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Google said to create shopping service unit to satisfy EU

[BRUSSELS] Google will create a standalone unit for its shopping service and require it to bid against rivals for ads shown on the top of its search page, in an effort to satisfy European Union concerns over the display of product results, three people familiar with the investigation said.

Google faces a Thursday deadline to comply with an EU antitrust decision in relation to the search giant's treatment of competitors' comparison-shopping sites, according to the people, who asked not to be named as the negotiations are private. While the shopping service will remain part of Google, it will operate separately and use its own revenues to bid for ads.

Google was ordered by regulators to stop promoting its own shopping search results over competitors' and to make changes designed to give rivals fairer treatment by Sept. 28, the EU said in June when it fined the company 2.4 billion euros (S$3.85 billion). The company could be fined up to 5 per cent of daily revenue if it fails to comply.

Al Verney, a spokesman for Google in Brussels, declined to comment. The offer is part of Mountain View, California-based Google's efforts to comply with the EU order while it challenges the regulator's findings in court.

Google parent Alphabet reports revenue for Google and its "Other Bets", like self-driving cars and Nest thermostats. A new shopping unit would continue to fall under Google, which makes money primarily from ads.

The company will tweak an advertising panel at the top of the search screen that shows several pictures of products with links to retailers' websites, one person said.

Each of 10 slots will be auctioned off to give rival sites, such as or Shopzilla, a chance to buy space to show links to retailers. Any changes only affect Google's sites in Europe.

While Google Shopping can bid for those slots, it will be run separately to ensure that its bids reflect its own operating costs and aren't subsidised by Google.

Regulators have accepted that the panel is for advertising and slots cannot be given away, the person said.

Each slot will be labeled with the name of the service providing the link, such as "By Google", similar to pages that showed up on French and Dutch versions of Google last week.

After levying the record fine in June, EU regulators have threatened further penalties if Google doesn't make changes that give customers a chance to choose other shopping comparison services.

EU Competition Commissioner Margrethe Vestager said last week that she would start investigating if Google's offer "doesn't work" and if companies that complained about Google's behaviour are still unhappy.

Richard Stables, chief executive officer of Kelkoo, said Google's offer to sell rivals slots was worse than the search engine's 2013 attempt to settle the EU case.

Anyone who believes such an offer will resolve problems in the shopping search market "doesn't understand how the market works", he said.

Foundem, a UK shopping site, last week slammed an auction for the slots, saying it creates "an additional anti-competitive barrier" that sees companies pay for placement instead of getting traffic for free from relevant search results.

Foundem's 2009 complaint to the EU helped trigger the probe after it said links to its sites were unfairly pushed down in Google search results.

Google had argued that the links were rated less relevant because they weren't of high quality.


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