The European Union launched a landmark antitrust case against Google Inc. on Wednesday, accusing the U.S. Internet giant of abusing its power and harming consumers.
The announcement marks an escalation of a five-year-old struggle between Google and EU regulators over the company's practices. It also opens a new front in a broader battle that has pitted Silicon Valley heavyweights against European governments that are uncomfortable with the ways such firms operate.
What worries them is how companies such as Google, Apple Inc., Amazon.com Inc. and Facebook Inc. have amassed dominant positions in critical areas of technology and the Internet. Their rapid rise guarantees that these firms will influence – and profit from – the major transformations under way across a host of industries.
Now their growing power has turned them into a major target for European authorities, who are scrutinizing everything from how the tech giants handle personal data to whether they sidestep taxes.
In the case against Google, EU regulators alleged that the company stifled competitors by "systematically favouring" its own shopping service in violation of the law. The 28-country EU also opened an investigation into potentially anti-competitive practices involving Google's Android mobile operating system.
For Google, it is the first time the company has ever faced formal antitrust charges. It denied that it had in any way squelched competition. "We respectfully but strongly disagree" with the EU's allegations and "look forward to making our case over the weeks ahead," Amit Singhal, a senior vice-president at Google, said in a statement.
In recent years, EU regulators and Google came close to reaching a settlement in this matter three times. A new EU competition czar, Margrethe Vestager, a Danish politician, took the reins late last year and has adopted a more confrontational approach than her predecessor. "Dominant companies have a responsibility not to abuse their market position," she said Wednesday. "This is about consumers getting the best possible results of their query."
A decision on the case will take months or more. Depending on the ultimate outcome, Google could be forced to change its practices, pay a large fine or possibly both.
The proceeding hinges on whether regulators can prove that Google abused its position as a dominant player in the marketplace for Internet searches to the detriment of competitors. In Europe, Google's dominance is near total: It accounts for about 90 per cent of Internet searches, compared with roughly 60 per cent in the United States.
European antitrust law places special obligations on powerful firms, said Ioannis Lianos, a professor of competition law at University College London. "In the U.S., if you have achieved dominance because you have been better or more aggressive, that's not a problem – in a way, it's kind of a cowboy thing," he said. In Europe, a dominant firm "has to be a gentleman to a certain degree."
The clash between European authorities and technology giants goes well beyond the realm of antitrust law (although Apple, too, is facing a nascent inquiry into its music-streaming service). Data privacy is another area of growing discord. Facebook, for instance, is dealing with a welter of investigations into its privacy policies from authorities in six European countries, including France and Germany.
Europeans are far more sensitive to how their personal data are collected than their American counterparts, partly a result of their experience with totalitarian states. Recent revelations of large-scale snooping by American intelligence agencies – with the assistance of big technology firms – have only made matters worse.
In a speech in February, Guenther Oettinger, the EU digital czar, was blunt in articulating the need for European countries to forge a unified response. "The Americans are in the lead, they've got the data, the business models and so the power," he said, according to The Wall Street Journal. Google and Facebook "will go to the member states where data protection is least developed, come along with their electronic vacuum cleaner, take it to California and sell it for money."
Meanwhile, for Google's antagonists, Wednesday was a rare moment of something like vindication. The push for antitrust charges was the product of complaints by a diverse group of companies, ranging from a small British comparison-shopping website to German publisher Axel Springer SE to Microsoft Corp.
Axel Springer welcomed Wednesday's decision. "It is a good signal for consumers and fair competition," said Edda Fels, a company spokesperson.