Google fined by EU again

Alphabet, Google’s parent company, has been fined 1.5 billion euros for anti-trust violations after a competition probe ruled that the dominant search group had spent 10 years blocking rival online advertisers.

Background

Alphabet Inc. is an American multinational conglomerate headquartered in Mountain View, California. It was created through a corporate restructuring of Google on October 2, 2015, and became the parent company of Google and several former Google subsidiaries. The two founders of Google assumed executive roles in the new company, with Larry Page serving as CEO and Sergey Brin as president.

Competition law is a law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. Competition law is known as "antitrust law" in the United States for historical reasons, and as "anti-monopoly law" in China and Russia. In previous years it has been known as trade practices law in the United Kingdom and Australia. In the European Union, it is referred to as both antitrust and competition law.

Google AdSense is a program run by Google that allows publishers in the Google Network of content sites to serve automatic text, image, video, or interactive media advertisements, that are targeted to site content and audience. These advertisements are administered, sorted, and maintained by Google. They can generate revenue on either a per-click or per-impression basis.

Analysis

The larger-than-expected penalty is the third to be imposed on Google by the EU in less than two years — taking the total to €8.2bn and drawing a line under current European antitrust investigations into the US tech group.

Margrethe Vestager, the EU’s competition commissioner, said the Alphabet subsidiary had placed anti-competitive restrictions on third-party websites between 2006 and 2016.

“The misconduct lasted over 10 years and denied other companies the possibility to compete on the merits and to innovate — and consumers the benefits of competition,” she said, adding that the fine reflected the “serious and sustained nature” of the infringement.

The case focused on Google’s AdSense business, which generates text adverts for third-party websites based on the searches performed on their sites. In 2006, Google told some websites they would have to use AdSense exclusively if they wanted a higher share of the search revenue generated on their sites.

The company relaxed its restrictions in 2009, allowing websites to show competing ads, but required they also displayed a minimum number of Google ads in prime spots and gave Google the right to authorise changes to rivals’ ads. The terms were dropped in 2016.

The AdSense text-ad business has been in decline since online ads that track users and picture and video formats have become more popular. While only a small number of websites agreed to the terms, they were “the commercially most significant websites” representing half the market turnover from 2006 until 2016, the commission found.

Ms Vestager said Google was dominant throughout the decade in search advertising across the European Economic Area — which includes Iceland, Liechtenstein and Norway as well as the 28 EU nations — with an average market share of about 85 per cent.

The fine closes the last running EU competition probe into Google and comes as Ms Vestager is due to stand down as competition commissioner and hand over to a successor in November. Google did not immediately say if it would appeal against the fine, but it has launched appeals on the two previous EU cases.

In June 2017, the EU fined Google €2.4bn for favouring its own shopping service above rivals and in 2018 it was hit with a €4.3bn penalty for restrictive terms for Android phone makers.

Google is trying to pre-empt any further EU competition probes by overhauling how it displays certain search results in Europe and is offering Android users a choice of browser and search app on their phones.

Users in the EEA began last week to see links to rival websites above Google’s answer box for searches for products, jobs or businesses in their local area. The rival links also appear above-paid results links to Google’s own services.

Competitors argue the recent changes are still not enough. “[We] see that they are sending less traffic to the web than the proposals made to [Ms Vestager’s predecessor Joaquín] Almunia,” said Luther Lowe, senior vice-president of public policy at Yelp, after running user experiments on the recent Google changes.

Assessment

Our assessment is that Google needs to seriously re-evaluate its business model in Europe as it has been found guilty of several new EU regulations and has paid billions of euros in fines so far. We believe that the EU is right in its attempts to retain competition in the market as well as protecting user data against manipulation by tech giants like Google. 

Image Courtesy: Gciriani [CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0)]

 

Comments