Alphabet sinks further into antitrust quagmire

February 22, 2016

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Alphabet is sinking further into an antitrust quagmire. The European Commission may beef up its anti-competitive complaint against Google, Bloomberg reported on Monday. U.S. authorities are probing the search giant, too. Proving abuses will be difficult, but the expanding scope means the company will have to expend more energy to pull itself out of the bog.

Google has long dominated web searches – it has almost two-thirds of the U.S. market, according to ComScore, and a higher percentage in many European markets. That has brought it regulatory scrutiny for years.

Demonstrating that the company has used its position abusively has been difficult. It’s easy to click on another search service and hard to prove Google is harming the public by injecting additional information into results. U.S. authorities dropped a probe in 2013 after the company promised to behave. Earlier this month, a London court found Google had not unfairly crushed a rival by putting its maps on top of search results.

The European Commission’s charges last year that the company favored its own shopping service was treading on old ground. A probe into Google’s behavior with Android, however, would be more dangerous. There’s little competition in mobile operating systems, and a dominant provider can act abusively by bundling apps and services together. Microsoft’s antitrust problems had similar roots.

Commissioner Margrethe Vestager is piling on pressure ahead of a meeting later this week with Sundar Pichai, the chief executive of Alphabet’s Google division. The Europeans are probing whether the company restricts advertising competition in other ways – such as by paying Apple to keep Google as the default search engine on the iPhone. A $1 billion transaction between the two in 2014 for that purpose came to light in recently unveiled U.S. court documents.

Vestager also said she is open to investigating whether a tax deal between Alphabet and the UK amounted to illegal state aid.

She would be stretching her remit by challenging Google’s tax agreements and her aggressiveness may not pan out legally. But it will have effects. It may have encouraged U.S. regulators to restart their investigations late last year. More importantly, the amount of time and effort Google will spend in the court and the press fighting these charges is ramping upward. That could leave rivals like Facebook chasing advertisers and new technologies like virtual reality relatively unencumbered.

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