Google could face stiffer competition law hurdles in EU than US, says expert

Competition law specialist Guy Lougher of Pinsent Masons, the law firm behind Out-Law.com, said that different "legal tests" apply in the EU and US for establishing what constitutes an abuse of a dominant market position. Because of the different standards, it is possible that EU regulators could decide that companies have engaged in anti-competitive practices even if US counterparts have given their regulatory blessing to those same practices, he said.

Lougher was commenting after EU Competition Commissioner Joaquín Almunia suggested that the European Commission will require Google to change the way it displays results for its own products in its search engine rankings. The Commission has previously warned Google that it could face sanctions if it is found to have engaged in anti-competitive behaviour.

Almunia said that it was his "conviction" that Google was "diverting traffic" from rival search engines because of the way the company "present their own services", according to a report by the Financial Times. He said that, although the Commission was still investigating, it was his "fear" that the activities amount to an abuse of Google's dominant position in the search market.

However, earlier this month the Federal Trade Commission in the US cleared Google of having engaged in "search bias". It said that the internet giant does not unfairly harm competitors in the way it calculates how its search engine results should be displayed. The regulator determined that "innovations" Google has introduced into the market were justified, even though rivals may have been harmed by the measures.

Lougher said that it is possible for EU and US regulators to form different views on business practices and their compliance with competition law.

"In the US there is a tougher legal test to establishing whether an activity amounts to monopolization," the expert said. "It is easier for dominant companies to get tripped up in the EU than in the US. Exactly the same conduct which potentially would not trigger an investigation or sanctions in the US can lead to a probe or penalties in the EU. This is because case law in the EU places more restrictions on what dominant companies can do, although applying the rules on dominance can be harder in relation to new technology markets."

The most recent figures, published by Search Engine Watch in a November 2012 report, suggest that Google has a near-67% share of the US search market. The company has nearly 90% of the search market in the UK, according to a report by the BBC, and also enjoys a similar share of the market in other major EU markets, according to a New York Times report. 

Lougher said that businesses' relative size in EU and US markets was also a significant factor, and could lead to regulators forming opposing views on whether the activities those firms engage in are anti-competitive or not.

"There is a general rebuttable presumption that a company holding more than a 50% share of a particular market is a dominant market player for the purposes of EU competition law," Lougher said. "However, companies that hold a much higher share of a market are at risk of being categorised as enjoying 'super-dominance' in that market."

"Under EU law, super-dominant companies face even greater legal constraints governing their practices than firms that hold a dominant market position which must themselves comply with stringent rules on their market behaviour. There is a smaller margin of discretion given to super-dominant companies when EU competition authorities review whether they have engaged in an abuse of a dominant market position," he added.

"Other factors as opposed to just the size of the market share that companies have, such as the length of time they have held that share, the relative size and strength of competitors, ease of new market entry and expansion, and whether customers can easily substitute the goods or services provided by a market player for those offered by rivals, are also relevant to authorities considering whether a business is dominant for the purposes of EU competition law" Lougher said.

The expert said that EU and US regulators have previously ended similar investigations into anti-competitive behaviour with different conclusions, and cited the case of Microsoft as an example.

Microsoft was fined €497 million by the European Commission in 2004 for abusing its 95% share of the personal computer operating systems market in the EU. The company has subsequently been ordered to pay €860m as a penalty for failing to comply with measures the regulator had obliged it to adhere to in order to help rival technologies achieve interoperability with its software.

US authorities also looked into whether Microsoft had abuse a monopoly position in the same market in the US. The company reached a settlement with the US Department of Justice (DOJ) in which it agreed to release code enabling other software developers to write programmes compatible with its Windows operating system, among other measures. The settlement was largely approved by the US Court of Appeals. Microsoft did not have to pay a fine as part of the settlement.