The case followed complaints by Microsoft and others over Google’s treatment of rivals’ web services in its search results. These companies argue that Google favors its own services, which are not clearly marked as such, and also that it unfairly locks advertisers onto its platform and scrapes content from third-party search and comparison sites without consent.

A recent leak outlined the terms of the proposed settlement deal, but here’s the official version:

To address these concerns, Google offers for a period of 5 years to:

(i) – label promoted links to its own specialised search services so that users can distinguish them from natural web search results,
- clearly separate these promoted links from other web search results by clear graphical features (such as a frame), and
- display links to three rival specialised search services close to its own services, in a place that is clearly visible to users,

(ii) – offer all websites the option to opt-out from the use of all their content in Google’s specialised search services, while ensuring that any opt-out does not unduly affect the ranking of those web sites in Google’s general web search results,
- offer all specialised search web sites that focus on product search or local search the option to mark certain categories of information in such a way that such information is not indexed or used by Google,
- provide newspaper publishers with a mechanism allowing them to control on a web page per web page basis the display of their content in Google News,

(iii) no longer include in its agreements with publishers any written or unwritten obligations that would require them to source online search advertisements exclusively from Google, and

(iv) no longer impose obligations that would prevent advertisers from managing search advertising campaigns across competing advertising platforms.

Authorities in the U.S. more-or-less cleared Google over similar complaints, but it’s important to note that Google’s share of the search market there is around 67 percent, whereas in the E.U, it’s around 90 percent. This gives it stronger market power in Europe, and forces the regulators’ hand somewhat (as do local laws).

A Q&A document, which outlines the Commission’s concerns in detail, points out that “it does not seem likely that another web search service will replace [Google] as European users’ web search service of choice.”

“In this context, it is important for the Commission to intervene in order to ensure that Google’s prominent market position in web search does not affect the possibility for other competitors to innovate in neighbouring markets, including in the long-term,” the document states.

The long-awaited deal is significant because it concludes a multi-year investigation by EU competition authorities, and because it is the first time that Google has bent to government demands over how it presents its search results. The details of the five-year deal, which has yet to be formally announced, were reported on Saturday by the Financial Times.

The terms of the deal

According to the FT, Google’s obligations vary depending on the nature of the search results. The most onerous conditions relate to listings like travel or restaurants where Google has a clear financial interest. In these cases, the company must identify any search listings that are Google-owned, and also provide at least three links to competing search engines. For other Google-related listings that do not produce direct revenue — weather or news, for instance — the company must provide a label.

The labeling will involve markers like boxes, separate page placement and “hover links.” A third party will monitor for compliance with these and other parts of the agreement.

The deal also requires Google to honor requests from news agencies and other sites not to “scrape” their content for use in its search listings, and to provide assurances that it won’t punish these sites by deleting them from the search listings altogether.

The agreement also addresses Google’s advertising practices by preventing it from imposing exclusive ad deals on its partners, and by making it easier for those partners to switch their ad campaigns to rivals like Microsoft and Yahoo.

The FT has a detailed account of the obligations here.

A victory for the EU, the public or Google?

When the deal is formally announced by EU regulators, we can expect to see considerable spin from Google and its competitors about what it really means.

At this stage, it’s clear that the deal represents the largest regulatory imposition to date over Google’s search business, which is still the core of the company and its prime money maker. This amounts to a victory for the EU and its high-profile competition commissioner, Joaquín Almunia.

While Google will hardly be celebrating the regulations, the company could have fared far worse. The five-year deal, which is legally binding, means Google avoids the sort of heavy fines and bitter regulatory battles that ensnared arch-rival Microsoft for well over a decade.

Europeans consumers, meanwhile, are likely to continue using Google as they have done so far. Despite repeated accusation by groups and companies tied to Microsoft that Google manipulates its search results, there is little actual evidence that the company blatantly puts its thumb on the scale.

The agreement may, however, serve to give Google critics some peace of mind by providing legal assurances that their worst fears won’t come true. And, as the deal is not finalized, critics and others will have time to comment on its provisions.

A different outcome from America

One of the most noticeable features of the deal is how much it differs from the outcome of a similar investigation carried out by America’s Federal Trade Commission.

In a January report, the FTC concluded a two-year antitrust inquiry by announcing that Google had done nothing wrong in the field of search. While the FTC did extract a pledge the company related to patent abuse, this was more a face-saving measure for the FTC than a burden on Google. (Here’s a plain English summary of the US investigation).

Different laws in the US and EU explain the divergent outcomes. American antitrust laws, for instance, focus on harm to consumers not competitors — a different line of inquiry to what happens in Europe. America also has more robust speech laws. Google argued strenuously that its search results are protected by the First Amendment; the FTC likely folded its cards rather than risk losing a court case over the question.

Google also controls a higher share of the search market in Europe than it does in the U.S. — more than 90 percent, compared with around 67 percent.

According to a source familiar with the investigations, Google was also more willing to settle in Europe because a legally binding EU commitment  does not expose the company to civil lawsuits.

In September, the European Commission preliminarily ruled the info firm may be abusing its dominant position in data feeds by stopping customers from mapping its Reuters Instrument Codes (RICs), which are used to identify stock tickers in multiple global markets, to alternative ticker services – a practise which would allow them to take company financial data from rivals. “These restrictions appear to create substantial barriers to switching,” the EC said.

On Thursday, Thomson Reuters, which disputes the complaint, proposed a solution – it will let customers use its codes to retrieve data from rival providers, but for an additional monthly license fee of at least $750.

