Politicians from France, Germany Ramp Up Rhetoric against Settlement with Google

By Sam Schechner And Vanessa Mock

May 23, 2014 11:23 a.m. ET

Google's proposed settlement with European Union antitrust cops is under increasing threat of being revised or scrapped, amid calls to more tightly regulate the Web giant in the run up to European Parliament elections.

Politicians from France and Germany have in recent days ramped up rhetoric against the settlement with Google, which aims to resolve accusations that the company abuses its dominance in online search to promote its own businesses. Germany's economy minister said this week the deal should be improved. His French counterpart said last week that the European Commission—the bloc's executive arm—should reject it as it stands.

Behind closed doors, commission officials have suggested to opponents that some elements of the deal—in which Google has pledged to dedicate space for competitors atop its search results—could be revisited, according to people involved in the discussions. Google officials, for their part, have been holding similar meetings to press their case that their settlement is fair, and tougher than regulators might get by pressing formal antitrust charges, people familiar with those meetings said.

"The offers by Google aren't worthless, but they're not nearly enough," said EU Energy Commissioner Günther Oettinger, among the 28 commissioners who must approve a settlement before it becomes binding.

A Google spokesman Thursday referred to earlier statements in which the company said it made "significant concessions."

The pressure to revise the antitrust deal is the latest in a series of European broadsides against the Mountain View, Calif., company, which has faced broader distrust toward U.S. companies following revelations of widespread surveillance by the U.S. National Security Agency.

Earlier this month, Google suffered a defeat in Europe's highest court, which ruled that the search company must grant individuals a "right to be forgotten," in some circumstances. A German privacy regulator is considering ordering Google to change its privacy policy, and France has given the company a bill for back taxes that could reach over EUR1 billion, including fines.

Now politicians in France and Germany are seeking to go further. The French government said it would push for a new European law later this year to classify Google and other Web giants like public utilities, forcing them to guarantee access to all of its services like phone operators. In Germany, Economics Minister Sigmar Gabriel advanced the idea of breaking apart Google in a German newspaper this week, though officials acknowledge such a move would require new laws.

"We don't want to become a digital colony of global Internet giants," said French Economy Minister Arnaud Montebourg said at an event to oppose the antitrust deal last week. "It is necessary, indeed urgent, to put in place a framework that guarantees a level playing field" for European companies.

Tech executives respond that the political rhetoric in Europe toward American tech companies amounts to a new kind of digital xenophobia, that could chase away foreign investment. Regulating search engines like public utilities could make them "impossible" to operate, one tech executive said.

Agreed in February, the EU antitrust deal with Google has become a particular lightning rod in the run up to this weekend's European elections. Martin Schulz, a German candidate who is in the running to become the next European Commission President, has put the case at the heart of his election campaign. During a televised election debate with other candidates, Mr. Schulz said Google was "a monopoly in Europe entirely and nobody even discusses it. […] That's why the instrument of competition in that case is a very important one."

Rivals' main argument against the Google settlement is that they don't believe it will go far enough to curb the company from promoting its own services, such as paid shopping results, over those of competitors. As part of the settlement, Google said it would use an auction mechanism in some cases to give competitors the space it has set aside for them—a feature that competitors argue would entrench Google's power.

It remains unclear how much traction that argument has found within the commission, however. Some people close to the process say they expect the furor to quiet after the elections, with commissioners set to leave their posts in the fall. Detractors respond that this is a situation in which the commission could take a highly unusual stand against an antitrust deal negotiated by one of its members.

"I could see a chance of the European Commission saying with a majority that this is an exceptional, precedent-setting case," Mr. Oettinger said of his fellow commissioners. "We must do everything so that the market power of Google doesn't become ever stronger."

EU antitrust chief Joaquín Almunia, who has been staunch in his refusal to revisit the deal, appeared to leave the door open to changes during a news conference earlier this week. "If, because of the arguments of the complainants, we consider that the proposals that we have on the table aren't enough, we will need to decide on the next steps," Mr. Almunia said. Any decision to send formal charges would come after the summer break, he added.

National competition regulators are also watching the case closely. The German regulator, the Bundeskartellamt, has been tasked by the government to carry out its own review of the case, according to people familiar with the matter. Its French counterpart is expected to conduct its own review as part of a nonbinding consultation process on the settlement under EU law.