Google skewing earns €2.4bn fine
Companies denied chance to compete on merits and consumers to choose services, says European Commission
Google lost its biggest regulatory battle yet, getting a record €2.4bn fine from EU enforcers who say the searchengine giant skewed results in its favour to thwart smaller shopping search services.
Google lost its biggest regulatory battle yet, getting a record €2.4bn fine from EU enforcers who say the search engine giant skewed results in its favour to thwart smaller shopping search services.
Alphabet’s Google has 90 days to “stop its illegal conduct” and give equal treatment to rival price-comparison services, according to an order from the European Commission on Tuesday. It is up to Google to choose how it does this and it must tell the EU within 60 days of its plans. Failure to comply brings a risk of fines of up to 5% of its daily revenue.
“Google’s strategy for its comparison-shopping service wasn’t just about attracting customers by making its product better than those of its rivals,” said Margrethe Vestager, the EU’s antitrust chief. “It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services.”
Google shares fell 1.5% in premarket trading in New York. They have risen 23% so far in 2017.
Vestager’s decision marks the end of a seven-year probe fuelled by complaints from small shopping websites as well as bigger names including News Corp, Axel Springer and Microsoft.
“I expect the commission now to swiftly conclude the other two ongoing investigations against Google,” Markus Ferber, a member of the European Parliament from Germany, said. “The Google case also illustrates competition cases tend to drag on for far too long before they are eventually resolved. In a fast-moving digital economy, this means often enough, that market abuse actually pays off and the abuser succeeds in eliminating the competition.”
Google had been pushing its own comparison-shopping service since 2008, systematically giving it prominent placement when people search for an item, the EU said. Rival comparison sites usually only appear on page four of search results, effectively denying them a large audience as the first page attracts 95% of all clicks.
“As a result of Google’s illegal practices, traffic to Google’s comparison-shopping service increased significantly, while rivals have suffered very substantial losses of traffic on a lasting basis,” the EU said, citing figures of a 45% increase in traffic for Google’s service.
Tuesday’s fines could just be the first in a series of EU antitrust penalties for Google, which is fighting on at least two other fronts including its Android cellphone software and the AdSense online advertising service. The decision follows Russia’s $7.8m antitrust fine and penalties from Italian, German and French privacy authorities.
“Vestager is proving she means business,” said Thomas Vinje, a lawyer who represents FairSearch, a group of companies that complained to the EU.
“This decision will mean that consumers receive comparison-shopping results that offer genuinely the best purchasing options,” Vinje said. While the penalty is a record, it will do little to faze a company whose parent has more than $90bn in cash.
Of graver concern is the way regulators called on Google to change the way it handled online shopping searches, one of its biggest sources of sales growth and strongest weapons against rivals Facebook and Amazon.com.
The EU says Google does not subject its own service to its algorithm, which ranks search results on quality and relevance to the user.
The EU’s allegations strike at the heart of a type of online advertising known as product listing ads, or PLAs, that is growing at almost three times the rate of traditional text-based search ads, according to digital marketing firm Merkle. The format lets a marketer place an ad for an item with large images and price information in the prime digital real estate at the top of search results.
Vestager does not fear big numbers. She has ordered Apple to repay some €13bn in tax advantages and hit truck makers with a record cartel fine of nearly €3bn.
The Google fine tops a €1.06bn penalty eight years ago for Intel, which is still waiting for the outcome of a court appeal.
Her move against Google risks attracting further criticism she has unfairly singled out US companies. While she has said American firms are “under no specific fire because of their nationality”, transatlantic tensions are rising after President Donald Trump’s decision to pull the US out of the Paris climate accord, adding to concerns over global trade.