Google Makes New Offer to Settle Its European Union Antitrust Case

BRUSSELS — Google made a second try last week to settle a three-year-old antitrust case with the European Union, officials said. Neither side released details of the offer, however, and rivals continued to call for the American technology company to cede more control of its Internet search and advertising business.

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The latest offer by Google was acknowledged in Italy on Sunday by Joaquín Almunia, the European Union’s competition commissioner. Mr. Almunia has been seeking a settlement with the company since the early stages of the case, which formally began in 2010. The case revolves around claims that Google has abused its dominance in the Internet search and advertising field by, among other things, favoring its own products and services in search results. Google powers 90 percent of searches in many European markets; its share in the United States is closer to 70 percent.

“Once we have completed our analysis, once we will check that these new proposals are able to eliminate our concerns, we will tell Google what to do,” Mr. Almunia, referring to the offer, said in an interview with Bloomberg Television.

Mr. Almunia is under mounting pressure from Google’s rivals seeking to prolong its legal entanglements in Europe and toughen the terms of any deal.

In July, he was forced to reject a preliminary settlement struck with Google after industry groups complained that aspects of the deal could strengthen, rather than loosen, Google’s hold in Europe. That proposal, the result of Google’s first offer of a settlement, would not have required the company to change the algorithm, or formula, that produces its search results. But it would have been the first time Google had agreed to legally binding changes to its search results, and it went much further than the minor concessions it made to settle a case before the United States Federal Trade Commission.

The latest proposal by Google addressed Mr. Almunia’s “areas of concern,” Al Verney, a spokesman for the company in Europe, said on Monday. “We continue to work with the commission to settle this case,” said Mr. Verney, who declined to describe the contents of the offer.

Mr. Almunia said over the weekend that he would prefer a swiftly negotiated settlement with Google because that would be a better way of regulating the fast-moving technology sector. But he said he could still issue formal charges against the company if a deal failed to materialize.

With the case still open, Google faces a serious challenge in Europe, where it risks far-reaching orders demanding it change its business practices and potentially a fine of up to $5 billion.

Leaders of industry groups said that the latest offer by Google should be carefully tested in the marketplace to assure that the remedies addressed complaints that the company favored its own products in search results.

“We must hope after so much prevarication that this time Google’s proposals represent a genuine attempt to address the concerns identified,” said David Wood, the legal counsel for Icomp, an industry group backed by Microsoft and a number of other companies. The previous proposals were, he said, “manifestly defective.”

In European Antitrust Fight, Google Needs to Appease Competitors

The European Commission on Wednesday formally said for the first time that Google’s proposal for addressing antitrust concerns did not go far enough, and demanded that it come up with more far-reaching remedies or potentially face a fine of up to $5 billion.

It was a significant setback for Google, which in April struck a deal with the commission to settle its three-year antitrust investigation by making certain changes in the way it displays answers to search inquiries. But the deal was contingent on feedback from Google’s rivals. The commission determined that the proposal was inadequate, and said the company needed to do more to address rivals’ concerns.

The about-face followed an outcry from Google competitors during the market testing phase of the inquiry, in which the commission asked for feedback on the proposal.

“What they discovered in the market test was that overwhelmingly, everyone said the settlement was inadequate and doesn’t solve the problem,” said a person with knowledge about the feedback competitors gave the commission, but who spoke anonymously because the filings were not public.

Joaquín Almunia, the European Union competition commissioner, said at a news conference, “I concluded that the proposals that Google sent to us months ago are not enough to overcome our concerns.” He said he had written to Eric E. Schmidt, Google’s executive chairman, “asking Google to present better proposals.”

A Google spokesman, Al Verney, said on Wednesday that it would “continue to work” with the commission to settle the case. He added that Google was confident that its earlier proposal “clearly addresses” the commission’s concerns.

Mr. Almunia did not give Google a deadline for presenting a new set of concessions, according to a person with direct knowledge of Mr. Almunia’s letter who spoke anonymously. So the case, which both sides had hoped to close this year, could continue for several months or more.

The main issue is the way Google, which, according to comScore, handles 86 percent of Web searches in Europe, orders its search results. Regulators have been investigating whether Google favors its own services — like travel, local business, mapping and shopping — over those of competitors. Regulators have also examined whether it disadvantaged competitors by including material from other Web sites in search results and whether its advertising business complied with European antitrust law.

Google managed to avoid antitrust charges in the United States, where it has two-thirds market share, after a two-year investigation of similar issues. Google has faced a more hard-line approach in Europe, where critics have accused the antitrust authorities of relying too much on outside complaints from competitors rather than on evidence of consumer harm. That is somewhat of a sore point for European officials, who insist they share the same goals as the Americans when it comes to consumers.

In April, Google proposed to change its search results to clearly label results from some of its own properties, like Google Plus Local, and in some cases to show links from rival search engines. It also proposed giving competitors more control over how it used information from their sites in its vertical search results and making it easier for small businesses to transport their ad campaigns to other search engines.

The proposal was the first time Google had agreed to legally binding changes to its search results, and went much further than the minor concessions it made to the Federal Trade Commission in its inquiry.

Still, the proposal would not have required Google to change the algorithm that produces its search results. Also, if it had been accepted, Google would have escaped a possible fine of about 10 percent of its annual global revenue of about $50 billion and a formal finding of wrongdoing that could limit its ability to expand in Europe.

James Kanter reported from Brussels, and Claire Cain Miller from San Francisco.

Antitrust Scrutiny of Telecoms in Europe

BRUSSELS — European Union antitrust authorities said on Thursday that they had investigated major telecommunications companies, including Deutsche Telekom of Germany, on suspicion that the companies were using their dominant market positions to limit Internet providers’ access to their networks.

The European Commission, the executive arm that oversees antitrust policy across the 28-member bloc, did not identify the companies or say how many had been inspected in the operation, which took place Wednesday.

But Deutsche Telekom confirmed on its Web site that a raid had occurred, adding that e-mails and other data had been seized. Reuters reported that the authorities had also raided the offices of Orange of France and Telefónica of Spain.

Big telecommunications companies provide the networks that link smaller sites, like movie-streaming services, to the Web, effectively acting as a gateway. In a statement, the commission said it was concerned that the companies may have violated antitrust rules “that prohibit the abuse of a dominant market position.” Those companies provide services “crucial for the functioning of the Internet” so consumers can gain access to “Internet content with the necessary quality,” it said.

Inspections are a preliminary step in an antitrust investigation. Companies found to have broken European Union competition laws can be fined as much as 10 percent of their annual global sales.

Cogent Communications, a company based in Washington that sells Internet access to third parties, said the inspections were probably linked to complaints it had filed in Germany against Deutsche Telekom and in France against Orange, previously known as France Télécom.

Dave Schaeffer, the chief executive of Cogent, said by telephone that the major telecommunications companies in France, Germany and Spain were impeding his business by refusing to upgrade congested networks. The result, he said, was that services for Cogent clients like Netflix, the film-streaming service, or YouTube, the online video-sharing site, would be slowed or difficult to access.

He cited Dailymotion, the French video-sharing site that is owned by Orange. “For example, Orange owns the direct competitor to YouTube,” Mr. Schaeffer said. Orange “wants French consumers to use Dailymotion instead of YouTube.”

The French state holds a stake of about 27 percent in Orange. This year, the government of President François Hollande expressed its objections to plans by Yahoo to buy a controlling stake in Dailymotion.

Mr. Schaeffer said his company had discussed the matter with the commission but that Cogent had not submitted a formal complaint. He said national authorities in France and Germany had rejected his company’s complaints against Orange and Deutsche Telekom but that Cogent was appealing the French decision. Cogent has also had difficulties in Spain but has not filed a complaint there, he said.

Deutsche Telekom said on its Web site that it was “surprised by the initiation of further investigations by the commission into the global market for Internet traffic, since previous allegations have all turned out to be unfounded.”

“Similar investigations carried out by national regulatory bodies, who have also dealt with the issue in great detail, have also been abandoned,” it said. “This market is dominated by major providers based in the United States, which means we are not the right target for these investigations.”

Orange and Telefónica could not be reached for comment.

Apple Executive Defends Pricing and Contracts in Antitrust Case

“Wow, we have really lit the fuse on a powder keg,” Mr. Jobs wrote in the e-mail dated Jan. 30, 2010, to Eddy Cue, Apple’s senior vice president of Internet software and services.

The e-mail was brought up as evidence during the second half of Mr. Cue’s testimony in a Manhattan courtroom on Monday, where much of the discussion focused on whether Apple intended to help the publishers raise Amazon’s prices.

