European Union thumps Google with record $2.7-billion fine
EU antitrust regulators hit Google with a record €2.4-billion ($2.7 billion) fine for favoring its own shopping service, taking a tough line in the first of three probes of its dominance in searches and smartphone operating systems. It is the biggest fine the European Commission has ever imposed on a single company in an antitrust case, exceeding a €1.06-billion sanction against US chipmaker Intel in 2009 and goes beyond what US regulators have ever fined a tech company.
PEOPLE ARE SILHOUETTED as they pose with laptops in front of a screen projected with a Google logo, in this picture illustration taken in Zenica October 29, 2014. BRUSSELS — European Union antitrust regulators hit Google with a record €2.4-billion ($2.7-billion) fine for favoring its own shopping service, taking a tough line in the first of three probes of its dominance in searches and smartphone operating systems.
It is the biggest fine the European Commission has ever imposed on a single company in an antitrust case, exceeding a € 1.06- billion sanction handed down against US chipmaker Intel in 2009 and goes far beyond what US regulators have ever fined a tech company.
European Union competition chief Margrethe Vestager on Tuesday gave Google 90 days to stop favoring its own shopping service in internet searches or face a further daily penalty of up to 5% of parent company Alphabet’s average daily global revenue.
“Google’s strategy for its comparison shopping service wasn’t just about attracting customers. It wasn’t just about making its product better than those of its rivals. Instead, Google has abused its market dominance as a search engine,” she told a news conference.
The fine will be easy for the world’s biggest search engine to absorb, but Google must now move fast to satisfy Vestager’s concerns while limiting the longer-term hit to its highly lucrative search business. It also leaves other tech companies wondering how far Vestager may go to force US tech giants to concede more ground to smaller competitors.
Vestager has become one of the world’s most combative antitrust regulators with powers to impose multi-billion dollar fines and force companies to make radical changes to their businesses.
Last year, the former Danish economy minister ordered Apple to pay Ireland unpaid taxes of €13 billion as it ruled the company had received illegal state aid. Apple is appealing the decision.
The decision is the first of a series of competition rulings that Google faces from the European Commission, which has not shrunk from taking on US tech giants such as Alphabet, which has annual revenues of $90 billion and a market value of $665 billion.
The Commission has also charged Google with using its Android mobile operating system to crush rivals, a case that could potentially be the most damaging for the company, as it is the system used in most smartphones.
The company has also been accused of blocking rivals in online search advertising.
RIVALS DEMOTED
The Commission found that Google, with a market share in searches of over 90% in most European countries, had systematically given prominent placement in searches to its own comparison shopping service and demoted those of rivals in search results.
Vestager said in a statement that Google had “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.”
Google said its data showed people preferred links taking them directly to products they want and not to websites where they have to repeat their search.
“We respectfully disagree with the conclusions announced today. We will review the Commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case,” Kent Walker, Google’s general counsel, said in a statement.
The biggest risk to Google is not the fine but the changes demanded to its business, said Richard Windsor, an independent financial analyst who tracks competition among the biggest US and Asian internet and mobile companies.
Google will have to brief the Commission on what measures it plans to take within 60 days of the decision and present periodic reports. Eight complainants were involved in the case which the European Union declined to name in line with its policy.
According to Windsor’s calculations, the €2.42-billion fine represents just 22.6 days of the operating cash flow that Alphabet reported in its latest quarter.
“What has the potential to hurt Google and be far more damaging is what remedies the European Commission may or may not impose on Google as a result,” Windsor said. “That’s where the real damage could be done.”
The fine, equivalent to 3% of Alphabet’s revenue, is the biggest regulatory setback for Google, which settled with US enforcers in 2013 without a penalty after agreeing to change some of its search practices.
The Commission’s action follows a seven-year investigation prompted by scores of complaints from rivals such as US consumer review website Yelp, TripAdvisor, UK price comparison site Foundem, News Corp. and lobbying group FairSearch. —