Google facing force of aggressive E.U. regulators

BRUSSELS — Europe may be a financial disaster and a faded military force, but in at least one arena it has emerged as champ: Regulators here are challenging the power of America’s technology titans. And they are winning.

Google is most squarely in the crosshairs as its officials negotiate furiously in hopes of avoiding a $4 billion fine and a formal ruling that it has abused its dominance in the search market to hurt rivals across a range of industries. A deal could be days away.

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Facebook, Apple and Microsoft also have faced serious scrutiny from European regulators in the past year. And even if Google succeeds in settling the sprawling antitrust case here, it is facing investigations into its new privacy policy and its Android operating system for phones and tablets.

Many of these issues, including the antitrust case against Google, also have been investigated by American regulators. But the laws here are stricter, the fines bigger and the courts more supportive of aggressive government action — to the point that many experts say the legal landscape of the technology industry is being shaped more profoundly here than in the United States.

“The pipeline is packed with these cases,” said Nicolas Petit, a professor at Belgium’s University of Liege Law School who watches the technology industry closely.

Whether Google gets labeled a monopolist is largely in the hands of Joaquin Almunia, a former Spanish labor leader and onetime Socialist candidate for prime minister who is the European Union’s top antitrust enforcer.

Almunia has pushed hard for a negotiated settlement in hopes of avoiding a years-long battle of the type that European regulators once waged with Microsoft over its Windows operating system. People closely watching the Google case predict that this week — the last before a long summer break hobbles operations here — will produce a deal or a formal “statement of objections,” essentially an indictment on allegations of monopolistic behavior.

Almunia said that a negotiated deal would be a better outcome and that the company’s proposals — there have been at least two rounds of them this month — are seeking to address the issues he has raised rather than disputing them.

“What was Google’s motto at the beginning? ‘Don’t be evil?’ ” Almunia said in an interview at his office here, the headquarters of the E.U. “I hope it continues to be important.”

The case is being tracked by regulators worldwide, including at the U.S. Federal Trade Commission, which has hired a prominent lawyer to lead its antitrust investigation of Google.

"We continue to work cooperatively with the European Commission," said William Echikson, a Google spokesman in Brussels.

Risk to Google

Almunia already has determined that the Google antitrust claims merit serious treatment, given that the company has more than 90 percent of the search market in some European countries. But having a monopoly is not a violation of law here; a company must abuse its dominance of a market to run afoul of regulators.

Almunia’s office has outlined four potential abuses of dominance in preliminary filings. In the interview, he expressed particular concern that Google may be altering its results in a way that keeps users from having access to the best possible services, especially ones that compete with Google’s offerings.

“The potential providers suffer in their profits, and the customers will receive . . . worse service,” he said.

The risk to Google, analysts say, goes beyond the potential for fines because their business long has depended on users believing that search results are crafted primarily to serve their needs — not those of advertisers. A finding of abusive monopolistic behavior threatens to undermine its carefully cultivated public image.

Its reputation suffered a dent last year, when French regulators fined Google $142,000 because its Street View program had gathered sensitive personal information from private wireless Internet signals as the company’s cars crisscrossed the world capturing images.

Google had acknowledged the secret data collection and apologized, blaming a single engineer for creating the data-collection feature without approval of senior management. It also said there was nothing personally identifiable in the data.

The French Data Protection Authority, however, discovered users’ passwords and lists of pornographic Web sites they were visiting when a Street View car drove by. In one instance, a Google car collected an e-mail exchange between a man and a woman — each married but not to each other — attempting to arrange a liaison. Global Positioning System data along with e-mail addresses made them clearly identifiable, the regulators concluded.

American regulators at the Federal Communications Commission investigated the same issue but found no violation of law. It fined Google $25,000 in April for obstructing the investigation.

The differences are not merely legal. Personal privacy is a deeply held cultural value in most of Europe. French regulators often ask newspapers and bloggers to delete or alter information when citizens express fear that unflattering references or photographs online might undermine job prospects or personal relationships.

Isabel Falque-Pierrotin, head of the French Data Protection Authority, said such requests shot up 42 percent last year. She favors a bill before the European Parliament to expand this “right to be forgotten” to include links on search engines — a move Google has resisted.

“Ultimately, responsibility for deleting content published online should lie with the person or entity who published it,” Peter Fleischer, Google’s global privacy counsel, wrote in a blog post in February.

The French authority also has scrutinized the way iPhones report the geographic movements of the Apple devices’ users and how Web sites track users as they surf the Internet.

“It’s a bit frightening because all your data is shared by a huge ecosystem and you don’t know,” Falque-Pierrotin said. “I think people are more and more conscious of that. So they rely on the regulator to unveil the black box.”

She called the approach not so much of a “French sensibility” as a “consumer sensibility.”

‘Judge, jury, executioner’

Some here worry that European regulators have become too powerful. The same officials investigate, engage in negotiations with companies, make rulings and levy fines — a process with far fewer checks than in the United States. Courts can overrule European regulators but rarely do.

Attorneys representing companies complain that a single bureaucracy can be “judge, jury and executioner” in cases. They also express concern that companies complain to regulators about rivals mainly to drain them of resources.

“The threshold to be taken seriously and generate a lot of aggravation is very low,” said Brussels-based lawyer Miguel Rato, who has often represented technology companies. “One thing the commission doesn’t do nearly well enough is deal swiftly with complaints that have no merit.”

The high-tech regulatory fights in Europe are unlikely to quiet soon. French regulators are investigating Google’s recent move to track signed-in users across its dozens of individual products. Irish regulators are reviewing Facebook’s compliance with a detailed audit of how the company handles personal data. The European Commission is probing Apple’s agreement with publishers over e-books, though a deal on that may be near as well. The U.S. Justice Department also is pursuing the e-books case, but a resolution may be more than a year away.

Even as the antitrust investigation of Google shows signs of reaching resolution, Almunia said his office is in the beginning phases of a separate probe into the Android operating system that Google uses to power mobile phones and tablet computers. He did not offer details.

 
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