Mr. Cue testified on Monday that Mr. Jobs’s e-mail was not a memo congratulating him about how Apple’s entry into the e-book market affected Amazon, causing it to switch to a business model called agency pricing, where the publishers, not the retailer, set the price of the books. Mr. Cue said Mr. Jobs was remarking on the company’s ability to “cause ripples” in the e-book industry, which was then largely dominated by Amazon.

While Mr. Cue conceded that some e-book prices had gone up as a result of agency pricing, he noted that many titles might not have become available in any digital store at all if Apple had not introduced agency pricing to the market. He said he had learned from his meetings with publishers that they were unhappy with Amazon’s uniform $9.99 pricing for e-books and that they were planning to use a tactic known as windowing — delaying the release of an e-book until after the more expensive hardcover had been in stores for a while.

Mr. Cue testified that both he and Mr. Jobs believed that “withholding books is a disaster for any bookstore.”

The Justice Department was not persuaded. Lawrence Buterman, a Justice Department lawyer, asked Mr. Cue whether he was aware that only 37 e-books had ever been windowed.

“The number doesn’t matter,” Mr. Cue said. “What matters is which books. Thirty-seven could be a huge number if it’s the right books.”

Both parties showed their evidence on a projector screen. Apple’s legal team used a MacBook to shuffle between evidence documents, stacking them side by side in split screens and zooming in on specific paragraphs.

In contrast, the Justice Department’s lawyers could show only one piece of evidence at a time. One video that Mr. Buterman played as evidence failed to produce the audio commentary needed to make his point.

In its antitrust case brought a year ago, the federal government is trying to cast Apple as the ringmaster that conspired with five big book publishers to raise e-book prices. The publishers have all settled their cases.

On Monday, the Justice Department’s lawyers homed in on a condition in Apple’s contracts with the publishers: the “most favored nation” clause, which required publishers to allow Apple to sell e-books at the same price as the books would be sold in any other store. Apple has said this clause existed to guarantee that Apple customers got the lowest e-book prices. But Mr. Buterman argued that it defeated Amazon’s ability to compete on price, and that it left Amazon with no choice but to switch to the agency model while allowing the publishers to raise prices.

Mr. Cue said he disagreed. He noted that Amazon had 90 percent of the e-book market before Apple entered the game.

“Amazon could have negotiated a better deal,” he said. “They had a lot more power.”

Lawyers for Apple and the government spent much of the hearing debating whether the e-mails exchanged between Apple executives and publishers illustrated Apple’s intent to help the publishers force Amazon’s hand. In one e-mail sent to Mr. Jobs, Mr. Cue was reviewing his meeting with the publishers, saying they were interested in solving the “Amazon issue.”

Mr. Cue said he was referring to the publishers’ ability to price books above Amazon’s uniform price of $9.99 in Apple’s iBookstore. Apple had proposed price caps of $12.99 to $14.99 for new releases. But he said this did not refer to enabling the publishers to force Amazon to raise prices, too.

E-Book Antitrust Case Against Apple to Begin

But the evidence in the case will not just determine whether Apple has violated antitrust laws. It will also tell a broader story of how the introduction of e-books created upheaval in the publishing industry — with guest appearances by major players like Amazon and Barnes & Noble and e-mails from the late Steven P. Jobs, Apple’s former chief executive.

In the case, brought a year ago, the Justice Department accused Apple and five book publishers of conspiring to raise e-book prices. The idea, the government said, was to allow publishers to set their own prices rather than letting retailers do so.

Their motivation, according to the Justice Department, was to defend themselves against Amazon, which was setting the price of most new e-books at $9.99 and becoming increasingly dominant in the market. Simon & Schuster, HarperCollins and the Hachette Book Group settled the day that charges were filed; Penguin and Macmillan settled months later.

Complaints by Amazon, which now controls at least 60 percent of the e-book market, are widely believed to have incited the investigation. Amazon declined to comment.

After the lawsuit was filed, the expectation was that e-book prices would drop sharply; the publishers that settled agreed to allow retailers to discount their e-books for two years. But the price drop has still not happened.

A government victory against Apple, which would not involve monetary damages, might also not affect e-book prices.

“Are consumers going to be better off as a result of any government win here?” said Charles E. Elder, an antitrust lawyer at Irell & Manella, which is not involved in the case. “That’s going to have to be seen depending on what happens to book publishing generally. It’s in trouble, and e-books are either the savior or they’re going to hasten the demise of book publishers.”

Apple declined to comment, but has said it has done nothing wrong.

“The e-book case to me is bizarre,” Timothy D. Cook, Apple’s chief executive, said during an onstage interview at a business conference last week in Southern California. “We’ve done nothing wrong there, and so we’re taking a very principled position of this. We were asked to sign something that says we did do something, and we’re not going to sign something that says we did something we didn’t do. And so we’re going to fight.”

Apple certainly has the money to fight, and a brand to protect, at a time when its stock is sagging and its tax practices and manufacturing processes are under scrutiny. Yet it is bigger than ever — with hundreds of millions of its iPhones and iPads in the hands of customers all over the globe.

The trial, before Judge Denise L. Cote of United States District Court, is expected to feature testimony from chief executives from the five publishers, who will offer a window into their world of fierce price negotiations. But the star witness may well be Mr. Jobs, even though he died in October 2011.

In the case, the government cast Apple as the “ringmaster” of the conspiracy. It said that when the company entered the e-book industry in 2010 with the introduction of the iPad, it wanted to pressure Amazon to raise its prices above its uniform $9.99 for new e-books.

At the time, publishers’ agreements to sell e-books were made under the so-called wholesale model of print books; publishers charged retailers about half the cover price for a book, and the retailers then set their own prices. The government said Mr. Jobs had persuaded publishers to agree to agency pricing, which allowed publishers to set their own prices for e-books, giving Apple a 30 percent commission for books sold in its online store.

The publishers’ contracts with Apple included a “most favored nation” clause, requiring that no other retailer sell e-books for a lower price; if they did, the publisher would have to match the price of the e-book in Apple’s store. That, the Justice Department said, resulted in higher prices that harmed consumers.

Apple Fights Back in E-Book Antitrust Case

That is one of several factors that seem to be motivating Apple’s vigorous defense against a Justice Department antitrust lawsuit accusing the company of conspiring with five of the largest publishing houses to fix prices on electronic books, according to people close to the case.

Unlike the five publishers, all of which have settled the case, filed in April 2012, Apple is aggressively disputing the government’s assertions that Apple and the publishers wanted to force Amazon, which controlled 90 percent of the e-book market before Apple entered it, to raise its prices, according to court papers filed this week. A trial is scheduled to begin June 3 in Federal District Court in New York.

Among other defenses, Apple says that both Amazon and the publishing companies were already contemplating a move to a different pricing model in 2009, before Apple entered the e-book business. Apple cites one Amazon executive who referred in an e-mail to the idea that Amazon got publishers to accept what it wanted all along as “Jedi mind tricks.”

Apple, whose 2010 introduction of the iPad corresponded with its opening of a digital bookstore, denies that it tried to convince publishers to enforce a regime that would allow them to set their own retail prices for books, above the $9.99 price that Amazon was then charging.

In addition, Apple says that the Justice Department has selectively edited and distorted e-mails between executives of Apple and the publishers.

“Apple injected much-needed competition and innovation into the e-book business,” said Orin Snyder, a lawyer at Gibson, Dunn & Crutcher who represents Apple. “The DOJ’s case is based on fictions and incomplete quotations. The actual evidence proves that Apple did not conspire to fix prices in the e-book business. We look forward to trial.”

The Justice Department accuses Apple of its own selective quotation. And, it said, the evidence shows that the publishing companies threatened to withhold books unless Amazon allowed them to set higher prices and that Apple “encouraged them to do so.”

Apple seems particularly peeved about the government invoking e-mails of its former chief executive, Steven P. Jobs, to assert its case, saying the government’s selective editing of those e-mails deliberately distorts Mr. Jobs’s intentions.

The government’s court papers quote from an e-mail that Mr. Jobs sent on Jan. 24, 2010, to James Murdoch, who as head of News Corporation oversaw its publishing company, HarperCollins. That was three days before the introduction of the iPad, as Apple was furiously negotiating deals with publishers that would allow it to introduce its bookstore on the same day.

Apple says the government left out of its papers the fact that Mr. Jobs said Amazon might have the right price for e-books already, at $9.99. “Maybe they are right and we will fail,” Mr. Jobs wrote.

Taken in total, Apple said, the e-mail “shows a new entrant with no market power proposing an alternative business model to HarperCollins, and candidly recognizing that Apple has no power to predict or influence other retailers,” Apple said in pretrial papers.

