There may be practical reasons for Google to change its ways across the globe. EU crackdown could change Google

The European Union — and not U.S. regulators — may ultimately crack down on Google for allegedly manipulating search results to show off some of its own products first, but that also could mean changes for American consumers.

European regulators can't control what the company does in the United States, but there may be practical reasons for Google to change its ways across the globe.


The FTC probe of Google’s search business appears headed for a resolution as early as this week, with the commission letting Google off the hook by voluntarily making some changes in search, including limiting use of reviews from rival sites and making it easier to port keyword search campaigns to other search services, POLITICO reported Saturday.

But if the EU pursues more drastic changes such as preventing Google from listing its own services ahead of rivals in search results, Google would likely have to build parallel systems — showing European users one set of search results and Americans another. It’s a technical hurdle the vaunted brain trust from Mountain View, Calif., could surely surmount, but it would shine a continual, real-time light on practices consumer advocates and rivals say is unfair.

“It’s going to be very complex for Google to change its behavior in Europe and to stay put elsewhere in the world,” said Nicolas Petit, professor at the Institute of Competition Law at the University of Liège in Belgium and director of the European Institute for Judicial Studies. “How could they change the way they do business here and not the rest of the world? It’s a global service.”

For nearly two years, Google has been investigated by both the FTC and the European Union on a variety of antitrust allegations. The biggest of those is whether the world’s dominant search engine engages in anticompetitive behavior by manipulating results to shunt users unknowingly toward Google-owned properties for shopping, travel and other services. Others include Google’s use of “snippets” of content from other websites — like reviews from TripAdvisor or Yelp — without permission and contracts that make it difficult for users of Google Ad Words to compare prices for buying “keyword” ads with other search services.

Knowledgeable sources said Google will commit to addressing those last two concerns by voluntarily making changes to its business practices.

But it now appears that the FTC doesn’t have the votes to press an antitrust case on the larger issues of alleged search manipulation and is focused on settling a related case with Google — possibly within days — on the company’s use of patents that are part of industry-wide standards for smartphones and other devices to block rivals’ products. But the EU’s competition commissioner has indicated it may bring a search case against Google by the end of the year.

Neither Google nor the FTC would comment for this article.

Legally, there’s plenty of precedent for companies conforming to local laws and settlements and disregarding them elsewhere. When Microsoft settled its notorious monopoly abuse case for tying its Internet Explorer browser to its dominant operating system software, the company agreed in Europe to provide a pop-up box offering users a choice of browsers with which to surf the Web. That concession was never demanded anywhere else, so to this day Microsoft makes its own browser the default choice on PCs sold outside of the EU.

Yet something like the Google search engine — less a physical product than a universal service — seems different in spirit to many experts.

“Any remedies would likely have worldwide reach, so it makes it less important for other regulators to come up with a decision,” Petit said.

Former FTC Chairman Bill Kovacic said that, while it depends on what the settlement was, he agreed with Petit.

“I don’t see how they can make commitments in Europe that do not affect their operations worldwide,” said Kovacic, the immediate predecessor to current FTC Chairman Jon Leibowitz. “In any number of respects, the decisions taken in Brussels will set a global standard for them.”

Some rivals and experts believe differently — that a properly motivated Google, unrestrained by American regulators, would just build two different systems.

"If it’s worth it to them to do two parallel systems, they can certainly do it," said Andrew Appel, chairman of the computer science department at Princeton University. "As long as those two markets are big enough, they might do that. If it were some little market somewhere, I doubt they'd bother."

As it stands, Internet users currently see different search results — sometimes while seated next to one another in an office — because Google’s algorithms take into account geography and a profile of users based on their search histories. And the company already blocks content to comply with local laws limiting speech such as one in Germany that bans neo-Nazi advocacy.

“They’ve made accommodations with China, for instance, that don’t apply elsewhere," American Antitrust Institute President Bert Foer said. “It all depends on what they're going to be compelled to do and how realistic [such differentiation] is."

Indeed, there’s little evidence that competitors in the U.S. who are prodding the FTC to pursue its own action would be appeased by an EU settlement.

“There could be some spillover benefits to the U.S., but so many of the searches are geographically located — travel, restaurants, that sort of thing — that I wouldn’t think the EU or FTC thinks that if the EU settles, the FTC won’t need to do anything,” said Matthew Reilly, a former FTC litigator and assistant director of the agency’s Bureau of Competition.

Reilly, who is working with FairSearch.org, the consortium of tech companies, including Microsoft and Expedia, that has complained of Google’s anticompetitive behavior, said it depended largely on what the European settlement contains. There are many possible outcomes, he noted, including that Google agrees to more clearly label its own products or to some change in how it lifts snippets from review sites like Yelp and TripAdvisor.

Reilly and others do believe a strong EU settlement would make inaction by the FTC or the Department of Justice significantly less likely — and they believe Google knows that, too.

“It would be peculiar if one agency viewed Google’s conduct as anticompetitive and the other does not,” Reilly said.

Google knows this — which may be why the negotiations have been painstakingly slow, experts say. The thinking goes that the search company would want a deal it can apply everywhere with minimal harm to its business that can also be seen as a good-faith, self-regulatory gesture, said Harvard business professor Ben Edelman.

“If the remedy is something that Google ends up liking pretty well, then they will want to implement it worldwide in order to be able to say, ‘We already did such-and-such, please leave us alone,’” said Edelman, a former Microsoft consultant and Internet commerce expert. “On the other hand, if they feel it’s unfair, if they feel beaten into submission, they might want to limit it to a particular place.”

There’s also an important public relations battle embedded in all of this, too. Google’s reputation — remember its motto “don’t be evil” — is under attack by such campaigns as Microsoft’s Bing search engine’s “Scroogled” TV ads in which customers claim they were led to bad products and high prices by search results that steered them away from better deals.

“Everybody’s playing this game on a three-dimensional global chessboard,” Foer said. “There’s all kinds of impacts. Google does not want a long, drawn-out battle with any government, so Google would probably want to agree to something they could comply with worldwide on the assumption once they settle with the EU, the rest of the world would want the same thing.”

Also, dual systems would allow critics an easy way to compare Google’s outcomes in Europe and the U.S. and prove, if true, the ways Google manipulates results in America. Companies in the U.S. could point, for example, at the different ways Google harms its competitors here, but not there in making the case that the U.S. version is inferior.

Intriguingly, the FTC’s potential ruling on patents could be a much easier thing to force Google to comply with around the world, Edelman said. That’s because if Google is required to license patents in a certain manner here, it would be strange for the company to handle them differently elsewhere, he said.

“I wouldn’t be surprised if [an FTC ruling on patents] applies worldwide, and it would be puzzling if it didn’t,” he said. “The FTC doesn’t have enforcement authority worldwide, but on the one hand, you’re talking about an American company so they may have jurisdiction over everything they do. There’s a greater likelihood that the patent licensing will be applied worldwide versus the antitrust side.”

This article first appeared on POLITICO Pro at 5:18 a.m. on December 17, 2012.