The European Commission slammed Google with a €2.42 billion ($2.7 billion) fine on Tuesday for breaching EU antitrust rules. According to EU antitrust regulators, Google has abused its market dominance as a search engine by giving an illegal advantage to another Google product, its comparison shopping service.
This is the outcome of the first of three investigations into Google’s dominance in searches and smartphones, and is the biggest fine the EU has ever handed out on any company. It even exceeds the €1.06 billion sanction it imposed on U.S. chipmaker Intel in 2009.
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.
“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,” said European Competition Commissioner Margrethe Vestager in a prepared statement. “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,” she added.
Google’s flagship product is the Google search engine, which provides search results to consumers, who pay for the service with their data. Almost 90% of Google’s revenues stem from adverts, such as those it shows consumers in response to a search query.
In 2004 Google entered the separate market of comparison shopping in Europe, with a product that was initially called “Froogle”, re-named “Google Product Search” in 2008 and since 2013 has been called “Google Shopping”. It allows consumers to compare products and prices online and find deals from online retailers of all types, including online shops of manufacturers, platforms (such as Amazon and eBay), and other re-sellers.
From 2008, Google began to implement in European markets a fundamental change in strategy to push its comparison shopping service. This strategy relied on Google’s dominance in general internet search, instead of competition on the merits in comparison shopping markets:
Google has systematically given prominent placement to its own comparison shopping service: when a consumer enters a query into the Google search engine in relation to which Google’s comparison shopping service wants to show results, these are displayed at or near the top of the search results.
Google has demoted rival comparison shopping services in its search results: rival comparison shopping services appear in Google’s search results on the basis of Google’s generic search algorithms. Google has included a number of criteria in these algorithms, as a result of which rival comparison shopping services are demoted. Evidence shows that even the most highly ranked rival service appears on average only on page four of Google’s search results, and others appear even further down. Google’s own comparison shopping service is not subject to Google’s generic search algorithms, including such demotions.
As a result, Google’s comparison shopping service is much more visible to consumers in Google’s search results, whilst rival comparison shopping services are much less visible.
Google’s practices amount to an abuse of Google’s dominant position in general internet search by stifling competition in comparison shopping markets.
Market dominance is, as such, not illegal under EU antitrust rules. However, dominant companies have a special responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in separate markets.
If Google fails to comply with the Commission’s Decision, it would be liable for non-compliance payments of up to 5% of the average daily worldwide turnover of Alphabet, Google’s parent company. The Commission would have to determine such non-compliance in a separate decision, with any payment backdated to when the non-compliance started.
Finally, Google is also liable to face civil actions for damages that can be brought before the courts of the Member States by any person or business affected by its anti-competitive behaviour. The new EU Antitrust Damages Directive makes it easier for victims of anti-competitive practices to obtain damages.
Other Google Cases
The Commission has already come to the preliminary conclusion that Google has abused a dominant position in two other cases, which are still being investigated. These concern:
1) the Android operating system, where the Commission is concerned that Google has stifled choice and innovation in a range of mobile apps and services by pursuing an overall strategy on mobile devices to protect and expand its dominant position in general internet search; and
2) AdSense, where the Commission is concerned that Google has reduced choice by preventing third-party websites from sourcing search ads from Google’s competitors.
The Commission also continues to examine Google’s treatment in its search results of other specialized Google search services. Today’s Decision is a precedent which establishes the framework for the assessment of the legality of this type of conduct. At the same time, it does not replace the need for a case-specific analysis to account for the specific characteristics of each market.