The European Union's antitrust watchdog has accepted "far-reaching" concessions offered by Google to settle allegations it is abusing its dominant position in Internet searches, bringing the three-year-old case close to an end.
Google would significantly change the ways it displays some search results in Europe in favor of its competitors. But reaching a settlement will spare the company a longer antitrust procedure that could have resulted in fines of up to 10 per cent of the company's annual revenue, or about $5 billion.
EU Antitrust Commissioner Joaquin Almunia said he's "strongly convinced" the US company's proposals - its third attempt to address the competition concerns - are sufficient.
"This is an important step forward," he told reporters in Brussels.
Google's proposals will now be sent to the 18 original plaintiffs for evaluation before the Commission makes a final decision in the coming months. Initial reactions from plaintiffs and consumer groups were unanimously negative, but Almunia said he was confident the deal with Google will be upheld.
Under its latest proposal, Google will commit to display results from three competitors in a similar way to its own whenever it promotes its specialised search services like Google shopping, restaurant or hotel searches. It will also label more clearly search results stemming from its own services to allow users to distinguish between natural search results and those promoted by Google.
A shopping search for a gas grill, for example, would yield two boxes of the same size and position at the top of the search results page, one showing three "Google shopping results" and immediately to the left of it three results labeled "Alternatives", according to an example provided by the Commission.
At present, only Google's own results are displayed prominently above all other search results. The changes will also be valid for search results displayed on mobile devices.
"Without preventing Google from improving its own services, it provides users with real choice between competing services presented in a comparable way," Almunia said.
The results from three competing search providers would be chosen using Google's web search algorithm and, in most cases, other search services would have to pay for their placement through an auction mechanism - a solution that competitors and consumer groups alike criticized for strengthening Google's already dominant position.
The EU Commission last year threw out two sets of proposed concessions by Google because they were deemed insufficient.
"We will be making significant changes to the way Google operates in Europe," said Kent Walker, Google's general counsel. Google declined to discuss financial repercussions of the decision.
Once a settlement is reached, the concessions will be legally binding for five years across the 28-country European Union, the world's largest economy. The company, based in Mountain View, California, has a market share of about 90 per cent of Internet searches in Europe, compared with around 70 per cent in the US.
"The concessions are far-reaching and have the clear potential of restoring a level playing field with competitors, said Almunia. "No antitrust authority in the world has obtained such concessions."
The US Federal Trade Commission investigated Google in a similar case last year and decided not to take action.
Google's competitors, however, were not impressed. Internet commerce lobby group Icomp said the Commission should have given Google's competitors more time to examine and test the concessions.
"Without a third party review, Almunia risks having the wool pulled over his eyes by Google," the group said.
FairSearch, a Microsoft-led group of Google's tech competitors that includes firms like Oracle, Expedia and Tripadvisor, condemned the Commission's move as being "worse than doing nothing."
Its lawyer Thomas Vinje said the proposed commitments will "lock in discrimination and raise rivals' costs instead of solving the problem of Google's anti-competitive practices."
EU and US consumer groups were unhappy about the outcome.
"The deal as outlined would give Google more power over competitors than is now the case, ultimately limiting consumer choice and driving prices higher," said Consumer Watchdog's John M. Simpson.
Europe's BEUC consumer lobby lamented the Commission apparently accepted shortcomings only to achieve a settlement before the summer.
The term of Commissioner Almunia, who put a lot of personal credibility into achieving a settlement for his highest-profile case, expires in fall.
Google has already offered several concessions to the EU. It will give content providers an opt-out from its specialized search services, without being penalized regarding its ranking in normal Google searches. Google will also remove some exclusivity requirements in agreements with publishers and make it easier to move online advertising campaigns from its services to rivals' offerings.
A separate antitrust investigation on Google's Android operating system is still ongoing, Almunia said.