Google fined €2.42BN for EU antitrust violations over shopping searches

The European Commission has fined Google a record-breaking €2.42 billion for antitrust violations pertaining to its Google’s Shopping search comparison service — in what is widely considered the most significant antitrust ruling in Europe since the 2004 Microsoft decision.

Its finding states that:

  • 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 of this anticompetitive behavior, the EC found that Google’s comparison shopping service is much more visible to consumers in Google’s search results, while rival comparison shopping services are much less visible.

The EC says Google must end the censured conduct within 90 days or face additional penalty payments of up to 5 per cent of the average daily worldwide turnover of Alphabet, its parent company.

For some context on the size of the fine, Google’s (Alphabet’s) full year revenue for 2016 was almost $90BN. The Commission says the fine has been calculated on the basis of the value of Google’s revenue from its comparison shopping service in the 13 EEA (European Economic Area) countries concerned.

In a statement on the decision, Competition Commissioner Margrethe Vestager, 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.”

We’ve reached out to Google for comment and will update this post with their response.

Responding to the decision, Shivaun Raff, CEO and co-founder of Foundem, the lead complainant in the case said in a statement: “We welcome today’s announcement that the European Commission has adopted a Prohibition Decision in the Google Search case. Although the record-breaking €2.42 billion fine is likely to dominate the headlines, the prohibition of Google’s immensely harmful search manipulation practices is far more important.  There can’t have been many Competition cases where the stakes for consumers, businesses, and innovation were any higher.

“For well over a decade, Google’s search engine has played a decisive role in determining what most of us read, use and purchase online. Left unchecked, there are few limits to this gatekeeper power. Google can deploy its insidious search manipulation practices to commandeer the lion’s share of traffic and revenues in virtually any online sector of its choosing, quietly crushing competition, innovation, and consumer choice in the process.”

Froogle > Google Shopping > Antitrust complaints

The Europe Union’s investigation into complaints about the Google Shopping service (previously called ‘Froogle’ and ‘Google Product Search’) dates back more than six years, although the Commission only issued a formal Statement of Objections (SO) in April 2015, extending that in July last year with further objections — when it also issued objections against AdSense. A third EC antitrust investigation pertains to Google’s mobile OS, Android, and remains ongoing.

The bloc’s law puts a special obligation on dominant companies not to abuse their power to try to harm existing competitors or block new entrants. Google’s search engine is massively dominant in the region, accounting for more than 90 per cent of the market.

The complainants in the Google Shopping case accuse the company of demoting rival vertical search services in its general search results, and thereby depriving their businesses of scale and market access.

The original complaint to the EC that Google had manipulated search results to demote a rival service was made to the commission by shopping comparison site, Foundem, in 2009, who said its service effectively vanished from Google search results weeks after launch in 2006 and was not reindexed until years later.

A formal investigation was opened by the EU in 2012, under the prior competition commissioner, who went on to reject three proposed settlements from Google. Current competition commissioner, Margrethe Vestager, took up the post in 2014, by which time complainants numbered more than two dozen. She went on to issue formal charges against Google Shopping in 2015, and supplemental charges in 2016.

Last fall the Commission gave Google a series of extensions to respond to these charges. The company’s formal response finally came in November — when it argued: “There is simply no meaningful correlation between the evolution of our search services and the performance of price comparison sites.”

Evidently the Commission disagreed with Google’s defense its behavior.

The EC is holding a press conference shortly; we’ll be listening and updating this story.

Developing… Refresh for updates  

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