search results, and (ii) third party advertisements shown at the top and at the right hand side of the search results page, also known as “paid search results” or “sponsored links”. The alleged abuses concern both unpaid and paid search results.

When Google receives the SO, it will have approximately two months to respond. As a standard procedure, the EC will grant two months to respond, although the procedural minimum is four weeks, a person familiar with the EC’s thinking explained. In complex cases where an SO spans beyond several hundreds of pages, a longer period may be granted. The defendants may also make a request for reasoned extensions, the person added.

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