Google has been hit with a record 2.4 billion euro fine for competition abuses related to its shopping business.
EU antitrust regulators ruled on Tuesday that the technology giant should face its largest-ever charge for a monopoly abuse case on the basis that Google manipulated its market dominance to the disadvantage of smaller competitors and European consumers.
What did Google do?
The European Commission found that, since 2008, Google had been altering its search engine results to give priority to its European comparison shopping service – initially ‘Froogle’ and later ‘Google Shopping’ – ahead of other rival shopping businesses.
By ranking Google Shopping service ahead of other competitors, Google was able to significantly increase the amount of traffic to the previously ailing service, thereby generating more clicks and revenue. Meanwhile, other companies were bumped down the list and saw traffic levels drop.
Though businesses have the right to build on their popularity, the European Commission ruled that Google had breached EU rules put in place to protect markets and shoppers.
“What Google has done is illegal under EU antitrust rules,” Margrethe Vestager, the European Union’s Competition Commissioner told a press conference on Tuesday.
“It has denied other companies the chance to compete on their merits and to innovate, and most importantly it has denied European consumers the benefits of competition, genuine choice, and innovation.”
“Google Shopping shows the images and prices of products in response to shopping-related searches when someone uses the search engine.”
“Google is giving its own service priority in search results to the detriment of other price comparison services, such as TripAdvisor and Expedia”
How did regulators find out?
Regulators were initially alerted to the possible malpractices following a number of complaints from rivals in both the U.S. and Europe.
The allegations then prompted a seven-year investigation, during which time regulators discovered that Google “systematically gave prominent placement only to its own product” and also “demoted other rival services.”
Why is the fine so high?
Vestager outlined that the fine reflects the “serious and sustained” nature of Google’s violation of EU antitrust rules.
EU regulatory guidelines stipulate that such fines for antitrust abuses are capped at up to 10 percent of the company’s global turnover. By this measure, Google’s fine could have been as much as $9 billion based on parent company Alphabet’s 2016 turnover.
Though it fell short of this mark, it is well above those previously doled out by the regulator, indicating its intention to make an example of the company.
It has also been given 90 days to make the necessary changes to create equal opportunity for all competitors or it could face further fines.
The fine, as with all other antitrust fines, will go to the general EU budget, reducing next year’s contributions for member states.
What does this mean for Google?
Google said on Tuesday that it “respectfully disagrees” with the allegations and it will consider appealing to the European Court of Justice to overturn the fine.
Such an appeal could well drag into 2020, according to legal associate Oliver Fairhurst of law firm Lewis Silkin.
“Google shows shopping ads, connecting our users with thousands of advertisers, large and small, in ways that are useful for both,” Kent Walker, Google’s senior vice president and general counsel wrote in a blog post shortly after the announcement.
“We believe the European Commission’s online shopping decision underestimates the value of those kinds of fast and easy connections.”
It is not yet clear what success Google will have appealing the case, however, it is currently under two further investigations by the European Commission meaning that Google’s battle with the regulators is unlikely to end soon.
The ruling may also open the way for private litigants to seek compensation for damages in national courts.
Is this end of problems for Google:
- Margrethe Vestager said “preliminary conclusions” In the Android and AdSense cases against Google also showed it breached EU rules.
- At the same time, A bigger concern for Google, in the long run, comes, not from the EU, but from Canada, where the country’s supreme court has ruled, in a 7-2 decision, that Google can be forced to pull results worldwide – not just from Canadian versions of its search engine.