The European Union’s Anti-trust Commission has just fined Google a record amount of €2.42 billion over anti-trust practices. EU’s main charge is that Google abused its dominant position in the market to give its shopping service an advantage over other results. For Google, which is now under the parent company Alphabet, this can’t come as good news. Here’s a look everything you need to know about this anti-trust case.
Who has fined Google, how much and what exactly is the reason?
The European Union’s anti-trust commission is known for being strict, and in the past has fined Microsoft as well. EU’s fine against Google is €2.42 billion, which is nearly $2.7 billion, and this is no small sum, despite Google’s own financial strength.
Google shares were already down after this report came in, and Google is also fighting other anti-trust cases in EU over the Android OS as well. European Commission’s main charge against Google is that it gave “an illegal advantage to another Google product, its comparison shopping service,” which violates EU anti-trust practices.
So what can Google do next?
The Commission’s press statement says, “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.” Essentially Google has 90 days to end these anti-trust practices, else the fine will hold.
What is the European Commission alleging in its case against Google?
In a press statement, European Commissioner Margrethe Vestager, who looks after competition policy, said, “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.”
According to European Union, Google has been abusing this position since 2008 when it first launched Google Product Search, which was earlier known as Froogle. In 2013, the product was renamed “Google Shopping”. This service lets users compare product prices, deals, details, and has online links from online shops of manufacturers, platforms like Amazon and eBay, and other re-sellers as well.
The Commission notes that since 2008, Google used its dominance in internet search to give a “prominent position to its own comparison shopping service.” Essentially, Google Shopping results appeared right on top, while rivals were demoted.
How did European Union come to this conclusion against Google?
European Commission looked at over 5.2 TB of actual search results from Google. This was nearly 1.7 billion search queries. EU Commission also looked at consumer behaviour and click-through rates. It also took into consideration the rise in traffic to Google’s Shopping Service, and the fall in traffic of rivals.
According to EU, while “Google’s comparison shopping service,” was right on top, rivals were pushed further down. The Commission says, Google “demoted rival comparison shopping services,” and this was done on the basis of some criteria in their algorithm. However, the same never applied to Google’s own comparison shopping service.
EU’s also notes consumers click on the results that shown on top, and given these are for Google’s Shopping service, this service got the better deal. The main argument is that by placing its own product on top of search, Google played unfair with competition. The Commission’s press release makes it clear Google is not being fined for its dominant position, but for its deliberate actions which put the links of other services at the bottom.
The press statement notes, “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.” Google’s practice was found all over the European Economic Area, in all 31 EEA countries.
The Commission’s report alleges that Google’s comparison shopping service has increased its traffic massively in countries. It saw 45X increase in the United Kingdom, 35X in Germany, 19X in France, 29X in the Netherlands, 17X in Spain and 14X in Italy. Meanwhile, rivals saw traffic fall by 85 per cent in UK, 92 per cent in Germany, and 80 per cent in France. It adds, “These sudden drops could also not be explained by other factors. Some competitors have adapted and managed to recover some traffic, but never in full.”
So what will the EU Commission do next, what does the decision mean?
Google compliance will be monitored. According to the press statement, “Google is under an obligation to keep the Commission informed of its actions (initially within 60 days of the Decision, followed by periodic reports).” But the decision also means that rivals can file civil action suits for damages against Google in EU, if they claim they have been wronged by the actions of the search giant. Google could potentially face a lot more cases in EU.
European Commission is also look at Google’s Android, and whether it killed innovation and choice in the smartphone world. It is also looking at AdSense, Google’s Ad network, and whether this is abusing its dominant position.
Has Google issued a statement? What has the company said?
Google has issued a statement via its Senior Vice President and General Counsel Kent Walker, who wrote a blogpost explaining why they disagree with the decision.
“When you shop online, you want to find the products you’re looking for quickly and easily. And advertisers want to promote those same products. That’s why Google shows shopping ads, connecting our users with thousands of advertisers, large and small, in ways that are useful for both…”
“We believe the European Commission’s online shopping decision underestimates the value of those kinds of fast and easy connections. While some comparison shopping sites naturally want Google to show them more prominently, our data show that people usually prefer links that take them directly to the products they want, not to websites where they have to repeat their searches,” adds the post.
He concludes the blogpost saying, Google “respectfully disagrees with the conclusions” of the European Commission. The company will review their decision in detail, and is considering an appeal as well.