Sarah Rotman Epps, an analyst at Forrester who follows the publishing industry, said Apple still has a relatively small share of the e-book market.

“Even though they have a big brand, their actions have had relatively little impact on the overall industry,” Ms. Rotman Epps said.

Since Apple’s entry, e-book prices have gone down, the company said, with the average retail price of an electronic book falling 63 cents since April 2010, from $7.97 to $7.34.

Michael Cader, the creator of Publishers Lunch, an industry publication, said there were multiple ways of interpreting what had happened to e-book prices since the start of Apple’s iBookstore. He said at least part of the decline might reflect the exponential growth in older books, self-published books and books from an array of small and digital-only publishers, many of which are often sold for as little as 99 cents to $3.

Edward Wyatt reported from Washington, and Brian X. Chen from San Francisco.

This article has been revised to reflect the following correction:

Correction: May 18, 2013

An article on Friday about Apple’s battle with the Justice Department over charges of price-fixing on e-books characterized incorrectly a comment by Michael Cader, of the industry publication Publishers Lunch, on the decline in e-book prices. He speculated that the growth in older books, self-published books and books from small and digital publishers might account for part of the decline; he did not state that as a fact.

Rivals Invited to Review Proposed Google Antitrust Settlement

The European Commission said that it had begun so-called market testing to see whether the remedies addressed complaints that Google favors its own products in search results.

The step also signals that Google, having avoided antitrust charges in the United States, has offered concessions that are acceptable to the commission and that would allow the company to avoid a guilty verdict and a huge fine in Europe.

“Now we have concrete proposals on the table which meet the necessary standards for us to submit to the public and to seek feedback on,” said Antoine Colombani, a spokesman for the European Union’s competition commissioner, Joaquín Almunia.

The testing would last a month, and a final settlement — which both sides have been working toward since late 2010 — could be agreed upon after the summer in the best case, Mr. Colombani said.

Google could still face a fine of as much as 10 percent of its global annual sales, which were nearly $50 billion last year, if it broke its promises. But the deal would allow Google to escape the long, expensive antitrust battles that Microsoft fought in Europe over its media player and server software. It paid large fines and agreed to regulatory oversight and changes in products.

A major element of Google’s offer to settle the case is to show links to the Web sites of competitors who offer specialized search services. In cases where Google sells advertising next to results for specific industries like restaurants and hotels, Google would provide a menu of at least three options for non-Google search services.

In addition, Google would label results pointing to its own services — like Google Maps, if they display local businesses — as Google properties and separate them from general search results with a box, though they would still appear in the normal list of results.

Before it reached a deal with the commission, Google was under pressure to make more concessions. A prominent consumer group and groups with links to Microsoft condemned Google for not making sufficient changes, and some companies asked for a longer period of market testing.

Some complained that the new rules would apply only to Google’s national domains because Google users in Europe can also use the company’s global Web site, which ends in .com, rather than .fr in France. Google does not plan to make any of the changes to the site ending in .com, so users in the United States will not see them.

Asked whether the current offer by Google was final, Al Verney, a spokesman for the company, said only, “We continue to work cooperatively with the commission.”

Google’s agreement would be legally binding for five years, and a third party approved by the commission would be put in place to ensure compliance.

During market testing, other companies in the industry will be permitted to comment on the proposal. Google’s rivals, including Microsoft, are expected to submit comments. Any settlement can be appealed to the commission. Some major technology rivals have demanded a longer period of market testing before the commission closes the case.

“Google has taken a year to develop the proposal released today,” said Thomas Vinje, chief lawyer for FairSearch Europe, a group of Google competitors including Microsoft, Nokia and Oracle. “We think it’s only fair that outside experts have more than a month to help the commission market test the long-lasting effects of Google’s proposal on consumers and innovation.”

Mr. Vinje said the changes did not go far enough. “Google’s own screen shots in its proposal shows it seeks approval to continue preferential treatment for its own products,” he said.

Other rivals took an even tougher line, and seemed likely to demand more concessions.

“Instead of promising to end its abusive practices, Google’s proposal seems to offer a halfhearted attempt to dilute their anticompetitive effects by labeling Google’s own services and throwing in some token links to competitors’ services alongside them,” said Shivaun Raff, a co-founder of Foundem, a British comparison-shopping site that was one of the original complainants in the case. “Neither measure will make a dent in Google’s ability to hijack the traffic and revenues of its rivals.”

Claire Cain Miller contributed reporting from San Francisco.

Executives Press European Antitrust Chief on Google

The letter, organized by one of the original complainants in the case, a British online shopping service called Foundem, asked the E.U. competition commissioner, Joaquín Almunia, to take a hard line in ongoing negotiations with Google to produce concessions that would protect small European competitors.

Google, which is used for more than 80 percent of the searches conducted in Europe, could face fines of up to $5 billion or 10 percent of its 2012 revenue if a settlement is not reached.

The commission, which has expressed concerns about Google’s use of algorithmic standards to rank its own services ahead of those of some competitors, is studying Google’s own proposals to avoid litigation.

“We are becoming increasingly concerned that effective and future-proof remedies might not emerge through settlement discussions alone,” said the letter signed by the group. “In addition to materially degrading the user experience and limiting consumer choice, Google’s search manipulation practices lay waste to entire classes of competitors in every sector where Google chooses to deploy them.”

Al Verney, a Google spokesman in Brussels, declined to comment specifically on the letter, saying “We continue to work cooperatively with the European Commission.”

Antoine Colombani, a spokesman for Mr. Almunia, said by e-mail that competition officials were reviewing the proposals from Google. If a settlement were reached, Mr. Colombani said, there would be no legal finding that Google had infringed on E.U. law.

Mr. Almunia, a Spanish jurist, asked Google in December to submit its final proposals to settle the case, which began in February 2010 when complaints were filed in Brussels by Foundem; Ciao, a German price comparison site; and Ejustice.fr, a French legal advice site.

The letter was signed by senior executives at six European online businesses: Foundem, and Streetmap EU, both in Britain; Twenga, a French-based price comparison site; and Visual Meta, Hot Maps Medien, and Euro-Cities, three German online businesses.

Executives at two U.S. Web businesses, Expedia and TripAdvisor, also signed, as well as the directors of three German associations representing the publishers of newspapers, magazines and independent telephone books.

Mr. Almunia has favored negotiated settlements over protracted litigation in his three years as the top antitrust official in Europe. Google has argued that it is impossible to exert monopoly control over the huge online marketplace, and has criticized some of the complainants for belonging to professional groups set up by its archrival, Microsoft.

Microsoft had urged the U.S. Federal Trade Commission to bring a suit against Google over its search engine practices, but the U.S. agency closed its own two-year investigation in January after Google agreed to make voluntary changes to its practices.

Heiko Hanslik, the president of the German Association of Independent Directory Publishers, known by its German acronym VfT, said his members worried that European officials would not take a hard line in their negotiations with Google. The European inquiry focuses on complaints that Google favors its own competing services in the placement of search results.

Mr. Hanslik, whose association represents German publishers of online and print directories and telephone books, said a typically relevant Google search — for example, to find a painter in Saarbrücken — would not turn up a directory of one of his members until the fourth page in search results on Google. “Google is exploiting its market position here in Europe and many, many online retailers will not be able to survive if this isn’t fixed,” he said.

Mr. Almunia has been cautious about his negotiations with Google. In February 2011, he met with Eric Schmidt, then the chief executive of Google, who asked him to give the search engine a chance to propose its own solutions before Mr. Almunia issued a so-called statement of objections, a legal instrument used by the European Commission to lay out its antitrust case and set the clock running for a response from the company.

Last May, Mr. Almunia asked Google to present suggestions for resolving the conflict. In the autumn, he asked Google for more information and eventually gave the company until the end of January to propose solutions.

Google has provided those suggestions, according to one person with knowledge of the situation who was not authorized to speak publicly. Mr. Almunia and his staff are examining them, but it is unclear whether the E.U. agency is close to reaching a decision on whether to accept the proposals and settle, or proceed with a prosecution.

In their letter, the complainants, including Foundem, made it clear that they would prefer Mr. Almunia to issue a statement of objections, and then, with greater leverage under the threat of fines and legal sanctions, enter negotiations with Google.

“We will respectfully withhold judgment on Google’s proposed commitments until we have seen them, but Google’s past behavior suggests that it is unlikely to volunteer effective, future-proof remedies without being formally charged with infringement,” the group wrote in its letter. “Given this, and the fact that Google has exploited every delay to further entrench, extend, and escalate its anti-competitive activities, we urge the Commission to issue the Statement of Objections.”

