Google hit with record fine by EU, told to change ways
After a seven-year legal battle, European authorities came down hard on Google on Tuesday for taking advantage of its dominance in online searches to direct customers to its own businesses, fining the tech giant a record 2.42 billion euros ($2.72 billion) and raising the prospect of more.
A yearslong analysis of Google’s online search results showed that the company lists links to its own online shopping services above those of rivals, European regulators said. On average, Google lists search results to its biggest rivals in online shopping only on page 4 — and smaller rivals even lower. That’s a huge advantage for Google when 90 percent of use-clicks are on page one.
The ruling that Google is taking advantage of its market dominance in online searches paves the way for a broader crackdown by the EU, which is investigating several other Google businesses, like its online images and travel businesses.
“What Google has done is illegal under EU antitrust rules. 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 and the full benefits of innovation,” EU Competition Commissioner Margrethe Vestager told reporters.
To avoid more pain in Europe, Google will have to change the way it does business in the region. It has 90 days to stop favoring its own links to online shopping or face more fines of up to 5 percent of the average daily worldwide revenue of parent company Alphabet.
Google says it is considering an appeal and maintains it’s just trying to package its search results in a way that makes it easier for consumers to find what they want.
“We will review the Commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case,” said Kent Walker, senior vice president at Google, in a statement.
When it comes to online shopping, a big problem is that consumers don’t spend enough time doing different searches and instead they focus on Google searches to find the best price, experts say. And there are plenty of search tools — from Camelcamelcamel.com, which tracks Amazon prices over time, to eBates, a shopping portal that offers coupons and cash back from 2,000 online retailers.
Internet consultant Sucharita MulpuruKodal urges shoppers to go directly to retailers’ sites to find the best deals. In Europe, she cites the online sites of Tesco and Walmart’s Asda, for example.
“Google has become a shortcut to buying, not a shortcut to saving money,” said Benjamin Glaser, features editor of DealNews, a comparison shopping site. He also says that Google searches only look for the lowest prices for that moment and also doesn’t incorporate shipping discounts and coupons as other deal sites like DealNews and eBates do.
The fine on Google is the highest ever imposed in Europe for anti-competitive behavior, exceeding a 1.06 billion euros penalty on Silicon Valley chip maker Intel in 2009.
The penalty itself is unlikely to leave a dent in Google’s finances. Alphabet has more than $92 billion in cash, including nearly $56 billion in accounts outside of Europe.
‘Asleep at the switch’
But it could affect Google’s way of doing business in the longerterm. U.S. interest groups were quick to latch onto the European ruling to argue that a similar approach be taken in the United States.
“Some may object to the EU moving so aggressively against U.S.-based companies, but these authorities are at least trying to deal with some of the new competitive challenges facing our economy,” said the News Media Alliance. “U.S. lawmakers and regulatory authorities, by contrast, have been ‘asleep at the switch’ for far too long.”
“We will monitor Google’s compliance closely,” Vestager said.
She noted that any company or person who has suffered damages due to the company’s practices can make claims to national courts.
More broadly, Vestager said, the inquiry has established that Google is dominant in general internet search in all 31 countries of the European economic area. This will affect other cases the Commission might build against the internet giant’s various businesses, like Google Images.