Webnauts,
I've read Jaan's blog and it raises some interesting points. I'd be wary of using the small print of a law designed to prevent overt public paid endorsement with the cottage industry of link building.
The other issue is regards Google's big brother approach. It is after all an effective monopoly. In both the US and EU, companies with 60-90% market share would expect to be heavily regulated. In the media world this is even more likely to be so. An abuse of a dominant market position risks sever financial penalties within the EU and these penalties are related to turnover or profit. In the media world this is even more likely to be so.
I am amazed that Google has reached it level of dominance so relatively unscathed. Essentially, its probably because regulators are so far behind the curve on the Internet and search in particular. A TV station with an 70% share of European broadcasting would be under severe scrutiny, particularly if it was US owned.
Google has a dominant share of paid search (See
Is Google Cheating you on Adwords?) and it wouldn't be difficult to see the link between penalising paid links with the benefits they yield from selling pay per click. Its all ultimately part of the same food chain. And Google wants to ensure they yield the maximum possible.