In Google vs. EU, a $2.7B fine could just be the start
Google’s parent company Alphabet can easily afford the $2.7 billion write-down it’s taking to cover a big antitrust fine in Europe. But it might find it harder to shrug off the rest of the European regulatory assault that’s headed its way.
In June, a European Commission ruling slapped down Google for abusing its market dominance in search by unfairly directing visitors to its comparison shopping service, Google Shopping, to the detriment of its rivals. The regulators not only imposed a huge fine, they also insisted that Google change the way it provides search results in Europe.
Alphabet is still mulling an appeal of that ruling. But it could take years to get a ruling at the European Court of Justice. And that case is only the first of several such investigations that have embroiled Google in Europe, a situation that raises uncertainty about its ability to operate freely on the continent going forward.
Alphabet Inc. reported second-quarter earnings were $3.52 billion, down 28 per cent from $4.88 billion a year earlier; that figure includes the effect of the $2.7 billion European fine. Revenues rose 19 per cent to $20.9 billion after subtracting commissions it paid out, up from $17.5 billion.
Google faces the prospect of additional fines if it doesn’t change the way it displays Google Shopping results in Europe by late September.
“These things tend to hobble a company’s behaviour even if there isn’t a decision,” says Jonathan Taplin, a former professor at University of Southern California and author of “Move Fast and Break Things: How Google, Facebook and Amazon Have Cornered Culture and Undermined Democracy.” ”I don’t think it’s the end, I think it’s the beginning.“
Google has offered to make concessions on multiple occasions in an attempt to settle Europe’s 7-year-old antitrust probe. But previous offers were still considered to drive the vast majority of clicks toward Google’s services - its key source of revenue from advertisers.
That’s what makes the current negotiations over what it can do to avoid further fines confusing, says Mark Ballard, head of research for Merkle, an ad agency that represents Gap, Crate&Barrel and other big online ad spenders.
“There’s a lot of uncertainty,” he says. “Until we see that plan it’s going to be hard to predict what kind of impact this will have.”
Alphabet shares closed up 0.5 per cent at $998.31, but dropped more than 3 per cent in after-hours trading, to $968.
This story has been corrected to show that revenue rose 19 per cent, not 21 per cent, to $20.9 billion, not $26 billion, after subtracting commissions it paid out, up from $17.5 billion, not $21.5 billion.
This Tuesday, July 19, 2016, file photo shows the Google logo at the company’s headquarters in Mountain View, Calif. Google parent Alphabet is taking a $2.7 billion write-down to cover a large fine EU antitrust enforcers assessed in June 2017.