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Updated Feb. 5, 2014 9:08 a.m. ET

BRUSSELS— Google Inc. GOOG +0.42% Google Inc. Cl A U.S.: Nasdaq ^$1138.16 +4.73 +0.42% Feb. 4, 2014 4:00 pm Volume (Delayed 15m) : 2.79M AFTER HOURS ^$1135.50 -2.66 -0.23% Feb. 4, 2014 7:58 pm Volume (Delayed 15m): 24,091 P/E Ratio 32.27 Market Cap $381.62 Billion Dividend Yield N/A Rev. per Employee $1,059,710 02/05/14 Google Reaches Settlement in E... 02/05/14 Google-EU Deal in Sharp Contra... 02/05/14 EU to Announce Settlement With... More quote details and news » GOOG in Your Value Your Change Short position clinched a settlement in its high-profile case with European Union antitrust regulators to address concerns that it is abusing its dominance in online search.

Under Wednesday's deal, Google has agreed to give comparable prominence in online search results to services offered by three rivals.

The deal is the culmination of an investigation lasting more than three years in which two earlier hopes of a settlement collapsed and the Internet giant was in turn praised and admonished by the EU's antitrust chief, Joaquín Almunia.

The announcement means that Google will avoid a formal, in-depth probe by EU regulators and a potential fine of up to 10% of its global annual revenue.

The settlement addressed the most problematic of four areas of concern raised by the commission in 2012—that Google unfairly promotes its own search results. The other three issues—that it copies or "scrapes" content from other sites without permission, forces publishers to sign exclusivity deals, and dissuades its clients from using other online advertising sites—were addressed in Google's two earlier offers.

The deal is a triumph for Google, which has used a strategy of accommodation to wriggle out of antitrust lawsuits on both sides of the Atlantic, leading to radical changes to its business. Last January, the Mountain View, Calif., company avoided formal charges in a similar U.S. Federal Trade Commission investigation by making only voluntary changes to its search practices.

The EU deal was immediately slammed by its rivals, including Microsoft Corp. MSFT -0.36% Microsoft Corp. U.S.: Nasdaq ^$36.35 -0.13 -0.36% Feb. 4, 2014 4:00 pm Volume (Delayed 15m) : 53.91M AFTER HOURS ^$36.35 0.00 0.00% Feb. 4, 2014 7:51 pm Volume (Delayed 15m): 1.61M P/E Ratio 13.32 Market Cap $302.81 Billion Dividend Yield 3.08% Rev. per Employee $841,040 02/05/14 Google-EU Deal in Sharp Contra... 02/05/14 Microsoft Prescription: More B... 02/04/14 A Wish List From Microsoft's B... More quote details and news » MSFT in Your Value Your Change Short position and Finland's Nokia Corp. NOK1V.HE +0.70% Nokia Corp. Finland: Helsinki ^€5.05 +0.04 +0.70% Feb. 5, 2014 4:02 pm Volume : 9.68M P/E Ratio N/A Market Cap €18.80 Billion Dividend Yield N/A Rev. per Employee €258,195 02/04/14 Microsoft CEO Nadella - How Mi... 01/31/14 Judge Shows Compassion Toward ... 01/28/14 Nokia May Be Down, But Finland... More quote details and news » NOK1V.HE in Your Value Your Change Short position , which late last year agreed to sell its handset business to Microsoft. The companies said the agreement was scarcely better than two earlier proposals offered by Google and would still put them at competitive disadvantage.

They also expressed frustration that there now wouldn't be a broad consultation, unlike after the previous two Google offers. Instead, the commission will seek feedback only from the 18 formal complainants and has said it expects to make no major changes to the settlement.

Under the deal, Google has agreed that when it promotes its own specialized services and products, such as for hotels, restaurants or shopping, the services of three rivals would be displayed in a way that is "comparable" and "clearly visible" compared with Google's links.

For instance, the settlement will force Google to give rivals as much as half of the space it uses when it displays its shopping results. Currently, when someone searches for a product, such as a camera, Google often displays links to merchant sites offering cameras, along with prices—placements that Google currently sells.

Under the settlement, Google will also show comparable links from three rivals that have cameras for sale, with same-sized photos and prices, marking them as "alternatives," according to a screenshot released by the commission.

But unpopular elements of earlier proposals are still there: Rivals would have to buy the space in the boxes through an auction process, meaning they would need to pay Google to be displayed prominently. Competitors also argue that the fact their links would be shaded would deter users from clicking on them as they would look more like advertisements, not like generic search results.

The deal follows a stark warning by Mr. Almunia last month, who told Google it had just weeks left to come up with an offer to counter accusations that it promotes its own products and services to the detriment of rivals.

Google General Counsel Kent Walker said the company would be making "significant changes" to the way it operates in Europe.

Speaking to reporters in Brussels, Mr. Almunia said he felt confident that the concerns of rivals had been fully taken on board and that the deal would put an end to Google's abuses.

"Without preventing Google from improving its own services, it provides users with real choice between competing services presented in a comparable way; it is then up to them to choose the best alternative," he said.

Mr. Almunia batted away complaints from competitors, saying the case had sought to address the commission's concerns—and not meet the many demands of its rivals, whose views were "very well known."

"Google is dominant, of course, but that's not what being investigated. What we need to eliminate are the abuses of this position that hinder competition…and kills innovation," Mr. Almunia said.

Nevertheless, the settlement would mark the first time Google has accepted legally binding changes to its core search business, which drives the company's profit by selling ever-more-targeted advertising. The EU is also forcing Google to give away precious real estate near the top of mobile and online search results where it sells some of its most lucrative ads.

Big money is at stake. Last week, Google reported a 17% increase in revenue, driven largely by nearly a one-third increase in online-ad clicks. But Google's revenue per click is falling, raising pressure to keep higher-paid ads like those from shopping.

Quizzed on whether Google would be able to circumvent the deal, for instance by changing the presentation of its search results on a Web page in future, Mr. Almunia said the terms of the agreement made that impossible. "If Google improves the presentation of its own services, it must do so with the links of rival services."

Google will have to adhere to the deal for the coming five years and an independent monitor will be appointed to check that no changes are made that would undermine the agreement, Mr. Almunia said.

David Wood, the legal counsel for Icomp, a group of complainants that includes Microsoft, said that without a broad market test of the accord, "Almunia risks having the wool pulled over his eyes by Google. Having initially welcomed earlier proposals, effective market tests demonstrated their fatal flaws and the commission rightly rejected them. Why has Almunia chosen to ignore the expert advice of the market on this occasion?"

Write to Vanessa Mock at vanessa.mock@wsj.com