Mr. Almunia’s decision will have far-reaching consequences in Europe “because it will set standards for the digital world,” said Christoph Fiedler, the managing director for media policy at the German Federation of Magazine Publishers, known by its German acronym VDZ.

James Kanter in Brussels contributed reporting.

Europe Fines Microsoft $732 Million Over Antitrust Law

Joaquín Almunia, the E.U. competition commissioner, said the Union had been “naïve” to put Microsoft in charge of monitoring its adherence to the deal it agreed to in 2009, when his predecessor let the company escape a fine in exchange for offering users of its Windows software a wider choice of Internet browsers.

But Mr. Almunia insisted that the enforcement of settlements could be sufficiently strengthened to ensure that companies abide by their pledges, and he signaled that he would not retreat from his goal to use such deals to avoid lengthy legal battles with major companies in swiftly evolving technology markets.

Settlements “allow for rapid solutions to competition problems,” Mr. Almunia said. “Of course such decisions require strict compliance” and the “failure to comply is a very serious infringement that must be sanctioned accordingly.”

Microsoft agreed to alter Windows for five years to give users of newly purchased computers in Europe a ballot screen that would allow them to easily download other browsers from the Internet and to turn off Microsoft’s own browser, Internet Explorer.

Microsoft told the commission at the end of 2011 that it had been abiding by the deal. “We trusted the reports about the compliance,” Mr. Almunia said Wednesday.

In fact, the company had failed to include the ballot system in certain products starting in May 2011, affecting more than 15 million European users. The lapse came to light in July 2012, after rival companies reported its absence.

“We take full responsibility for the technical error that caused this problem and have apologized,” Microsoft said Wednesday. “We have taken steps to strengthen our software development and other processes to help avoid this mistake — or anything similar — in the future.”

A Microsoft spokesman declined to comment on whether the company would appeal, but it seemed unlikely, as the company prefers to focus on its rivalry with Google. Microsoft is among the companies that have complained about Google’s business practices to Mr. Almunia

The fine comes as Mr. Almunia’s office is negotiating with Google to try to resolve the commission’s concerns about the way it runs its Internet search service and its advertising business.

Mr. Almunia said Wednesday that attempts to reach a deal with Google were continuing and were unrelated to the decision taken against Microsoft. But he made it clear that the substantial fine was meant to serve as a warning to others.

If Google eventually settles, it “will have to exert extra care to not give the impression that it is deviating from the commitments that such a settlement will entail” to avoid a similarly high fine, Mario Mariniello, a research fellow at Bruegel in Brussels and a former antitrust official, wrote in a blog post.

But Mr. Almunia said some of the blame rested with regulators and indicated that the commission might never again, in effect, put the fox in charge of the henhouse.

“Maybe we should have tried to complement the responsibilities of the reports about the implementation, but we only reacted when we received the first complaint,” Mr. Almunia said. “Maybe in 2009 we were even more naïve than today.”

He said the commission would be more inclined to use trustees to police future settlements, would be more precise in defining their responsibilities and would “pay even more attention to the reports that the monitoring trustees will send to us.”

Companies that agree to settlements usually pay for trustees, but the choices are vetted for conflicts of interest, according to E.U. officials.

Since 2003, when the current settlement rule was introduced, the commission has taken 29 such decisions. But there were no appointments of independent monitoring trustees in the majority of those cases, including in a settlement with I.B.M. in late 2011.

Mr. Almunia said he had not yet decided whether to appoint a trustee to oversee whether Microsoft was adhering to the rest of its compliance period in the browser case, which runs to 2014.

Microsoft has been a special case in the history of E.U. antitrust enforcement, racking up a total of €2.26 billion, or $3.4 billion, in fines over about a decade.

Microsoft was the first company to pay so-called periodic penalties for failing to follow an order to make it easier for rival products to communicate with powerful server computers running Windows. That amount, nearly €900 million, was subsequently reduced to €860 million after the company appealed to the General Court of the European Union.

The decision against Microsoft was another milestone for E.U. antitrust law, and for Microsoft, which became the first company to be punished for failing to adhere to a settlement.

Although the commission can levy fines of up 10 percent of a company’s most recent global annual sales, the penalty on Wednesday represented 1 percent of Microsoft’s annual sales, partly because the company cooperated with the commission after the issue came to light.

Mr. Almunia said there had been no indication that Microsoft intentionally broke the settlement agreement.

The fact that nobody — apart, apparently, from rival companies — noticed the absence of the browser choice screen for more than a year has prompted critics of the European antitrust enforcement to question the effectiveness of the measure.

But Mr. Almunia insisted Wednesday that the remedy had been effective, saying that, “our decision was very relevant in opening the market and broadening the choice for users, for what kind of browsers they want to use.”

Microsoft, which currently offers a browser choice in its latest Windows 8 operating systems in Europe, said last year that it was prepared to extend the system beyond 2014 by an additional 15 months, partly to atone for its error. But it remained unclear on Wednesday whether that plan would go forward.

This article has been revised to reflect the following correction:

Correction: March 6, 2013

An earlier version of this article misstated the 14-month period in which, according to European officials, Microsoft failed to offer a choice of browsers to more than 15 million European users of the Windows 7 SP1 version. It was in 2011 and 2012, not from 2011 to 2014.

Europe to Fine Microsoft for Breaking Antitrust Deal

On Wednesday, the European Union is expected to impose a large fine on Microsoft for failing to give users of the company’s Windows software a choice of Internet browsers. It would be the first time that European regulators had punished a company for neglecting to comply with the terms of an antitrust settlement, and it could signal a tougher approach to enforcing deals in other antitrust cases, including one involving Google.

Microsoft and officials at the European Commission reached an antitrust settlement in 2009 that called on the company to give Windows users in Europe a choice of Web browsers instead of pushing them to Microsoft’s Internet Explorer. But Microsoft failed to offer users such a choice for more than a year — apparently without anyone at the company or the commission noticing.

Last July, the company admitted the problem and apologized. It said the failure was a result of a technical issue that had escaped its notice, and it updated its Windows 7 and Windows 8 software to give European users the browser choice.

In October, Europe’s antitrust chief, Joaquín Almunia, charged Microsoft with failing to live up to the agreement.

The amount of the fine could not be learned on Tuesday. Mr. Almunia’s office and Microsoft executives declined to comment.

The decision to fine Microsoft comes as Mr. Almunia’s office is negotiating with Google to try to resolve the commission’s concerns about that company’s dominance of the Internet search and advertising markets. Even if Google and the commission reach a settlement, a substantial fine for Microsoft would serve as a warning that a company violates such a settlement at its financial peril.

“It’s important for the commission to show it’s serious in this case because this will set a precedent, and because the commission increasingly uses settlements to help reach solutions more quickly, especially in the fast-moving technology sector,” said Nicolas Petit, a professor of competition law and economics at the University of Liège in Belgium.

“The commission also has an incentive to slap on a big fine in this case to ensure that companies, which are hard to monitor, get the message that it will be costly down the road if they get caught defying settlement orders,” Mr. Petit said.

In theory, Mr. Almunia can levy a fine totaling up to 10 percent of a company’s global annual revenue. In Microsoft’s case that could mean a penalty of $7 billion, but analysts say it is highly unlikely to reach that level.

The largest fine ever levied by the European authorities in an antitrust case was 1.1 billion euros, or $1.4 billion, in 2009 against Intel for abusing its dominance in the computer chip market. Intel is still appealing that ruling.

Microsoft has paid a long series of fines to European regulators over the past decade.

In 2008, it was fined nearly 900 million euros in so-called periodic penalties for defying a decision that regulators had imposed on the company.

The amount was subsequently reduced to 860 million euros after the company appealed to the General Court of the European Union.

Microsoft also paid fines of 497 million euros and 281 million euros for separate but related offenses, bringing the total to 1.7 billion euros during its battles so far with European regulators.

Although Microsoft has appealed past punishments, it may be reluctant to do so this time, preferring to focus on its rivalry with Google. Microsoft is among the companies that have complained about Google’s business practices to the commission.

The commission has been formally investigating Google since November 2010.

Mr. Almunia offered the company a settlement in May 2012 after finding that it might have abused its dominance in Internet search and advertising by giving its own products an advantage over those of others, even while maintaining that it offered neutral results.

Mr. Almunia and Google have been negotiating since then, and a final agreement may not come until later this year, suggesting that the strategy of seeking quick results in antitrust technology cases through settlements instead of lengthy legal battles could be coming undone.

