EU Commission Officials Announce Multi-Billion Euro Fine in Google Antitrust Case

29 June 2017

EU officials announced on Tuesday 27 June that they had issued tech powerhouse Google with a fine amounting to €2.42 billion, following an investigation that began nearly seven years ago.

The European Commission, which is the bloc’s executive arm, also told the internet company to revise its “conduct” within a window of 90 days. Otherwise, the company will face a hefty fee amounting to five percent of Alphabet’s average “daily worldwide turnover,” which would mean a daily fine of around over €10 million.

Alphabet, Inc., is the holding company which serves as the “parent” to Google, along with other subsidiary businesses. Google itself is by far the dominant search engine within the 31 countries that together make up the European Economic Area (EEA), with estimates placing its market share at approximately 90 percent or higher.

While the antitrust case was not directly about Google’s dominance as a search engine, it did touch on how the relationship between that search engine and Google’s online shopping works. More specifically, the European Commission had looked into whether the company’s “Google Shopping” system for ranking products for online sale via its search engine put other comparison sites at a competitive disadvantage – to the point where it would constitute a breach of EU antitrust rules.

The case had been brought by nearly 20 companies based in Europe and the United States, including Yelp and Microsoft, along with consumer groups such as the European Consumer Organisation (BEUC). The issue is also one of three that the European Commission’s antitrust team is investigating regarding Google’s business practices.

These proceedings were formally launched in 2010, with officials explaining at the time that they would be looking at violations of Article 102 of the Treaty of the Functioning of the European Union (TFEU).

That provision specifically states that “any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between member states,” and provides a series of examples of what that abuse may entail.

International landscape

Google has been the subject of multiple antitrust investigations on both sides of the Atlantic, though the probe it faced in the United States via its Federal Trade Commission (FTC) ultimately had a different scope and did not violate US competition laws nor result in a fine. Google instead agreed to a settlement with US regulators to make some changes in its company approach to online ad campaigns and competitors’ access to patents.

Currently, there are no enforceable global systems that address differences and disparities in competition policies across countries, despite steps taken to improve cooperation on various fronts. For example, there are cooperation mechanisms in place between the US and the EU, though at the domestic level they approach competition policy through different legal means.

Competition policy chapters are becoming an increasingly common feature in free trade agreements. For example, the US and the EU had been looking at negotiating a chapter on competition policy in the Transatlantic Trade and Investment Partnership (TTIP), though those talks are currently frozen.

The EU had published its own textual proposal on competition policy in that process, including on how the two sides might deal with anti-competitive practices such as abuse of market power in both their national legislation and in bilateral cooperation. That proposal would not have been subject to TTIP dispute settlement.

Consumer choice, innovation

The high-profile case, which has now led to the largest antitrust fine ever levied in the European bloc’s history, also raised questions of consumer choice, along with how to balance innovation and product development with the need to ensure a level playing field in the digital space.

“Google has come up with many innovative products and services that have made a difference to our lives. That’s a good thing,” said Margrethe Vestager, the EU Commissioner for Competition, in announcing the decision on Tuesday.

“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,” she argued.

In other words, the Commission was concerned that Google was driving artificially web traffic – and therefore consumers and their choices – in favour of its own services. The investigation did examine, for example, how internet traffic flows changed in response to the listings produced by Google’s search engine, as part of antitrust regulators’ larger assessment.

Vestager therefore said that Google’s practices were not just bad for other companies in the field, but also for consumers. The EU’s antitrust authorities ultimately deemed that Google had erred by making “Google Shopping,” its service for ranking products for online sales, the priority search engine result compared to other options.

Google must now take steps to address these concerns, though crafting the details of that solution will be up to the company.

Google weighs options

Google’s legal team responded swiftly to the case, noting that it was weighing its options going forward and questioning what the decision means for consumers, along with why Amazon has not been subject to the same scrutiny by the European Commission. 

“We believe the European Commission’s online shopping decision underestimates the value of those kinds of fast and easy connections,” said Kent Walker, SVP and General Counsel, in a Google blog post defending the company’s system for determining ad placements.

“When you use Google to search for products, we try to give you what you’re looking for. Our ability to do that well isn’t favouring ourselves, or any particular site or seller – it’s the result of hard work and constant innovation, based on user feedback,” he added.

The company intends to examine the possibility of an appeal, according to Walker – a move that is widely expected by analysts, and which would likely drag out litigation over another few years, at least.

Tech rivals, business groups respond

The EU executive arm’s decision has been welcomed by various tech companies, including those which were the complainants in the actual probe, given the expectation that it could help level the playing field in online shopping – along with potentially clarifying related questions over Google’s leading role in other online services.

FairSearch, a business coalition that describes itself as being “united to promote economic growth, innovation, and choice,” issued a statement calling the move a “powerful precedent” that could extend to other digital services, such as search engines for travel-related purposes.

“The Commission’s decision will finally put a stop to that abusive conduct, and it will enable those competitors that have survived despite Google’s behaviour, as well as new entrants, to compete on the merits and offer results that serve European consumers and not just Google,” said Thomas Vinje, the organisation’s spokesperson and legal counsel.

Like various other tech companies and groups, FairSearch argued that the Commission move had nothing to do with “anti-American sentiment,” referring to some criticisms that the intense scrutiny by Brussels could be motivated by growing tensions over protectionism and potential interest in supporting EU industries.

“The European Commission pursues US tech companies because they are the ones who dominate their industry. In industries where European companies dominate – for example energy, transportation, and often financial services – the Commission pursues them, not American companies,” said Vinje.

ICTSD reporting; “Google fined record €2.4bn by EU over search engine,” THE GUARDIAN, 27 June 2017; “Google to Face EU Antitrust Fine as Soon as Tuesday,” BLOOMBERG, 26 June 2017; “EU fines Google $2.7 billion in first antitrust case,” REUTERS, 27 June 2017; “Margrethe Vestager’s Google decision risks messy endgame,” POLITICO, 27 June 2017.

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