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Google reaches deal to settle European antitrust case

Google reached a deal with European antitrust authorities on Wednesday, ending a lengthy competition investigation into the American tech company's practices that could have led to billions of dollars in penalties.

Under the agreement, Google would pay no fine and there would be no finding of wrongdoing. Such a finding could have limited its future activities on the Continent.

(Read more: After 3 years, Google clinches EU anti-trust deal)

The discussions have centered on whether Google abused its dominance in Internet search and advertising to favor its own products and services in search results. The agreement would require Google to give rivals more prominence in its promoted results. Some competitors said the settlement doesn't go far enough, adding that they may take their case to the European Court of Justice.

The European Commission said it would seek comment from Google's rivals before making the deal legally binding later this year, though Joaquín Almunia, the European Union's competition commissioner, said any feedback would be unlikely to drastically change the final agreement.

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"If I receive strong arguments that oblige changes to my decision, I am always ready, I am flexible," Mr. Almunia told reporters on Wednesday. "I don't see why, from now on, I would change my mind based on the proposals Google has put forward."

The deal marks the culmination of almost four years of negotiations between Google and the European Union, whose officials rejected two earlier settlement offers. Google is used for roughly 90 percent of searches in many European markets, slightly higher than its 70 percent market share in the United States.

Mr. Almunia, who leaves his post later this year, had made the antitrust settlement with Google a top priority, though some analysts question whether the agreement will drastically alter Google's dominance within Europe's Internet landscape.

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As part of the deal, Google will have to give greater prominence to rivals in European search results for the next five years, which could lead to major changes in how its search business operates in Europe compared to other parts of the world.

That includes displaying results from three competitors every time Google shows its own results for searches related to products, restaurants and hotels.

Rivals will have to pay Google each time their results are shown next to the search giant's own results through a bidding process overseen by an independent monitor, according to European officials.

The settlement also includes making it easier for advertisers to move their business to rivals like Yahoo and Microsoft. Until now, Google has imposed conditions that have made it difficult for rival advertising networks operated by other search engines to use content that has appeared within Google's sponsored advertising links.

The European agreement goes further than a similar settlement that Google reached in the United States with the Federal Trade Commission last year, which forced only minor concessions from the company. Google could also have faced penalties of up to $5 billion from the European Commission.

"My mission is to protect competition to the benefit of consumers, not competitors," Mr. Almunia said in a statement on Wednesday. "I believe that the new proposal obtained from Google after long and difficult talks can now address the Commission's concerns."

(Read more: Samsung bows to Google to dial back Android tweaks)

Google's rivals, including Microsoft, have raised concerns that the deal will still allow the tech firm to maintain its dominance over European search results and advertising revenue. They also have demanded the opportunity to comment on and offer amendments to the proposals, which will likely have a significant impact on their own operations.

Some local competitors are now considering whether to turn to the European courts to appeal against the antitrust agreement.

"Almunia risks having the wool pulled over his eyes by Google," David Wood, legal counsel for Icomp, a trade body representing the Internet companies affected by Google's practices, said in a statement. "We do not believe Google has any intention of holding themselves to account on these proposals."

Google only agreed to the offer under considerable pressure from European policy makers, according to a person with direct knowledge of the matter, who spoke on the condition of anonymity because he was not authorized to speak publicly.

The tech giant was keen to avoid the lengthy legal troubles that plagued Microsoft after European antitrust officials opened an competition investigation into its practices in the early 1990s.

Google has had several legal wrangles with European politicians and their domestic counterparts over its growing presence on the Continent. That includes privacy complaints about Google's mapping services and tax disputes related to the company's European operations.

Wednesday's settlement marks Google's third effort to appease European antitrust officials. Policy makers rejected the company's first concessions in early 2013, saying that changes to its search results did not go far enough to deal with their competition concerns.

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Google resubmitted its settlement offer in September, though Mr. Almunia of the European Commission said that proposal, which would have given Google's rivals a more prominent position in search results, still was not acceptable.

"We will be making significant changes to the way Google operates in Europe," the company said in a statement on Wednesday.

Since the investigation began in late 2010, Google's business model has diversified significantly beyond search. The settlement does not require the company to change the algorithm that produces its search results. And analysts pointed out that the search settlement does not include its expanded web services like cloud data, mapping and email, and e-commerce, which have given the company an increasingly dominant position in how Europeans use the Internet.

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