National Post (National Edition)
GOOGLE’S VERY BAD DAY
A $3.6-BILLION FINE BY THE EUROPEAN UNION COMES DAYS AFTER U.S. RIVALS DEMAND A CRACKDOWN,
LUXEMBOURG •It’snotonly the European Union that has it out for Google.
Seven large U.S. tech companies had written to the EU’s antitrust watchdog urging it to go ahead with what ended up being a record fine on the world’s most-used search engine for obstructing competition and “stifling innovation.”
“As U.S.-based companies, we wish to go on the record that enforcement action against Google is necessary and appropriate, not provincial,” the companies, including Yelp Inc., Oracle Corp. and Rupert Murdoch’s
News Corp., said in a letter to EU Competition Commissioner Margrethe Vestager.
The companies “have watched Google undermine competition in the United States and abroad,” they said in the June 26 letter. “Decisive action is necessary to restore competition and once again open the Internet to innovation and growth.”
The European Commission on Tuesday fined
Alphabet Inc.’s Google a record 2.42 billion euros ($3.6 billion) for skewing results to the detriment of smaller shopping search rivals.
Google was given 90 days to change its behaviour, or face further fines of up to five per cent of its daily revenue. That’s about US$10 million a day, according to Needham & Co. analyst Kerry Rice.
The decision is a further step in the tumultuous seven-year EU probe fuelled by complaints from small shopping websites as well as bigger names, including News Corp., Axel Springer SE and Microsoft Corp.
Google has the right to appeal to the EU’s top courts, and the commission said it plans to monitor Google’s reaction to the order “for a number of years.”
European politicians over the years have called on the EU to sanction Google or even break it up, while U.S. critics claim regulators are targeting successful American firms.
The letter seeks to dispel criticism that the commission is using its powers to deliberately and unfairly target U.S. companies.
“The case against Google, both in Europe and the United States, rests on sound legal and factual foundations,” the firms said in the letter.
In addition to three separate probes into Google, the EU last year slapped Apple Inc. with a record 13-billioneuro ($19.4-billion) tax bill plus interest after the commission accused it of benefiting from selective tax treatment in Ireland. Similar EU decisions may be in store against Amazon.com Inc. and McDonald’s Corp. over their tax affairs in Luxembourg.
On Tuesday, Vestager refuted allegations that her actions were biased against U.S. companies.
“I’ve been going through the statistics in antitrust, in merger control, in our state aid work,” Vestager said after announcing her fine against Google. “I can find no facts to support any kind of bias.”
Google has little choice but to accede to her demands. That would mean tweaking the lucrative box of paid posts that appear atop searches for products in the region — or removing it altogether, giving Europeans the retro look from the 1990s when search results prominently featured ten blue links to outside websites.
It’s a major blow to the firm’s strategy, hatched about a decade ago, of keeping searchers on Google services, rather than sending them elsewhere on the Internet.
“More important than the fine, we believe the changes Google may need to make to its search algorithms and Google Shopping placement to comply with the EU ruling could potentially impact its financials greater,” Rice wrote in a note to investors. “Google has a range of options from doing nothing to modifying its Search and Shopping algorithm, to removing its Google Shopping service from European countries.”
While the penalty will barely make a dent in its US$90-billion cash hoard, Google faces the prospect of less ad revenue and a regulatory backlash targeting other services from maps to restaurant reviews as well as the threat of even more penalties.
The search-engine giant will have “the sword of Damocles hanging over its head,” said Jay Modrall, a lawyer for Norton Rose Fulbright in Brussels. That’s because it’s no longer Google’s choice on how it makes changes to allay EU concerns. Instead, it’s “under a legal requirement to do so and under notice that if its commitments are not sufficient, it’ll be fined even more.”