The commission has taken a tougher line with Google than American regulators did. The Federal Trade Commission decided in January after a 19-month inquiry that Google had not broken antitrust laws. But Mr. Almunia has insisted that Google make changes to the most sensitive area of its business, online search.

The latest dispute stemmed from the settlement of a case concerning Microsoft’s dominance in Internet browsers, a dominance that the company has ceded to market forces in recent years.

In Microsoft’s settlement of 2009, the company did not pay a fine but agreed to install a system called Browser Choice Screen with Windows. It was intended to offer alternatives like Google Chrome and Mozilla Firefox to counter the strength of Internet Explorer, Microsoft’s own browser.

The choice must be offered for five years, according to the agreement.

Millions of European users of the Windows 7 SP1 version of the software may not have been offered a choice of browsers from February 2011 to July 2012, Mr. Almunia said.

The company said it learned of the error when the commission sent a notification about reports it had received indicating that alternative browsers were not being offered on some personal computers.

Microsoft’s failure to comply with the European order has already resulted in financial penalties of a different sort for the company’s own executives.

In a filing with American financial regulators last October, Microsoft said that Steven A. Ballmer, the company’s chief executive, and Steven Sinofsky, then the head of its Windows division, received less than the full annual bonuses they were eligible for, in part because of the browser issue in Europe.

A month later, Mr. Sinofsky left the company in a decision that was described as “mutual” by people briefed on the matter.

Nick Wingfield contributed reporting from Seattle.

This article has been revised to reflect the following correction:

Correction: March 5, 2013

An earlier version of this article misspelled the first name of a former executive with Microsoft. He is Steven Sinofsky, not Sinfosky.

This article has been revised to reflect the following correction:

Correction: March 6, 2013

An earlier version of this article misstated the period during which Microsoft failed to offer a choice of browsers to millions of European users of Windows 7 SP1. It was  between 2011 and 2012, not between 2011 and 2014.

Google’s Rivals Say F.T.C. Antitrust Ruling Missed the Point

But some critics of the inquiry now contend that the commission found no harm in Google’s actions because it was looking at the wrong thing.

Instead of considering harm to people who come to Google to search for information, Google’s competitors and their supporters say that the government should have been looking at whether Google’s actions harmed its real customers — the companies that pay billions of dollars each year to advertise on Google’s site.

In its reports, the F.T.C. did not detail how it defined harm or what quantitative measures it had used to determine that Google users were better off.

But interviews with people on all sides of the investigation — government officials, Google supporters, advocates for Microsoft and other competitors, and antitrust experts and economists — show that many of the yardsticks the commission used to measure its outcomes were remarkably similar to Google’s own. Not surprisingly, they cast Google in a favorable light.

At issue were changes that Google made in recent years to its popular search page. Google makes frequent adjustments to the formulas that determine what results are generated when a user enters a search. Currently, it makes more than 500 changes a year, or more than one each day.

Users rarely notice the changes in the formulas, or algorithms, that generate search results, but businesses do. If a change in the formulas causes a business to rank lower in the order of results generated by a search, it is likely to miss potential customers.

What customers are now seeing reflects changes in the format of Google results. For certain categories of searches — travel information, shopping comparisons and financial data, for example — Google has begun presenting links to its own related services.

People close to the investigation said that Google had presented the F.T.C. with the results of tests with focus groups hired by an outside firm to review different versions of a Google search results page. After Google acquired ITA, a travel search business, in 2011, it began testing a new way to display flight results.

The company asked test users to compare side-by-side examples of a results page with just the familiar 10 blue links to specialty travel sites with a page that had at the top a box containing direct links to airlines and fares.

People who reviewed the Google data said tests with hundreds of people showed that fewer than one in five users preferred the page with links only. Users said they liked the box of flight results, so Google reasoned that making the change was better for the consumer.

“There is a deep science to search evaluation,” Amit Singhal, a senior vice president who oversees Google’s search operation, said in an interview on Friday. “A lot of work goes into every change we make.”

But the changes were not better for companies or alternative travel sites that were pushed off the first page of results by Google’s flight box and associated links. By pushing links to competing sites lower, Google might be making things easier for people who come to it for free search. But it also is having a negative effect on competitors, shutting off traffic for those sites.

Drawing fewer customers as a result of Google’s free links, those competitors are forced to advertise more to draw traffic. And advertisers who aren’t competitors have fewer places to go to reach consumers, meaning Google can use its market power to raise advertising prices.

“There might be no consumer harm if Google eliminates Yelp,” said one Microsoft advocate, who spoke on the condition of anonymity because of the likelihood of further interactions with the F.T.C. “But advertisers certainly are harmed.”

F.T.C. Pushes Antitrust Inquiry Against Google Into January

WASHINGTON — Google was prepared to start the holidays early this week, by settling its antitrust dispute with federal regulators without a harsh punishment.

But in shelving its inquiry until January, the Federal Trade Commission has put stronger penalties back on the bargaining table, people briefed on the investigation who were not authorized to speak publicly about it said Wednesday.

For two years, the F.T.C. has been looking into whether Google abuses its market power by favoring its own services over rivals in search results. Google and the agency had been planning to sign a settlement this week that would have said Google would change some of its behavior but that would not have been subject to court action.

The agency may now demand a consent decree — a formal order detailing anticompetitive behavior and an agreement that if the company does the same thing again, it could be fined and subject to court sanctions. Google has instead offered voluntary concessions.

But the people briefed, and others close to the negotiations, said the agency was unlikely to take a second look at one of the major issues — Google’s dominance in specialized search, like travel and local reviews — because the legal hurdles remain high.

Google has long said that it does not believe it has broken antitrust laws and that the agency’s case against it is weak. Jill Hazelbaker, a Google spokeswoman, said that it continued to cooperate with the F.T.C. but declined to comment further.

Cecelia Prewett, an F.T.C. spokeswoman, declined to comment.

Competitors of Google called for the agency to use the additional time to take harsher legal action against Google. Failing to do so would hurt consumers in many ways, including by allowing Google too much control over private data, said Pamela Jones Harbour, a former F.T.C. commissioner and a lawyer representing Microsoft.

Supporters of Google said its case had already been made.

“If in 19 months they did not offer the kind of evidence and facts to support a case or conclude the behavior was such that it was posing legal difficulties, then frankly another couple weeks isn’t going to make a difference,” said Ed Black, chief executive of the Computer and Communications Industry Association, of which Google is a member.

Regulators’ decision to delay resolution of the case offered a glimpse of the tense negotiations and a series of missteps that have bedeviled the negotiations.

As details of a possible settlement appeared in news reports over the last week, Google’s competitors began arguing that a settlement without court-enforced sanctions was meaningless.

At the F.T.C., people close to the agency said, commissioners grew irked that they were being portrayed as spineless. In a parallel investigation, European regulators were said to be wringing a more stringent agreement from Google.

But it was unclear that Jon D. Leibowitz, the F.T.C. chairman, could get the two votes necessary to approve a tougher case against Google.

The five commissioners had yet to vote on possible sanctions. Julie Brill, a Democrat commissioner, supported strong antitrust action, while Edith Ramirez, the commission’s other Democrat, has resisted the strictest sanctions, said the people who have been briefed on the inquiry.

J. Thomas Rosch, a Republican, questioned whether the agency had the evidence to bring a case on search manipulation, but also expressed skepticism at a settlement that did not involve a consent decree, the people briefed said. Maureen K. Ohlhausen, the other Republican commissioner, opposed the government’s interference in private enterprise, they said.

Each of the commissioners and an F.T.C. spokeswoman declined to respond to queries about their views on the settlement.

Throughout the deliberations, both sides have complained about leaks to the news media of details of private meetings and settlement terms.

Edward Wyatt reported from Washington and Claire Cain Miller from San Francisco.

This article has been revised to reflect the following correction:

Correction: December 21, 2012

An article on Thursday about the Federal Trade Commission’s investigation of Google misspelled the surname of the commission’s chairman. He is Jon Leibowitz, not Liebowitz.

As Europe Presses Google on Antitrust, U.S. Backs Away

BRUSSELS — Google seems on its way to coming through a major antitrust investigation in the United States essentially unscathed. But the outlook is not as bright for Google here, as the European Union’s top antitrust regulator prepares to meet on Tuesday with Eric E. Schmidt, Google’s executive chairman.

In the United States, the Federal Trade Commission appears to be ready to back off what had been the centerpiece of its antitrust pursuit of Google: the complaint that the company’s dominant search engine favors the company’s commerce and other services in search queries, thwarting competition.

