Google just can’t catch a break in Europe. The search giant has been embroiled in an intense legal battle over its allegedly anticompetitive position since 2009, and despite its efforts to appease European officials by displaying paid Shopping ads by competitors in the SERPs, the European Commission still isn’t satisfied that Google is playing fair.
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Now, Google could soon be forced to make an even bigger concession – breaking up its European business.
What’s Going On?
In short, the European parliament believes that Google is too big and too powerful, and that it is using its dominance to hamstring competition in the paid search space, particularly with regard to Shopping ads.
As a result, a source close to the ongoing antitrust case leaked a preliminary legal motion to The Financial Times (paywall) that suggests the European parliament could be about to put pressure on the European Commission to force Google to decouple its commercial business from its search business – not exactly an attractive proposition to Google.
Can Europe Force Google to Break Up Its Business?
As numerous reports have noted, the European parliament is powerless to make Google, an American company, do anything. However, the European Commission – the executive body of the European Union – is responsible for setting legislation that would apply across the E.U., meaning it has much more legislative power than the European parliament.
If the Commission were to pursue this course of action, it could make things very uncomfortable for Google by forcing it to separate its commercial advertising business from its search platform if Google wants to play in Europe. Given that Google currently enjoys as much as 95% of the search market share in Europe, a forced break-up of the business would be nothing short of disastrous for Google.
It’s worth noting that, although the move is rumored to be a possibility, it would be a bold and potentially dangerous move for the Commission to make. Not only would Google fight such a ruling vigorously, it would also likely draw significant criticism from the U.S., which could harm trade between America and the E.U. No decisions have been made at this time, but the fact that it’s even on the table is a sign that Google’s fight in Europe is far from over.
Why Would A Forced Break-Up Be So Bad for Google?
Basically, it’s very difficult to manage a broken-up company.
Europe is a major market for Google. If forced to separate its advertising and search businesses to appease the European Union, Google would not only have to somehow manage to operate two entirely separate businesses in an already legislatively complex geographical area, but also overcome the challenge of continuing to maintain its market share.
If you recall the Microsoft antitrust case from the 1990s, you’ll remember that Microsoft came perilously close to being forced to split its operating system business from the rest of the company. Although the decision was ultimately overruled in 2001, the damage the case did to Microsoft was catastrophic, and the company never truly recovered.
Will It Happen?
At this point, it could go either way. Joaquín Almunia, the European Union’s former competition commissioner, was a more vocal opponent of Google’s European business practices than his successor, Margrethe Vestager, but that doesn’t mean she’s ruling out the possibility.
It’s more likely that more stringent regulatory frameworks will be applied to Google and the European search industry in general. Not only would this be an easier case to win in the courts, it would also be a lot easier to actually oversee and implement than attempting to force one of the world’s largest and most powerful companies to split up its businesses into two distinct entities.
Only time will tell whether Google can weather the political storm in Europe. However, one thing’s for certain – Google won’t go down without a fight.
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