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Google hit with record-breaking €2.42bn antitrust fine

Tue 27 Jun 2017

The European Commission has announced a record-breaking 2.42 billion euro fine has been levied on Google for breaking EU antitrust regulations.

The fine was calculated based on Google’s reported earnings from its comparison shopping service in the 13 EEA countries involved. The company has 90 days to correct unfair practices and may face civil actions for further damages brought by member states or by individuals that have been harmed by antitrust violations.

The Commission has resolved an investigation into Google’s business practices, concluding that Google exploited its dominance as a search engine to unfairly promote its comparison shopping service, currently known as ‘Google Shopping.’

Comparison shopping sites rely heavily on traffic to be effective. The more customer views on a particular site, the more retailers are attracted to participate, which generates more views and more revenue, in effect creating a cycle of success. In order to succeed, these sites depend on fair and accurate representation in search engine results.

The investigation found that as of 2008, Google began to systematically promote Google Shopping at the expense of competitors in the field. A shopping search query through Google would routinely return results with Google Shopping at or near the top of the results list.

In turn, rival shopping sites were demoted, pushed to the bottom of the list of search results.

As consumers tend to prefer results displayed at the top of a list by a large margin, the propensity for Google search results to provide preferential placement for Google Shopping created an unfair market advantage for the shopping site.

The Commission found that this constituted an abuse of Google’s dominance as a search engine, which was used to stifle competition in the comparison shopping field.

Margrethe Vestager, EU Commissioner in charge of competition policy said that while Google is a valuable innovator in products and services, the policy that it implemented for Google Shopping did not require innovation on Google’s part and denied other companies the opportunity to innovate and compete on a level playing field. Rather than attracting customers by improving its own product, the company chose to promote its product by unfairly exploiting market dominance as a search engine.

“What Google has done is illegal under EU antitrust rules,” she said. “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.”

The Commission determined that the illegal promotion of Google Shopping over competitors created significant gains in site traffic for the Google product ‘at the expense of rivals, and to the detriment of European consumers.’

Traffic to the Google Shopping site increased by 45 times in the UK alone as the result of search results promotion, while traffic to certain competitor websites in the UK suddenly decreased by 85% – an event that could not be explained by factors other than the change in search engine results. Competitor websites in Germany had losses in traffic up to 92%, and up to 80% in France.

While some of these alternate shopping sites have recovered some of the traffic lost to Google Shopping, none have been shown to have recovered in full, creating a significant change to the online comparison shopping market in the EU as a whole.

Google will be required to pay the fine assigned by the Commission, change its search engine results practices within 90 days, and could be liable for further civil penalties brought forth by member states or by individuals who have been harmed by these antitrust violations.

The EU Commission is continuing to investigate Google on two other antitrust infractions, one involving AdSense and the other, the Android OS. Preliminary results in both investigations point to Google’s abuse of a dominant position in violation of antitrust regulations, although final determinations have not been reached.

Tags:

business EU Europe Google government legal news U.S. UK
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