Yet in a statement last spring, Joaquín Almunia, the competition commissioner of the European Union, placed the contentions about search bias at the top of his list of concerns about Google. And in a private meeting this month, Mr. Almunia told Jon Leibowitz, chairman of the F.T.C., that European antitrust officials remain focused on that issue, according to two people told of the meeting, who asked not to be identified because they were not authorized to speak about it.

Mr. Almunia’s tougher bargaining stance, antitrust experts say, is not merely a personal preference.

European antitrust doctrine, they say, applies a somewhat different standard than United States law does. In America, dominant companies are given great leeway, if their conduct can be justified in the name of efficiency, thus consumer benefit. Google has consistently maintained that it offers a neutral, best-for-the-customer result.

In Europe, antitrust experts say, the law prohibits the “abuse of a dominant position,” with the victims of the supposed abuse often being competitors. “The Europeans tend to use competition law to level the playing field more than is the case in the United States,” said Herbert Hovenkamp, an antitrust expert and law professor at the University of Iowa. (Mr. Hovenkamp advised Google on one project, but no longer has any financial connection to the company.)

The European rationale, legal experts say, is that shielding competitors to some degree preserves competition and enhances consumer welfare in the long run.

“Europe has a stronger hand to play with Google because of its standards,” said Keith N. Hylton, a professor at the Boston University School of Law.

The European antitrust regulators, like their American counterparts, have been in negotiations with Google for several months. The F.T.C. is expected to announce its decision within days, while the European timetable seems not as tight and is likely to go into next year.

The investigations in the United States and Europe really started with accusations of search bias. Rivals complain that the search giant gives more prominent placement and display for its online shopping and travel services, for example, than to competitors. The potential antitrust concern is that such specialized, or “vertical,” search services — like Yelp or Nextag — are partial substitutes for Google’s search engine because they also allow people to find information.

In his public statement in May, Mr. Almunia identified four areas of concern in Europe’s antitrust investigation of Google. The first concern he cited was search bias.

“Google displays links to its own vertical search services differently than it does for links to competitors,” Mr. Almunia said in a statement then. “We are concerned that this may result in preferential treatment compared to those of competing services, which may be hurt as a consequence.”

His other three concerns are ones that Google is preparing to address with a set of voluntary commitments in the United States, according to two people briefed on Google’s talks with the F.T.C., who declined to give their names because they were not authorized to speak about them.

Google, according to the people, has agreed to refrain from copying summaries of product and restaurant reviews from other Web sites and including them in Google search results, a practice known as screen scraping.

James Kanter reported from Brussels and Steve Lohr from New York. Claire Cain Miller contributed reporting from San Francisco.

Google Wins Time From Europe’s Antitrust Enforcer

After meeting with Eric E. Schmidt, Google’s executive chairman, the antitrust official, Joaquín Almunia, said in a statement Tuesday that “we have substantially reduced our differences.”

“I now expect Google to come forward with a detailed commitment text in January 2013,” said Mr. Almunia, the E.U. competition commissioner.

The meeting between Mr. Almunia and Mr. Schmidt came as regulators in the United States appeared to be backing away from what had initially been one of the centerpieces of an antitrust investigation on both sides of the Atlantic. Early on, regulators focused on a question that drilled to the core of Google’s business model: whether its popular Web search engine thwarted competition by favoring the company’s services in presenting results of search queries.

Recent accounts of the U.S. proceedings indicate American officials are no longer pressing the search-ranking issue. But Mr. Almunia is evidently continuing to hold Google accountable on that. He said Tuesday that in their discussion, the company indicated it would make changes in “the way in which Google’s vertical search services are displayed within general search results as compared to services of competitors.”

The other areas in which Mr. Almunia expected to reach a deal included the ways Google uses and displays content from other companies in its search tool, and the restrictions that Google places on advertising and advertisers. Any concessions offered by Google would be tested in the marketplace to assess their acceptability to other companies, Mr. Almunia said, before becoming binding.

If Mr. Almunia accepts a settlement offer, Google would avoid a possible fine of as much as 10 percent of its annual global revenue, about $37.9 billion last year. It would also avoid a guilty finding that could restrict its activities in Europe. “We continue to work cooperatively with the commission,” said Al Verney, a Google spokesman in Brussels.

Exactly what concessions on search services that Mr. Almunia can wring from Google remained an open question Tuesday, though antitrust experts agreed that he had more leverage than his U.S. counterparts.

While Google is the dominant search engine in the United States, it holds even greater sway in Europe, accounting for more than 90 percent of searches in a number of major markets. That is one factor giving the Europeans greater leverage in trying to set rules on how Google ranks competing services.

Another factor is European antitrust law, which has long given competitors more protection than U.S. law provides.

Antitrust law in Europe, and the commission’s approach to it, has shifted in recent years, raising the hurdles for complainants against dominant companies, said Emanuela Lecchi, an antitrust partner in London with the law firm Watson, Farley & Williams.

Even so, she said, Europe still offers rivals greater protection. Compared with the United States, Ms. Lecchi said, European regulators “are more inclined to try and make sure there is always a choice of players on markets, and that’s something that might allow Google’s rivals to make more progress at the end of the day.”

Some experts said the U.S. Federal Trade Commission could be playing a tactically clever hand by allowing the Europeans to push Google an extra mile. They suggested that the F.T.C. would be shielded from accusations it was attacking a U.S. champion, even though any concessions Google made to the Europeans on search were likely to apply globally anyway.

“The F.T.C. may be seen as outsourcing the more difficult parts of this investigation to another agency,” said Andreas Stargard is a competition lawyer and antitrust litigator in Brussels with the firm Paul Hastings. Besides, Mr. Stargard said, “the F.T.C. isn’t as expert in these complex antitrust matters as it used to be.”

As the scope of the U.S. investigation showed signs of narrowing in recent days, groups concerned about Google’s behavior, especially in online search, have been calling on the Europeans to ensure that any decision in the case would give them a better chance to challenge Google’s market share in areas like mapping and travel.

“It’s all very well dealing with the manifestations of abuses, but what the market really wants to know is how we get competition back into search,” David Wood, the legal counsel for ICOMP, an industry group based in Europe that includes Microsoft among its members, said Tuesday.

Earlier in the week, FairSearch, a group with most of its member companies in the United States and Europe, and that also includes Microsoft, asserted in a statement that “Google dominates more than 93 percent of the search market” in Europe. FairSearch urged Mr. Almunia to take the opportunity to “build on a record of leadership in global antitrust enforcement” by pressing Google for more concessions than in the United States.

Steve Lohr contributed reporting from New York.

E.U. Antitrust Officials Say Microsoft Violated Deal

BRUSSELS — European regulators on Wednesday charged Microsoft with an antitrust violation for failing to live up to a prior agreement to give users of its Windows software equal access to rival Internet browsers.

The decision by Joaquín Almunia, the European Union antitrust commissioner, opens Microsoft up to a substantial fine for defying the terms of a settlement reached in 2009.

The case also represents the first time a company facing antitrust penalties from Europe’s top enforcer has been sent a so-called Statement of Objections for neglecting to comply with the terms of a settlement, which allows companies to avoid fines.

“Companies should be deterred from any temptation to renege on their promises or even to neglect their duties,” Mr. Almunia said.

Mr. Almunia put Microsoft on notice that it must include adequate access to rival browsers in European versions of its next-generation operating system, Windows 8, which goes on sale at the end of the week.

Mr. Almunia said he warned Microsoft officials “at the highest level possible” of his concerns about Windows 8 and had made clear to them what “should be avoided if they don’t want to take the risk of new investigations.”

Microsoft apologized for the latest infringement when it came to light in July, calling it a technical problem it had learned of only recently.

On Wednesday, Microsoft said, “We take this matter very seriously and moved quickly to address this problem as soon as we became aware of it.”

“Although this was the result of a technical error, we take responsibility for what happened, and we are strengthening our internal procedures to help ensure something like this cannot happen again.”

The significance of Wednesday’s action could reach beyond Microsoft. It comes as Mr. Almunia’s office is negotiating with Google to try to settle the commission’s concerns about that company’s dominance of the Internet search and advertising markets.

Legal experts say that by cracking down on Microsoft, Mr. Almunia is also sending a warning to Google that settling its case may not be possible unless there are also effective monitoring mechanisms.

Mr. Almunia said that the case involving Google was different and that there was no direct link with his decision to charge Microsoft. But he underlined that the move against Microsoft was “a very serious message not to infringe the commitments that have been agreed and have that been given status as legally binding.”

Mr. Almunia can levy a fine totaling up to 10 percent of a company’s global annual revenue. In Microsoft’s case that could mean a penalty of $7 billion, but analysts say it is probably unlikely to reach that level.

