Commission fines Google €2.4bn over abuse of search dominance

Google gven 90 days to put its search engine right or face daily fines

European regulators have in the past investigated Microsoft, Intel, Apple, Google, Facebook and Amazon, raising US claims that Brussels was waging a war against the Silicon Valley.

European regulators have in the past investigated Microsoft, Intel, Apple, Google, Facebook and Amazon, raising US claims that Brussels was waging a war against the Silicon Valley.

 

The European Commission on Tuesday fined Google €2.4 billion for breaking e EU competition rules by abusing its monopoly over internet search to unfairly promote its own shopping comparison service.

Google, at the end of a seven-year investigation, was given 90 days to put its search engine right or face daily fines of up to 5 per cent of the average daily turnover of Alphabet, Google’s parent company. The fine, the largest yet in an antit-trust case, represents close to 2.5 per cent of the company’s yearly sales – € 89 billion in 2016 . The EU maximum penalty is 10 per cent of yearly sales.

Google can challenge the EU’s decision in the European Court of Justice, a process that may yet drag out a final decision for many years.

The commission accuses Alphabet ’s Google of unfairly steering traffic to shopping sites that pay for top placement on its search results pages and do not give other comparison sites such as Kelkoo and Twenga an equal chance.

Decision

Competition Commissioner, Margrethe Vestager, explaining the decision to the press in Brussels, warned that in two other ongoing investigations of Google – into whether it had squeezed rivals out of its Android operating system, and into its online search advertising platform – the commission “has come to a preliminary conclusion that Google has abused a dominant position.” Further fines can be expected.

A spokesperson for Google responded defiantly to the ruling: “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 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”.

Ms Vestager said Google will be required to change how it ranks some of its search products to give its rivals mostly small European and American tech companies - greater prominence when people search online. It is up to Google to explain how it will do this, she said.

Google currently has a 90 per cent share of the European internet search market and since 2008 has used that dominant position and its search algorithm to favour its own shopping comparison site, Google Shopping (originally called Froogle).

Traffic

The site had limited initial success following its launch in 2004, but its fortunes were transformed after 2008 when the new search algorithms began to be used. The commissioner, who said they had seen evidence of a 90 per cent fall-off in rivals’ traffic after the change, said that even the most highly ranked rival shopping service appear only on page four of Google’s search results sites . Others appear even further down.

“Visibility and traffic”, are two sides of the same coin she said, and warned that the commission in its competition work would put a particular emphasis on companies with a dominant market position. “They will not be allowed to abuse their power in one market to gain advantage in another market.”

The ruling , Ms Vestager claimed “shows that in Europe companies must compete on their merits.”

Although the concept of curbing “self-promotion” online might appear new to competition policy, in fact it was simply, she insisted, a new version of what the Commission had been doing for a long time, preventing the abuse of a dominant position.

European regulators have in the past investigated Microsoft, Intel, Apple, Google, Facebook and Amazon, raising US claims, strongly denied yesterday by Vestage, that Brussels was waging a war against the Silicon Valley . Intel holds the current top spot for a monopoly abuse with a fine of €1.06 billion - more than 3 per cent of Intel’s sales in 2008.

Challenge

Google can challenge the EU’s antitrust authorities at the EU courts. The company still faces other EU investigations, including into whether it had squeezed rivals out of its Android operating system and another into its online search advertising platform.

The Google investigation is one of the most complex and politically charged ever undertaken by Brussels. Although the ruling orders Google to cease the anti-competitive practices, the precise changes required are expected to take months or even years to negotiate.

Google can be hit with further non-compliance fines.

Investigation

The EU investigation also looked at other services offered “in-house” by Google, such as travel services and local information. Under Mrs Vestager the investigation was narrowed to focus on the shopping business.

It is unclear whether the commission saw the other potential cases as too weak, or set them aside for a later stage.

Allegations of anti-American bias have been levelled at Brussels since the early 1990s, but tensions were ratcheted up last year after Mrs Vestager’s decision to force Apple to pay €13 billion in back taxes in Ireland.

However, leaders of six American companies – some of which are complainants in the European case – and the News Media Alliance, a trade association, wrote on Tuesday to Mrs Vestager to express support for Europe’s enforcement and a hope that American authorities might look again at Google’s conduct in the US.

“We believe that decisive action is necessary to restore competition and once again open the internet to innovation and growth,” their letter said.

Targeting

European officials deny they are targeting US companies. They contend that they investigate the American technology giants because they make up most of the industry - three quarters of the largest 20 IT companies are American, according to S&P capital IQ.

However, Americans allege bias in Europe after the US Federal Trade Commission examined the same issues as Brussels has done and decided not to pursue charges in 2013.

– Additionl reportign The Financial Times Ltd