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EU Trouble Looms For Google As Lawsuit Seeks $31 Million Over AdWords

Jeff Roberts

A French company has filed a new claim to reflect the harm it says it incurred after Google (NSDQ:GOOG - News) unplugged it from its AdWords program. The bellwether case is likely to go to trial in Paris in January and comes at a time when European antitrust regulators are tightening their noose around the search giant.

The French claim grows out of a 2010 incident in which Google abruptly terminated the AdWords account of NavX, a company that lets drivers download the location of speed traps, on the grounds the sale of radar detectors appeared to violate French law and Google’s advertising policy.

The case made headlines after the French Competition Authority issued an interim order in June 2010 that required Google to clarify its ad policy and to reinstate NavX’s AdWords account. The regulator closed the case four months later after Google agreed to provide notice before terminating accounts and to provide guidelines about which sort of ads it considered inappropriate.

The NavX ruling, which technically applies only to radar companies, also figured prominently in a French report last December that suggested Google was using its dominant market position to harm other competitors.

The French Competition Authority doesn’t award damages but NavX is hoping to use its findings to bolster its cash claim against Google in commercial court. To this end, the company is trumpeting a new special assessment that purportedly shows how much revenue it lost as a result of being delisted from Google Adwords. By its reckoning, NAVZ is owed 20 million euros for the incident, which caused it to lay off 12 of its staff, plus another 3 million euros in moral damages (about $31 million).

The case is significant because it could provide a window into the value of Google advertising. But more importantly, it will test the waters for Google’s legal exposure in Europe regarding its AdWords practices. The company has so far fought off nearly a dozen lawsuits in the United States, some of them reportedly tied to Microsoft (NSDQ:MSFT - News), related to various aspects of its lucrative Adwords business. But it not fare so well in Europe.

European courts have repeatedly shown themselves hostile to the US search giant, including a series of Belgian rulings that fined Google for news-related copyright infringement. If NavX prevails in its Paris lawsuit, the case could open the floodgates for a series of similar claims. The lawsuit, which a French business paper predicts will go to trial in January, is based on both breach of contract and antitrust claims.

The case also comes at a time when the European Commission is completing a massive inquiry into Google’s business practices. The French regulator described many of these, including alleged manipulation of search rankings, in its report while also declaring that it would wait to take action on the basis of the EC’s findings.

This week, Google’s chairman, Eric Schmidt, met with top European competition regulators. As the Guardian reports, the company faces large fines and new regulations if the EC concludes it has abused its dominant market position. Google may be in a tight spot given reports of a 400-page “statement of objections” and claims that it committed “multiple and multifaceted abuses.”

Google declined to comment for this story.


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