The largest single fine ever levied by the European antitrust authorities was €1.1 billion, or $1.4 billion, in 2009 against Intel for abusing its dominance in the computer chip market. Intel is still appealing that ruling.

Microsoft has paid a long series of fines to European regulators over the past decade.

In 2008, Microsoft was fined nearly €900 million in so-called periodic penalties for defying a decision that regulators had imposed on the company.

In June, the General Court, the second-highest in the Union, handed a small victory to Microsoft by reducing the fine by €39 million to €860 million after finding that the commission had miscalculated the amount.

Microsoft also paid fines of €497 million and €281 million for separate but related offenses, bringing the total to €1.7 billion during its battle with European regulators.

The current dispute stems from the settlement of a case concerning Microsoft’s dominance in Internet browsers — a dominance that the company has relinquished to market forces in recent years.

In Microsoft’s 2009 settlement, the company did not pay a fine but instead committed to installing a system called Browser Choice Screen with Windows. It was intended to offer users alternatives like Google Chrome and Mozilla Firefox to counter the strength of Internet Explorer, Microsoft’s own browser product. The choice must be offered for five years, according to the agreement.

Millions of European users of the Windows 7 SP1 version of the software may not have been offered a choice of browsers between February 2011 and July 2012, Mr. Almunia said.

The company said it only learned of the error when the commission sent a notification about reports it had received indicating that alternative browsers were not being offered on some personal computers.

On Wednesday, Mr. Almunia saved his sharpest words when discussing Microsoft’s highly anticipated new Windows 8 operating system, one which the company has high hopes for.

In particular, Mr. Almunia said users of Windows 8 should be able to remove the icon for Microsoft’s browser, called Internet Explorer, from the start screens on their personal computers if they had chosen another browser as their default option.

Once users had made the choice of another browser, “there should not be unnecessary warning windows or confirmations by the user, and the Internet Explorer icon should also be unpinned from the Start screen,” said Mr. Almunia.

Mr. Almunia said it had examined another operating system by Microsoft called Windows RT for tablet computers but had decided not to take that investigation further — at least now.

“We will remain vigilant and we will continue to monitor all aspects of Microsoft’s compliance with its commitments in the future,” he said.

F.T.C. Staff Prepares Antitrust Case Against Google Over Search

The government’s escalating pursuit of Google is the most far-reaching antitrust investigation of a corporation since the landmark federal case against Microsoft in the late 1990s. The agency’s central focus is whether Google manipulates search results to favor its own products, and makes it harder for competitors and their products to appear prominently on a results page.

The staff recommendation is in a detailed draft memo of more than 100 pages that is being shared with the five F.T.C. commissioners, said two people briefed on the inquiry.

The memo is still being edited and changes could be made, but these are mostly fine-tuning and will not alter the broad conclusions reached after an inquiry that began more than a year ago, said these people, who spoke on the condition that they not be identified.

Google said in a statement on Friday, “We are happy to answer any questions that regulators have about our business.” In the past it has said many times that “competition is a click away.”

The commission is also building a team to take Google to court, if it comes to that. Last spring, it hired a seasoned litigator to help with the case, Beth A. Wilkinson, a partner in the firm Paul, Weiss in Washington. In a further sign that it means business, last week it brought on a well-known economist as a consultant: Richard Gilbert of the University of California, Berkeley.

The F.T.C. staff memo does not mean that the government will sue Google for antitrust violations. Next, the vote of three of the five F.T.C. commissioners would be required. And each step is a further prod for Google to make concessions to reach a settlement before going to court. Last month, Jon Leibowitz, chairman of the F.T.C., said a final decision on whether to sue Google would be made before the end of this year.

The Google investigation echoes the Microsoft case in a basic way. Google, like Microsoft in the personal computer industry, has drawn complaints from rivals and antitrust regulators as it has expanded its business beyond its dominant product, search and search advertising. Google has aggressively built off this main business to fields including online commerce and smartphone software.

As it expands its empire, Google takes on new competitors and brings formidable resources. Rivals may suffer, Google says, but the company is improving its products and services, benefiting consumers and the economy.

The American inquiry is moving in tandem with a major antitrust investigation in Europe. The European authorities are pressing ahead and seeking changes in Google’s behavior.

Speaking in New York last month, Joaquín Almunia, the European Union’s competition commissioner, pointed to antitrust regulators’ concerns that Google is “using its dominance in online search to foreclose rival specialized search engines and search advertisers.”

Google is also being investigated by the attorneys general of six states: Texas, Ohio, New York, California, Oklahoma and Mississippi.

Given the momentum of the investigations, antitrust experts say, the F.T.C. staff recommendation was to some extent expected.

The F.T.C. investigators have looked at a wide range of Google’s business practices, according to companies that have been questioned and received subpoenas from the agency.

The areas of inquiry include accusations of manipulating the search results it displays to favor Google commerce services it has developed like Google Shopping for buying goods and Google Places for advertising local restaurants and businesses. In the civilian subpoenas, the F.T.C. calls this “preferencing.”

The investigators are also looking into whether Google’s automated advertising marketplace, AdWords, discriminates against advertisers from competing online commerce services like comparison shopping sites and consumer review Web sites.

Claire Cain Miller and Edward Wyatt contributed reporting.

Common Sense: Apple’s Map App Could Raise Antitrust Concerns

These milestones were reached with the steady hand of Timothy D. Cook at Apple’s helm, but they seem inseparable from Mr. Jobs. They are the result of initiatives begun during his tenure and, in many ways, reflect his personality — one that was perfectionist, competitive, driven and controlling.

Those qualities have remained on display at Apple in the year since his death, most recently in the decision to substitute Apple mapping software for rival Google’s in the iPhone 5 and the new iOS 6 operating system, as well as allegations that Apple and book producers conspired to control the price of e-books.

Apple hasn’t fully explained its decision to replace Google’s maps, but it probably reflects the evolution of the Apple-Google relationship from close allies to fierce competitors, a process that began well before Mr. Jobs’s death. Apple also hasn’t indicated whether it was carrying out Mr. Jobs’s wishes, but the decision seems consistent with his “compulsion for Apple to have end-to-end control of every product that it made,” as Walter Isaacson put it in his book “Steve Jobs.”

Apple’s use of its own mapping technology in the iPhone appears to be a textbook case of what’s known as a tying arrangement, sometimes referred to as “bundling.” In a tying arrangement, the purchase of one good or service (in this case the iPhone) is conditioned on the purchase or use of a second (Apple maps).

To the degree that tying arrangements extend the control of a dominant producer, they may violate antitrust laws. Probably the best-known example was Microsoft’s attempt to bundle its Internet Explorer browser on Windows software, to the disadvantage of Netscape, a rival browser, despite complaints that Explorer was initially an inferior product. This was the linchpin of the government’s 1998 antitrust case against Microsoft. E-mails were introduced as evidence in which Microsoft executives indiscreetly stated their intentions to “smother,” “extinguish” and “cut off Netscape’s air supply” by bundling Explorer with Windows.

Among other findings, the judge ruled that Microsoft had engaged in an illegal tying arrangement. The outcome of the case kept the door open to competition in the browser market. Today, the once-dominant Internet Explorer faces stiff competition from rivals like Mozilla Firefox and Google Chrome. Microsoft’s settlement came too late for Netscape’s browser, which was no longer being developed or supported after 2007. But Firefox traces its lineage to Netscape’s source code.

Could Apple’s map suffer a similar fate?

Early users searched for locations and got nonsensical results. Mad magazine ran a parody of the famous Saul Steinberg New Yorker cover of the world seen from Ninth Avenue “now using Apple Maps,” in which the Hudson was the Sea of Galilee and other landmarks were ludicrously misidentified.

Mr. Cook swiftly tried to contain the damage. “Everything we do at Apple is aimed at making our products the best in the world. We know that you expect that from us, and we will keep working nonstop until Maps lives up to the same incredibly high standard,” he said a week ago.

Would Mr. Jobs have been so quick to apologize? Perhaps not. He was famously resistant to the idea after complaints about the iPhone 4’s antenna, and the Apple “genius” manual instructs employees never to apologize for the quality of Apple technology.

Bundling its maps with the iPhone 5 may yet prove to be a strategic blunder for Apple, but it may nonetheless skirt the boundaries of the antitrust laws that tripped up Microsoft. “There’s no antitrust theory under which vertically integrating into an inferior component is considered anticompetitive,” Herbert Hovenkamp, an antitrust professor at the University of Iowa College of Law, told me. That’s because the problem is considered self-correcting by market forces. “There have been lots of complaints about tying arrangements involving inferior products. But ordinarily, incorporating an inferior product doesn’t increase your market share, because consumers leave for a better product. It’s not a promising strategy,” Professor Hovenkamp said. The danger for Apple is that customers will choose an Android phone with a superior Google Maps application rather than an iPhone.

