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Google Settles with EU

Sejuti Banerjea

Bloomberg reported yesterday that the European Union’s three-year anti-trust probe into Google’s (GOOG) operations had come to a close. The EU is satisfied that Google’s latest offer of concessions are “far-reaching and have the clear potential to restore a level playing field in the important markets of online search and advertising.”

Joaquin Almunia, the European Commission’s VP in charge of competition policy has been criticized by associations of competing companies like Microsoft (MSFT) and Expedia (EXPE) for being too lenient on Google, which will not be fined for its unfair practices. Almunia defended himself by saying, "The mission of the commission is to protect competition to the benefit of consumers and users and not to protect competitors."

So what are the specific concessions Google has agreed to? As regards its product listing ads, Google has agreed to add the findings of three competitors. This is expected to increase the variety for consumers and help them take decisions.

Competitors are of course unhappy, since they will be competing against each other to get themselves featured in this section. Not only that -- the places will be auctioned out to the highest bidders, meaning that Google will effectively pit its competitors against each other and make more money in the process.

The concessions on the advertising side could be more painful. Here, Google has agreed to release publishers from exclusivity agreements, so they will be able to use other search advertising platforms. Websites opting out of its specialized search will also be avoided. This has been done to help promote competing platforms such as Bing.

However, Google’s results will still be more comprehensive and therefore more useful, so companies may display a tendency not to move away from it.

The 18 companies opposing Google will be written to and will have the option to appeal, but since Google’s whole proposal will not be made public, it will not have to stand up to further public scrutiny. The limited disclosure has irked some, but Almunia seems to be in a hurry to close out the case before his term expires this fall. He has expressed his satisfaction with the outcome in no uncertain terms.

Google has a Zacks Rank #3 (Hold). A better-ranked stock in the sector is the Chinese company Baidu (BIDU), which carries a Zacks Rank #2 (Buy).

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