Exclusive-Google warns of lower quality as it revamps Europe search results to avoid EU fines

By Foo Yun Chee

BRUSSELS, Sept 8 (Reuters) - Alphabet's Google on Tuesday rolled out changes to its online search results in Europe to satisfy EU antitrust regulators that it said will degrade users' experience and ratchet up costs for European businesses.

Google told Reuters the changes mark the largest reduction in quality of service at the world's most popular internet search engine in its 29-year search history.

The company said the EU pitched the changes as levelling the playing field for companies to be displayed on Google.

However, it said in its view the changes favour price comparison sites, also known as vertical search services (VSS), linked to sectors including hotels, airlines and restaurants, such as Expedia or Booking.com.

They get more prominence in search results over companies in those sectors that are listed with just a link to their websites, telephone numbers and addresses.

GOOGLE HIT WITH MORE THAN $500 MILLION FINE IN JULY

The U.S. tech giant was hit with a €460 million ($534 million) fine in July for favouring its own services in shopping, hotels, transport and sports results in search results, in breach of the EU's Digital Markets Act seeking to rein in the power of Big Tech.

The European Commission gave it 60 days to comply with the DMA or risk periodic penalty payments of up to 5% of its total worldwide turnover.

The revamped search results will highlight one specialised search engine at the top of the page, followed by two others with fewer details. A carousel of hotels, airlines and restaurants, for example, will sit below them with key features such as real-time prices stripped out.

The rankings will be determined by Google's algorithm.

"To comply with DMA requirements, we're making significant changes to Search in Europe," Nick Fox, Google's senior vice-president, knowledge & information, said in a statement to Reuters.

"These changes degrade the user experience for Europeans — boosting online intermediaries at the expense of local businesses, and removing helpful features people rely on every day. Users outside the EU will not be impacted by these changes," he said.

CHANGES WILL HIT EUROPEAN BUSINESSES, GOOGLE SAYS

Google said past changes to comply with the DMA led to a 30% drop in free, direct booking traffic to European businesses, and the latest changes are expected to hit them.

The company said it has tested the changes with millions of users in Europe, which show a high level of dissatisfaction as they have to retype queries to find what they want.

EU regulators handed out a separate €430 million fine in July for restrictions preventing app developers from steering users free of charge to cheaper offers on rival app stores or websites.

On how Google Play plans to comply with the DMA with regard to that, the company said it has already updated its external offers programme.

It announced tweaks in August last year to make it easier for app developers to direct customers to other channels and choose a fee model.

Google has racked up total EU antitrust penalties of €10.38 billion in its near two decade-long fight with EU antitrust regulators.

The EU fines drew fire from U.S. President Donald Trump, who threatened to launch a probe into the bloc's "robbing" of American companies.

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(Reporting by Foo Yun Chee; Editing by Susan Fenton and Jan Harvey)