US technology giant Google has been hit with a record-breaking €2.42bn (£2.14bn) fine from the European Union.
According to European regulators, Google denied real choice to consumers and deprived competitors from being able to publicise themselves on a level playing field, by promoting its own online shopping service in searches.
A statement issued by the European Commission (EC) added that the company must now end the conduct within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, Google’s parent company.
Speaking about the ruling, Commissioner Margrethe Vestager, responsible for competition policy, said: “Google has come up with many innovative products and services that have made a difference to our lives. That’s a good thing. But Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals.
“Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.
“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.”
Kent Walker, SVP and general counsel at Google, said that when consumers shop online they want to find the products they are looking for quickly and easily and in turn, advertisers want to promote these.
“That’s why Google shows shopping ads, connecting our users with thousands of advertisers, large and small, in ways that are useful for both,” he added.
“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.”
Reaction in the UK
It’s not surprising that UK tech entrepreneurs were quick to react to the news, due to Google’s obvious prominence in the technology industry, but also, and perhaps most importantly, in direct response to what the ruling could mean for the AdTech sector as a whole.
Damian Routley, partner at Adglow’s UK HQ, said the EC’s decision was “a very bold move” and the sheer size of the fine, he added, spoke volumes.
He told Tech City News: “I am interested to see whether this sets a precedent for further judgments of this size. It also sends a clear message to the major global advertising platforms that the EU will not stand for anything less than absolute transparency of measurement and rigorous authenticity when it comes to these platforms doing what is best for users, not what is best for themselves.”
Ethar Alali, director and chief architect at Axelisys, an IT strategy firm, also spoke about the wider implications for the industry.
“Whatever your own thoughts are on the incredible fine are, it sends a clear signal to Google that anti-competitive behaviour won’t be tolerated, as well as opening up the potential for civil litigation by those companies disadvantaged by it.
“It crucially places similar services under intense scrutiny not to make the same mistake and has the potential to hit sites such as eBay and Amazon too,” he added.
A legal view
From a legal perspective, Gustaf Duhs, partner at law firm Stevens & Bolton, said the EU’s decision was “perhaps indicative of the harder line that the current European competition commissioner, Margrethe Vestager, appears to be adopting”.
“The fact that Google and the Commission’s previous three rounds of commitment discussions did nothing to produce a settlement emphasises both the challenges and the huge stakes for all involved. The fine is a stark reminder to other dominant companies that they need to tread carefully in respect of competitors. This case, coming in the wake of previous cases in relation to Intel and Microsoft, underlines the fact that the technology sector is and will continue to be at the front line of antitrust enforcement activity.”
Duhs went on to note he expected Google to appeal the decision to the EU’s General Court, highlighting that the process could take many years to resolve and will add to what is already a protracted investigation dating back to 2010.
“There have been suggestions that the EU has been driven by political motives in its treatment of Google and other tech companies, and that EU fines on US companies are a form of protectionism.
“Whatever the truth in such arguments (and the European Commission will strongly argue it takes decisions independent of political pressure and on the merits) it is interesting to note that the US authorities settled a similar investigation of Google in 2013. It remains to be seen whether there is any political reaction from the US in the light of the EU’s decision,” he concluded.