Google hit with record fine by EU regulators
Punishment of €2.4bn for tampering with results to edge out smaller rivals
Google lost its biggest regulatory battle yet, getting a record €2.4 billion (Dh9.86bn) fine from European Union enforcers who say the search-engine giant skewed results 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 a binding order from the European Commission on Tuesday. It is up to Google to choose how it does this and inform the EU of its plans within 60 days. Failure to comply brings a risk of fines of up to 5 per cent of its daily revenue. “The more consumers click on comparison shopping results, the more money Google makes,” said Margrethe Vestager, the EU’s anti-trust chief. “This decision requires Google to change the way it operates and to face the consequence of its actions.”
Google shares fell 1.5 per cent in pre-market trading in New York. They have risen 23 per cent so far this year.
Ms Vestager’s decision marks the end of a seven-year investigation fuelled by complaints from small shopping websites as well as bigger names, including News Corp, Axel Springer and Microsoft. European politicians have called on the EU to sanction Google or even break it up while US critics claim regulators are targeting successful American firms.
Google’s lawyer Kent Walker said the company respectfully disagrees with the EU’s conclusions and will consider a court appeal, according to a blog post. “When you shop online, you want to find the products you’re looking for quickly and easily,” Mr Walker said. “Results are useful and are a much-improved version of the text-only ads we showed a decade ago.”
Ms Vestager said the case is likely to stay on her desk “for quite some time” as regulators monitor how Google deals with the order “for a number of years.”
Google has 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 massive audience as the first page attracts 95 per cent of all clicks.
“As a result of Google’s illegal practices, traffic to Google’s comparison-shopping service increased significantly, whilst rivals have suffered very substantial losses of traffic on a lasting basis,” the EU said, citing figures of a 45 per cent increase in traffic for Google’s service.
Yesterday’s fines could just be the first in a series of EU anti-trust penalties for Google, which is fighting on at least two other fronts, including its Android mobile-phone software and the AdSense online advertising service. The decision follows Russia’s US$7.8 million anti-trust fine and penalties from Italian, German and French privacy authorities. Europe has proved a tough jurisdiction for Google, which fell foul of the region’s top court, losing a high-profile right-to-be-forgotten case three years ago.
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 handles online shopping searches, one of its biggest sources of sales growth and strongest weapons against rivals Facebook and Amazon. The EU says that Google doesn’t subject its own service to its algorithm, which ranks search results on quality and relevance to the user. It said it gathered huge amounts of data, including 5.2 terabytes of search results from Google, based on 1.7 billion search queries.
“It would take be 17,000 years to read them all out to you,” Ms Vestager said.
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. Ms Vestager does not fear big numbers when trying to convince companies to step back in line.
She has ordered Apple to repay some €13bn in tax advantages and hit truck makers with a record fine of nearly €3bn. The Google fine tops a €1.06bn penalty eight years ago for Intel, which is still waiting for the final outcome of a court appeal.
Google was accused of skewing search results in its own favour to boost its shopping search service.