In a blow to Google's bid to put all books online and expand its Internet dominance, a federal judge in New York on Tuesday rejected its settlement with authors and publishers, saying the terms "simply go too far" in giving Google an advantage over competitors and copyright holders.

The decision comes as regulators in this country and in Europe scrutinize Google's supremacy in the search business. The judge's thinking, laid out in a 48-page filing, echoed many of the antitrust arguments made by the Justice Department when it criticized the deal a year ago.

The $125 million settlement had drawn hundreds of objections from Google rivals, consumer watchdogs, academic experts, literary agents and even foreign governments. Google already has scanned more than 15 million books for the project.

Google vowed on Tuesday to continue digitizing books, only a portion of which are affected by the settlement, which would have allowed Google to sell access to millions of out-of-print books to consumers and libraries.

"This is clearly disappointing, but we'll review the court's decision and consider our options," said Hilary Ware, managing counsel at Google. "Like many others, we believe this agreement has the potential to open up access to millions of books that are hard to find in the U.S. today."

Google could appeal the decision or attempt to satisfy the judge's concerns by negotiating a new settlement.

The judge, Denny Chin of the 2nd Circuit Court of Appeals, said the deal would "arguably give Google control over the search market." Specifically, Chin was concerned that the settlement would allow third parties to show small portions of books scanned by Google only if they had entered into agreements with the company.

He added the deal also presented concerns about privacy, because Google could potentially collect information on what kinds of books people were reading.

He was particularly critical of the access Google would have to so-called orphan works — out-of-print books whose writers could not be located — saying the deal gave the company "a de facto monopoly over unclaimed works."

The judge said Congress should ultimately decide who should be entrusted with guardianship over orphan books and under what terms, rather than the issue being resolved by private, self-interested parties.

He said Congress also could address the concerns of the international community of authors and publishers. He called it significant that foreign authors, publishers and even nations were saying the agreement violates international law. France and Germany had objected to the deal, along with authors and publishers in Austria, Belgium, India, Israel, Italy, Japan, New Zealand, Spain, Sweden, Switzerland and the United Kingdom.

The class-action settlement, reached in 2008, came after the Authors Guild and the Association of American Publishers sued Google to stop the company from scanning books and putting them on the Web. Under the terms of the deal, Google said it would pay $125 million and allow authors and publishers to collect money any time their books are viewed online.

Critics of the deal cheered the judge's decision.

"This opinion is, in effect, a microcosm of the big issues that Google's confronting in Washington," said Gary Reback, an antitrust lawyer and leader of the Open Book Alliance, a group that opposed the settlement. "We think it's as much as we could have asked for. We're very pleased with it."

"We believe the court reached the right result on this complex, proposed settlement," said Gina Talamona, a spokeswoman for the Justice Department. "We are pleased that the court supported our position."

The Associated Press contributed to this story.