The EC is putting the proposal out for feedback from affected companies. It says: ”The new proposal improves the previously offered commitments in several regards.”

Earlier, the EC had said: “Thomson Reuters has, in effect, locked in its existing consolidated real-time datafeed customers who have embedded RICs in their applications.

“As a result, other consolidated real-time datafeed providers are not able to compete effectively with Thomson Reuters’ on the market for consolidated real-time datafeeds.”

More: EC.

Late on Monday, just before the expiration of a deadline imposed in May by the European Commission, news hit that Eric Schmidt had sent a letter to the EC competition chief Joaquin Almunia. In it, he is said to have responded to a number of questions about Google’s behavior in the search market — offering what is described as a “settlement offer.”

Sounds like a step forward, right?

But hang on a minute: this is complicated stuff. So let’s try parsing this for a second.

In this case we’re talking about four main areas of Google’s activity that the regulator is concerned about:

• That Google prefers to link to its own services, like Images and Maps, instead of those provided by rivals
• That it copies material from rival services for its own travel and restaurant listings
• That it tries to tie sites to exclusive advertising agreements
• That it stops advertisers from exporting campaigns to other platforms

So what is Google actually proposing to alleviate these worries? We don’t know: the details of Google’s letter have yet to go public, and the only thing that European officials have said is that they are in receipt of the letter. So, despite speculation by legal experts who think Google could be offering to hold arbitration talks with any offended parties, we are still in the dark.

And even if Google is briefing some people on what it’s putting forward, its own opinion of what it’s saying may not tally with what Almunia’s office will make of it. The Mountain View company has shown recently that it has a habit of responding within the letter of the law but not necessarily the spirit: for example with a terse response to objections over its controversial new privacy policy in February.

There are plenty of reasons to think that Google’s proposals here may be substantive.

It wants to head off threats from other areas, such as investigations into Motorola Mobility and data usage. And then there’s the threat of a fine that could run into the billions of dollars. It doesn’t seem to want war, even if it’s on a countdown to conflict.

But fixing some of these problems could cut to the heart of its business, and that may not be something it is prepared to do. And let’s remember that European antitrust fines, even large ones, don’t always work. So before we all jump on the settlement bandwagon, let’s wait to see what Google’s really offering — because it may not be what we were thinking.

Despite earlier provisionally concluding News Corp’s part-owned BSkyB’s exclusive subscription pay-TV deals with Hollywood studios restricts competition, the UK’s Competition Commission has now reversed its decision, saying:

“Whereas in the past consumers wanting to watch recent movies on a pay-TV movie service had to subscribe to Sky Movies through a traditional pay-TV platform, the launch of new and improved movie services in the pay-TV market by Netflix and Lovefilm means that they now have other alternatives.”

That development – the unleashing of new content options over internet TV – was evident to those who have been watching the sector. But it was a a development the Competition Commission had to find for itself, during an inquiry that began almost two years ago.

Sky, led by CEO Jeremy Darroch (pictured), had declared itself “perplexed” by the December 2011 provisional ruling. After provisionally ruling against Sky Movies, the Competition Commission at one point mooted that BSkyB be forced to carry competing services from the likes of Lovefilm and Blinkbox on its own pay-TV box – something BSkyB would have contested vigorously.

But there were especially two factors behind the commission’s change of mind:

“In particular, Netflix launched in the UK in January 2012 and, since the original provisional findings, LOVEFiLM has enhanced significantly its Internet-distributed movie offering.

“As rival services increase the number of their subscribers, the barriers to them acquiring further first subscription pay-TV window rights will continue to fall.”

Indeed, Netflix CEO Reed Hastings had left the door open for the Competition Commission’s reversal when, whilst launching Netflix in to the UK in January, he told paidContent:

“We could just bid against them (Sky). We are not dependent on whatever the Competition Commission does.”

Now Hastings will have to front up. BSkyB will this summer launch Now TV, its own suite of on-demand and live TV channels including movies, over internet TV devices without requiring a full annual satellite subscription as its core business does.

“The CC expects consumer choice to increase further when Sky launches its own Internet-based service in the summer (branded Now TV), which will offer Sky Movies without the need to take any other pay-TV content or subscribe to Sky’s satellite platform.

Europe launched a massive antitrust investigation into Google in November 2010 to look into the company’s business practices, including whether it was gaming search results to favor its own products.

Monday’s announcement by a Commission official cited “fast-moving markets” to explain that it was important to achieve a “quick resolution” to the investigation. The official also said he had sent a letter to Google chairman Eric Schmidt that suggested the company propose remedies in the next few weeks.

The Commission’s letter was written no doubt with another American company, Microsoft, in the back of its mind. In the last decade, European courts and regulators Microsoft fined hundreds of millions of euros over the course of several multiyear antitrust investigations.

Today’s announcement thus appears to be a shot across Google’s bow to encourage it to settle rather than fight antitrust charges in court.

The four accusations cited by the Commission today relate to Google’s search listings and AdWords business. The underlying accusations against the company are being driven by Microsoft and by smaller companies that accuse Google of crushing competition.

While a settlement with the Commission might spare Google the ordeal of a trial, the company would still be the subject of ongoing investigations into other parts of its business. Google would also continue to face other regulatory headaches from national governments in France as well as a series of private lawsuits over its AdWords technology and advertising contracts.

Google has so far denied that its practices are anticompetitive and is likely reluctant to submit to measures that would force it to share more of its business practices with regulators and rivals.

The full text of today’s statement by Joaquín Almunia, Vice President of the European Commission responsible for Competition Policy, can be found here.

(Image by Maxx-Studios)