With No Deal on Cards, Google Said to Face First EU Fine in 2016

Google is likely to face its first European Union antitrust sanction this year, with little prospect of it settling a test case with the bloc's regulator over its shopping service, people familiar with the matter said.

There are few incentives left for either party to reach a deal in a six-year dispute that could set a precedent for Google searches for hotels, flights and other services and tests regulators' ability to ensure diversity on the Web.

Alphabet Inc's Google, which was hit by a second EU antitrust charge this month for using its dominant Android mobile operating system to squeeze out rivals, shows little sign of backing down after years of wrangling with European authorities.

Several people familiar with the matter said they believe that after three failed compromise attempts since 2010, Google has no plan to try to settle allegations that its Web search results favour its own shopping service, unless the EU watchdog changes its stance.

Such a change of heart appears unlikely, with European Competition Commissioner Margrethe Vestager a Dane whose team is leading the Google investigation showing little interest in reaching a settlement where there is no finding of wrongdoing or a fine against the company, other people said.

Underpinning Vestager's tough approach, and the Commission's case, are scores of complaints from companies, big and small, on both sides of the Atlantic.

Alphabet shares were flat at 1824 GMT.

Microsoft's shadow
For Google, which has denied any wrongdoing, the stakes are high. Some rivals are convinced that any fine is effectively a cost of doing business and it has more to gain in profit from its existing business model than conceding to complaints.

The European Commission declined to comment.

"From a pure profitability perspective, it is better off dragging out the competition case, continuing its practices for as long as possible, and ultimately paying a fine that will be smaller than the profits it generates by continuing the conduct," Thomas Vinje, a lawyer who advises several of Google's competitors, told Reuters.

However, some sources said they see last week's low-key pact with arch-rival Microsoft to withdraw all regulatory complaints against each other as a signal that Google might in time choose to strike a deal with Brussels.

By doing so it would avoid a repeat of Microsoft's damaging fight with the European Commission and by settling at least its dispute with the EU over Internet shopping might also head off possible actions by other regulators.

One source said it was too early for Google to rule anything out or in regarding the EU case.

To date, Google has a mixed record in taking on regulators globally, winning some battles and losing others.

However, Microsoft offers a salutary lesson to those who want to take on the Commission, Ioannis Kokkoris, a law professor at Queen Mary University of London, said.

Microsoft ended up with fines of more than EUR 2.2 billion (roughly Rs. 16,593 crores) after a decade-long battle with the Commission.

"You are entering a long battle, an expensive battle. And if you go to court, the outcome would not necessarily be better," Kokkoris said.

© Thomson Reuters 2016