Competition Commissioner Joaquin Almunia said on Wednesday that Google's offer to label its own services in general web search results and display more rival services did not go far enough.
"After an analysis of the market test that was concluded on June 27, I concluded that the proposals that Google sent to us are not enough to overcome our concerns," he said.
The Commissioner has written to Eric Schmidt, Google's executive chairman, "asking Google to present better proposals, to improve its proposal".
It is the latest development in a three-year investigation of claims that Google abuses its dominant share of the general web search market to promote its own specialist services, such as shopping comparison, damaging competition online.
Google proposed changes in April in the hope of settling the case but the complainants have analysed the potential effect and claim they would have little or no impact.
Rather than labelling of its own services and including more links to rivals' services on search results pages, companies including Microsoft (NasdaqGS: MSFT - news) , Oracle (NYSE: ORCL - news) and the British shopping comparison website Foundem insist Google should be banned from discriminating in rankings.
If the dispute goes to court Google could face fines of up to 10 per cent of its $31bn annual turnover.