June 27, 2017
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Google has been fined €2.42 billion (£2.1 billion) by the European Commission after it ruled that the search engine giant had abused its market power in vertical (shopping) search.
Following an antitrust saga that has already lasted for close to a decade, the regulator announced its largest penalty to date after concluding that Google had abused its power by systematically providing a more prominent placement to its own comparison shopping service.
Margrethe Vestager, the Competition Commissioner of the European Union (EU), stated: “What Google has done is illegal under EU antitrust rules. It has denied other companies the chance to compete on their merits and to innovate, and most importantly it has denied European consumers the benefits of competition, genuine choice and innovation.”
Vestager was keen to add that many of Google’s products and services have been “innovative” and “made a difference to our lives”.
“That’s a good thing,” Vestager continued. “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.”
Google has responded almost immediately to the fine, via this post on their official blog written by Google’s SVP and General Counsel, Kent Walker. Within the article, Walker points out that people want to quickly and easily find the products they’re looking for when shopping online. At the same time, he acknowledges that advertisers are looking 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,” Walker acknowledged.
“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.”
Walker went on to state that “thousands of European merchants use these ads to compete with larger companies like Amazon and eBay”.
While the size of the fine has come as a surprise, many in the digital marketing industry have been expecting some sort of announcement for a while now. The EU opened a formal inquiry into whether Google manipulated search results to favour its own business in November 2010 following complaints from the likes of Trip Advisor and Microsoft that the US tech firm gave its Google Shopping service a prominent position on the internet search engine.
There have been numerous attempts by both sides to settle the issue but to no success. Google, for example, offered to change its search engine practice in April 2013 in an attempt to bring the investigation to a conclusion. However, the EU rejected the offers on two occasions following feedback from complainants.
Joaquin Almunia, Vestager’s predecessor, also made a number of attempts to resolve the dispute. However, each effort failed due to intense pressure from privacy advocates, national governments and rivals.
Walker has stated that “given the evidence, 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.”
However, the European Commission ruling has also set out that Google must end its anti-competitive practices within 90 days or face the risk of a further penalty. This penalty could see the search engine having to make payments of five per cent of its parent company Alphabet’s average daily worldwide earnings — around $14 million a day when based on stats set out in the company’s latest financial report.
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