Google Potentially Penalized for Breaking European's Trust

Google Gets Slammed with European AntiTrust Lawsuit

Following a five-year investigation of American search engine and technology giant Google, the European Union's chief antitrust regulator Margrethe Vestager has officially accused the company of violating the EU's anti-trust legislation. Vestager's claims strike Google in its two largest brands: the popular search engine itself and the Android operating system. If Google is unable to dispute these charges, the company may face billions in fines and stricter regulation overseas, and potentially start trends that affect other cell phone manufacturers.

Google's predicament is not without precedent: both Microsoft in 2008 and Intel in 2009 have faced similar charges for monopolizing their respective industries. If Vestager's claims hold water, Google will be found guilty of leveraging its popular search engine and Android phones in ways that systematically hinder competition and consumer choice. In the case of the search engine, Google is alleged to unfairly promote its own products as the first and most visible results, and Android phones are sold pre-loaded with additional Google apps and software, allegedly giving preferential treatment to the company.

In the United States, the Federal Trade Commission once investigated Google for similar reasons, but their findings never resulted in an official charge. Indeed, in the United States, Google faces much more competition from other search engines and does not appear to have an uninhibited monopoly over that market. Europe also has more stringent policies regarding their marketplace, which rank the accountability of corporations much more highly than consumer choice, unlike the American "free market" attitude. If, however, the European Union's allegations make it to formal charges, the changes Google will have to make to their overseas buyers may very well manifest in some form in the United States.

Google has informally addressed Vestager's claims as "wide of the mark", but has three months to decide on its formal actions. Despite her aggressive approach, the EU antitrust chief has suggested willingness to seek informal solutions or settlements with Google, but it is unclear how far, if at all, Google will be willing to bend to satisfy the EU. With analysts from the United States and Europe declaring their favor either way, the likely result of fully formal charges being made is ambiguous. Whatever the outcome, the rest of the tech world is going to be paying close attention, especially other cell phone manufacturers. If Google is forced to change what it ships its phones and tablets with, the rest of the industry will have little choice but to follow suit, or face the same charges.

Gennady Barsky is the CFO of JetSmarter and a real estate mogul from NYC.