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What's Next for Google and the EU? It Could Be a Quick Settlement.

Google has pledged to combat the EU charges, but veterans of similar legal battles expect the company to arrive at a settlement soon.

Johannes Jansson/norden.org

Google’s antitrust standoff with the European Union, a tumultuous legal tug-of-war begun in February 2010, reached a climax this morning with the EU laying the foundation for a formal complaint against Google for abusing its market position.

Now what?

Publicly, in a pair of statements echoing its internal memo, Google said it is readying a challenge to the accusations. But sources familiar with earlier EU antitrust cases against tech behemoths such as Microsoft and Intel say Google’s best bet is to settle, and do it soon.

At the onset, the company’s defensive strategy is to downplay its dominance. Google released figures showing its popularity in European commerce searches, the center of the EU claim, is outmatched by Amazon, eBay and local rivals. It cited Yelp’s ascent in mobile search.

It’s an attempt to undercut the EU’s case by proving that the Google services running parallel to search, like its shopping and travel aggregation products, don’t share its ubiquity. Microsoft tried a similar tactic when it faced EU charges for restricting browsers for Windows users, said multiple sources familiar with the company. And it did not hold water, even though Microsoft, as mobile exploded, quickly ceded its dominance.

“We learned from the commission: You can’t fight them,” said one executive from Microsoft, which has shelled out fines to the EU totaling over $1.5 billion since 2012. “It’s better to put it behind you.”

European regulators are tougher on tech giants than those in the U.S., setting a lower bar for what qualifies as monopoly abuse or anti-competitive practices. However, a settlement may demand Google make costly adjustments to its search business, something it has done in the past. In 2014, Google reached an initial agreement with the EU on the antitrust case, pledging to give rivals more search real estate whenever it promotes one of its in-house products, like Google Shopping. (Ultimately, that concession failed to appease the agency, which renewed the case after fielding complaints from officials in France and Germany.)

In addition to dents to its search ads, the case will involve massive legal fees, particularly as Google must now prep for an investigation into Android. But that’s not the most burdensome cost; Google has plenty of cash for its lawyers. A larger concern may be the drain on its executives. Lately, CEO Larry Page has been increasingly steeped in policy tussles such as the EU complaint, according to one media executive close to Google.

The company has pushed for clean breaks from the EU charges before. A source familiar with the regulator’s cases said Google moved more swiftly with the 2014 compromise than Intel and Microsoft had in the past.

But it did so with the prior EU antitrust commissioner, Joaquín Almunia, who left the role in November. His successor, Margrethe Vestager, has been markedly more aggressive. “[She] may be more inclined to drive solutions on her time frame rather than wait out for a settlement as her predecessor,” wrote Paul Lugard, a partner with Baker Botts, an antitrust specialist based in Brussels.

She may also, according to another legal expert familiar with the EU, be inclined to push for the maximum fine if a case proceeds — a tenth of Google’s annualized revenue, or around $6.6 billion.

That speaks to another defensive maneuver Google is deploying: Casting the case as political ax-grinding. Advocacy groups in the U.S. have praised the EU decision, using it to criticize the FTC and other federal watchdogs for not following suit.

But as it brings the case against Google, the EU may simultaneously be trying to assuage concerns that it is hostile to American tech businesses. It’s a sentiment taking shape in Washington, captured neatly by President Barack Obama in his February interview with Re/code.

“In defense of Google and Facebook, sometimes the European response here is more commercially driven than anything else,” said Obama. “As I’ve said, there are some countries like Germany, given its history with the Stasi, that are very sensitive to these issues. But sometimes their vendors — their service providers who, you know, can’t compete with ours — are essentially trying to set up some roadblocks for our companies to operate effectively there.”

In launching its broadside against Google, the EU does not see it that way. “I will approach this issue in a fair and objective way,” Vestager said, as she laid out the EU’s case. “It’s for the sake of consumers and for the sake of innovation.”

This article originally appeared on Recode.net.