An exception is when a monopolist does it, which is what happened with Microsoft. If a consumer used Microsoft Windows, the dominant software, Explorer was installed by default. “This arose with Microsoft because back then Explorer was considered inferior and quirky,” Professor Hovenkamp said. “But that wasn’t why it was a violation. It’s because consumers had no choice.” By contrast, Apple’s iOS isn’t the dominant smartphone operating system. Apple’s software has captured 17 percent of the global smartphone market, compared with 68 percent for Google’s Android. Apple users who want Google maps can readily switch to an Android phone. “Most tying arrangement cases have involved firms with close to 100 percent market shares,” Professor Hovenkamp noted.

The real test will be whether Apple makes rival mapping apps readily available for downloading on its iPhones. In his apology, Mr. Cook suggested that iPhone users try alternatives, and even suggested using Google maps by going to Google’s Web site. Google said it was working on a map application for the iPhone.

From an antitrust perspective, the e-books controversy is more serious. United States antitrust authorities have accused Apple of conspiring with major book publishers to raise e-book prices, and Apple offered to settle a European investigation into the same practices. The Justice Department cited a passage in Mr. Isaacson’s book in which Mr. Jobs called the strategy an “aikido move,” referring to the Japanese martial art, and said, “We’ll go to the agency model, where you set the price, and we get our 30 percent, and yes, the customer pays a little more, but that’s what you want anyway.”

The charges describe a classic price-fixing arrangement, “which is presumptively illegal,” Professor Hovenkamp said. “Everybody wants market dominance, not just Apple. But it’s how you go about it. You can’t go out and fix prices.” Apple has denied the charges, and a trial has been set for next year.

Mr. Cook’s challenge has always been to guide Apple out of the shadow of its visionary and charismatic founder. Can he encourage Mr. Jobs’s competitive zeal and drive for perfection while distancing Apple from Mr. Jobs’s potentially damaging — even unlawful — need to dominate and control? “Historically, Apple hasn’t been very sensitive to antitrust issues,” Professor Hovenkamp said.

There’s no quarreling with Apple’s extraordinary success, and Mr. Jobs’s obsession with controlling all aspects of Apple’s products clearly paid off for its customers and shareholders. It proved to be the right strategy for the time. But competition in smartphones and Apple’s other efforts has intensified in the year since Mr. Jobs died, and Apple may not be able to continue blindly down that path. With his swift apology for the imperfections of Apple’s maps, Mr. Cook seems to have taken a step in the right direction. If he also settles the e-books case and makes Google’s and other map applications readily available to iPhone users, he’d be signaling a clear break from the past and encouraging Apple to embrace, rather than stifle, competition.

This article has been revised to reflect the following correction:

Correction: October 5, 2012

An earlier version of this column referred incorrectly to a case in which Microsoft resolved anticompetitive concerns by agreeing to offer users a choice of browser. The agreement was part of a 2009 settlement of a European antitrust case, not the United States government's 1998 antitrust case.

Google and European Commission Move Toward Antitrust Settlement

Europe’s competition commissioner, Joaquín Almunia, had asked Google in May to make concessions in four areas or face formal antitrust charges, which could mean years of costly litigation and hefty penalties if it lost.

“The commission considers Google’s proposals as a good basis for further talks and has now reached a good level of understanding,” said a commission spokesman, Antoine Colombani. He added that meetings on a more technical level would now be held to reach a settlement.

It was unclear what concessions Google had offered. A spokesman in Brussels, Al Verney, said only, “We continue to work cooperatively with the European Commission.”

The commission found after a nearly two-year inquiry that Google might have given its own products an edge over those of others while maintaining that it offered neutral results.

Google’s search engine has a 90 percent market share in many big European markets, compared with less than 70 percent in the United States, where it is also under investigation.

In May, Mr. Almunia took the rare step of going public with his demand that Google change its business practices, an indication that he was looking to settle rather than go through the time-consuming process of filing charges and making a case — after which the remedies won are often irrelevant in the rapidly changing technology industry.

“These fast-moving markets would particularly benefit from a quick resolution of the competition issues identified,” Mr. Almunia said then, calling this preferable to “lengthy proceedings.”

Nicolas Petit, a law professor at the University of Liège in Belgium, said that he did not believe the commission had a strong case against Google, and that this might have contributed to Mr. Almunia’s unusual offer. “It could have been a bluff, like a poker game,” he said.

On the other hand, Mr. Petit said, Google has a reputation for pushing the boundaries of the law and then backing off when it faces legal challenges, as it did when it began scanning books without seeking permission and then agreed to pay $125 million to settle charges of copyright infringement — a deal later rejected by an American judge.

“Its image is extremely important in its success,” Mr. Petit said, “and that’s why they like settlements — because they can be presented as win-win situations for consumers and the company alike.”

The commission’s investigation began after smaller Web businesses complained that Google had downgraded their sites in its search results or discriminated against them in other ways. Microsoft — itself the target of a decade-long antitrust battle with the commission that resulted in fines and penalties of 1.7 billion euros, or $2.06 billion at the current exchange rate — filed a complaint in March 2011.

The four practices Mr. Almunia listed in May included the way Google displayed links to its services differently from links to competitors’ services, and its use of restaurant and travel reviews from competitors’ Web sites.

Google Offers Concessions in European Antitrust Case

The regulators declined to reveal what was in the letter.

A Google spokesman, Al Verney, said the company had “made a proposal to address the four areas the European Commission described as potential concerns.” He added, “We continue to work cooperatively with the commission.”

Joaquín Almunia, the commissioner to whom the letter was sent, said in May that the company might have abused its dominance in Internet searching by displaying links to its own services, like Google maps or images, when it answered a query, preferring them over those of competitors. He also said Google had included material in its own search results that was copied from competitors’ Web sites that offer services like restaurant guides and travel advice.

Two other areas of concern involved how Google conducted its advertising business, including how it delivered search ads on partner sites.

At that time, Mr. Almunia told the company to propose changes in a matter of weeks to its methods of answering search queries, or to face formal objections.

Antitrust experts said the company would be extremely wary of giving away too much at this stage, partly because of the ramifications for its business beyond Europe, where regulators could take what Google offers as a starting point for their own demands.

The company is also under antitrust investigation in the United States, Korea and India.

“Google will be very protective of its search algorithms,” said Emanuela Lecchi, a partner at the law firm Watson, Farley & Williams in London, who does not represent clients involved in the case.

Even so, Ms. Lecchi said, the company “may be prepared to concede some alteration to the way it displays results.”

Another area where it “may be relatively straightforward for Google to make an offer could be agreeing to enter into a code of practice with advertisers and companies that would include abiding by some informal appeal mechanism or arbitration over contested ranking,” she added.

Mr. Almunia’s request for settlement terms from Google was a rare gesture by the commission, which is seeking to speed up resolution of antitrust cases, particularly in the fast-changing technology marketplace where proposed remedies often rapidly lose their relevance.

In previous antitrust cases in Europe involving Microsoft and Intel, the investigations ran for about a decade before the commission finally ordered changes to their business practices.

If Mr. Almunia accepts a settlement offer from Google, the company would avoid a possible fine of up 10 percent of its annual global revenue, about $37.9 billion last year. It would also avoid a guilty finding that could restrict its business activities in Europe.

Google has previously defended its practices by indicating that innovation online has never been greater.

Google is the dominant search engine in the United States but holds even greater sway in Europe, accounting for more than 90 percent of searches in a number of major markets.

Google faces other problems in Europe, too. In April, Mr. Almunia opened an inquiry against Motorola Mobility, a Google subsidiary, over possible abuse of patents after complaints by two rivals, Microsoft and Apple.

Mr. Almunia is also looking at Google’s Android software, which the company has used to move into a leading position among mobile phone operating systems. Google’s critics and competitors pressed Mr. Almunia on Monday to keep up the pressure on the company. Stephen Pociask, the president of the American Consumer Institute Center for Citizen Research, told Mr. Almunia that “it would be wise to be skeptical of any settlement that Google reaches without serious limits and real incentives to change their behavior.”

Mr. Pociask said Google had broken pledges to improve its behavior in the past.

In Europe, Thomas Vinje, a lawyer for FairSearch, a coalition of 17 companies that has criticized Google’s practices, said that any settlement needed to reflect the concerns of competitors.