Why Microsoft is taking on Google in Europe

Two American companies battling across the pond may seem odd, until you look at the European record of enforcing its competition laws.

At first, it's a bit jarring to see Washington-based Microsoft press its unfair competition claims against California-based Google in Belgium. But Microsoft picked Europe as the latest venue in its fight with Google for the simple reason that it's more likely to get quicker action from European regulators who've been more prone to reel in dominant companies.

Microsoft General Counsel Brad Smith disclosed the filing with the European Commission in a blog post last night. Microsoft is alleging that Google is unfairly competing in European markets by rigging its search algorithms, ranking its own services higher than rival products, and impeding access to YouTube content, making it harder for alternative search engines to find videos.

Microsoft General Counsel Brad Smith Microsoft

There are plenty of reasons for Microsoft to press its case in Europe rather than the United States. To start, Microsoft filed its complaint there because European regulators have already opened an investigation into Google's conduct. In addition, Microsoft has learned from its own battles with European regulators that the burden to prove anticompetitive conduct is often lower in Europe than in the United States. That's particularly true with the kind of case Microsoft is hoping the European Commission will bring.

"Microsoft has a much better shot at this in the European market," said Herbert Hovenkamp, a professor of antitrust law at the University of Iowa College of Law. In Europe, companies with dominant market positions have a duty to share technical data that rivals need to compete. So when Microsoft alleges that Google won't share technical data to help it examine and index information on services such as YouTube, it may very well find favor with the European Commission, Hovenkamp said.

Related links
• Microsoft to file antitrust complaint against Google
• Has Google learned Microsoft's antitrust lessons?
• EC launches antitrust probe against Google

Indeed, Microsoft ran afoul of this very regulation when it prevented open-source software developers access to interoperability information for its Windows server software. After years of wrangling with the EU regulators, the company agreed in 2007 to provide the data that European laws required it to disclose.

The standard for data sharing for dominant companies in the United States is far less cumbersome. "In the U.S., this is an extremely difficult case to bring," Hovenkamp said, because those standards are set by federal regulatory agencies, not much-broader antitrust laws. "There is no such agency or dealing obligation with respect to the computer industry or the Internet," Hovenkamp said.

Microsoft will also have an easier time in Europe branding Google as a dominant company. That's important, because European law ratchets up the standards under which dominant companies conduct business. According to one of the foundational cases for European competition law, Michelin v. the European Commission, a dominant company bears "a special responsibility not to allow its conduct to impair competition on the common market."

There's no statute in European law, nor is there one in the United States, that sets a market share watermark above which a company is determined to be dominant. But European regulators have generally branded companies as dominant when their share hits 60 percent of a defined market, according to Hovenkamp. In the United States, that standard typically kicks in at 75 percent. That's important, because Google's share of the search market is 95 percent in Europe, but just 75 percent in the United States, according to NetApplications.com.

European search engine market share,February 2011 NetApplications.com

What's more, U.S. trustbusters so far have investigated Google only when the company has made investments or acquisitions that have triggered antitrust inquiry. Neither the Justice Department nor the Federal Trade Commission has opened a broader investigation into Google's conduct. Some of Google's smaller rivals have suggested a coziness with the Obama administration--the president cited the company as a symbol of American innovation in his 2011 State of the Union address--as a reason why regulators have yet to initiate a formal probe.

If Microsoft can prevail on European regulators to force Google to share data there, an American investigation becomes less important. That's because Microsoft will be able to use any information European regulators might compel from Google to compete with it globally. And that's especially important in the United States.

 

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