A Guide to the Google Antitrust Lawsuit in Europe

Google antitrust lawsuitThe European Commission filed formal antitrust charges against Google Inc. (Nasdaq: GOOG, GOOGL) on Wednesday.

A Google antitrust lawsuit in Europe has been fermenting for some time now. The EC (the European Union's executive arm) first began investigating the search king five years ago.

Money Morning Chief Investment Strategist Keith Fitz-Gerald - a seasoned market analyst with 33 years of experience - predicted in December a Google antitrust lawsuit would happen at least by fall this year.

"I have maintained for several years that this course of action was likely," Fitz-Gerald said of Google on Dec. 2. "I believe that we'll see a move by Q3 2015 at the latest."

Our guide to the Google antitrust lawsuit will bring you up to date on how all this began, what happened this week, and what to expect from here...

Google Antitrust Lawsuit All Began with a Husband-and-Wife Team

In 2009, England-based comparison-shopping website Foundem was the first company to file antitrust charges against GOOG.

Foundem's husband-and-wife founders Adam and Shivaun Raff said the search site excluded their pages from Google search results. Google ranked its own Google Shopping service ahead of Foundem, pushing Foundem out of the key top spots that came up from Google searches.

"Whereas these penalties used to be reserved for spam, or sites caught attempting to cheat Google's algorithms, they are now increasingly targeted at perfectly legitimate vertical search and directory services," Foundem owners Adam and Shivaun Raff explained on their website.

Then in 2010, a flood of antitrust claims racked up against Google. Competitors like Microsoft Corp. (Nasdaq: MSFT) and Yelp Inc. (NYSE: YELP) backed some of the complainants. Big European press publishers also joined the fight.

That sparked the EC's four-year investigation and determination - which was already settled last year...

GOOG Already Settled European Antitrust Claims Once

In February 2014, the EC finished its investigation. It concluded Google - which accounts for 90% of all Web search in Europe - illegally used its search monopoly in Europe to massage search results.

The EC said the company promoted Google services, hid competitor services, and misled consumers.

But Google actually already settled with the EC. The company agreed to offer a fairer array of search results. For instance, should Google Shopping show up as a top search result, the company would also feature three rival services in top results.

Obviously, the settlement didn't stick...

Google Antitrust Lawsuit Push Regained Momentum in Late 2014

In September, the EC reopened the matter after complaints from GOOG competitors that the settlement didn't go far enough. They alleged search results were still largely discriminatory.

Then on Nov. 27, the European Parliament voted to "unbundle" Google's search engine from its other commercial services.

"It's a monopoly. It's killing our technology businesses," said parliament member Ramon Tremosa, who coauthored the passed resolution. He complained that Google search results are ranked based on what's best for Google - not the user. His motion demanded an end to "Google's illegal and discriminatory treatment."

The mandate was largely symbolic. Unbundling Google would mean forcing it to break up - a power that rests solely with the EU.

Still, the vote placed enormous pressure on the EU to act against Google.

GOOG Has Already Exited Spain and Russia

On Dec. 11, GOOG announced it would pull its Google News service out of Spain on Dec. 16. The exit came after an intellectual property law the country passed Oct. 30 - one that so blatantly targeted Google it earned the nickname "the Google tax."

Starting in January 2015, aggregator sites (read: Google) would have been required to pay every Spanish publication a fee if the publication's content comes up on the site. The law gives an inalienable right to compensation - in other words, even if a publication wishes to be found in Google News (and of course, most do), Google would have had to pay the sanction. And the sanction can reach as high as 600,000 euros ($758,000).

"This new legislation requires every Spanish publication to charge services like Google News for showing even the smallest snippet from their publications, whether they want to or not," Google posted on its Europe Blog on Dec. 11. "As Google News itself makes no money (we do not show any advertising on the site) this new approach is simply not sustainable. So it's with real sadness that on 16 December (before the new law comes into effect in January) we'll remove Spanish publishers from Google News, and close Google News in Spain."

Also on Dec. 11, news broke that Google would transfer all of its engineering operations out of Russia.

The nation was about to enact a new law that required citizens' personal data to be stored in local data centers. Companies that failed to follow the rule would face penalties.

GOOG still keeps "a dedicated team in Russia" to support local users, but this was another step toward the Google antitrust lawsuit filed this week...

Google Antitrust Lawsuit Now

In a "Statement of Objections" Wednesday, the EC said Google had "systematically" favored its own comparison shopping product in its search results.

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EU Competition Commissioner Margrethe Vestager stated she was concerned GOOG has an "unfair advantage" in breach of EU antitrust rules.

"Google now has the opportunity to convince the Commission to the contrary. However, if the investigation confirmed our concerns, Google would have to face the legal consequences and change the way it does business in Europe."

And Google's response?

"While Google may be the most-used search engine, people can now find and access information in numerous different ways - and allegations of harm, for consumers and competitors, have proved to be wide of the mark. If you look at shopping - an area where we have seen a lot of complaints and where we understand the European Commission will focus its Statement of Objections - it's clear that (a) there's a ton of competition (including from Amazon and eBay, two of the biggest shopping sites in the world) and (b) Google's shopping results have not the harmed the competition."

Google added it would make its case in coming weeks. The company will face as much as $6.6 billion in fines if it cannot defeat the antitrust charges.

Fitz-Gerald sees Europe's push against Google as a push against American tech. GOOG has become the fourth most valuable company in the U.S. with a market capitalization of $370 billion. Only Apple Inc. (Nasdaq: AAPL), Exxon Mobil Corp. (NYSE: XOM), and Microsoft Corp. (Nasdaq: MSFT) are larger.

"The Nov. 27 parliament vote was really interesting because it speaks to two things," Fitz-Gerald said Dec. 2. "One, the growing perception that America dominates the world's Internet. And two, the decades-old phobia that America dominates all industries. That's coming into play here - this move isn't necessarily about Google as much as it's about European tech firms figuring out how to compete in this space."

Stay tuned to Money Morning for continued coverage of the Google antitrust lawsuit.

Will Google Break Up in 2015? The EU could decide to break up Google. If it does, the U.S. may do the same. "If the EU ever decides to break up Google, American regulators won't want to be upstaged," Money Morning Chief Financial Strategist Keith Fitz-Gerald said in December. But Fitz-Gerald believes a Google break up would be an "awesome development" for investors - here's why...

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