European Commission fines Google for breaching EU antitrust rules
Wednesday, 28 June 2017
The European Commission has fined Google €2.42 billion for abusing dominance by giving illegal advantage to its own comparison shopping service. The company must now end the conduct within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, Google’s parent company. “Google has come up with many innovative products and services that have made a difference to our lives,” Commissioner Margrethe Vestager, in charge of competition policy, said yesterday (27 June). 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.”
Google’s flagship product is the Google search engine, which provides search results to consumers, who pay for the service with their data. Almost 90% of Google’s revenues stem from adverts, such as those it shows consumers in response to a search query.
In 2004 Google entered the separate market of comparison shopping in Europe, with a product that was initially called “Froogle”, re-named “Google Product Search” in 2008 and since 2013 has been called “Google Shopping”.
It allows consumers to compare products and prices online and find deals from online retailers of all types, including online shops of manufacturers, platforms (such as Amazon and eBay), and other re-sellers. Comparison shopping services rely to a large extent on traffic to be competitive. More traffic leads to more clicks and generates revenue.
From 2008, Google began to implement in European markets a fundamental change in strategy to push its comparison shopping service. This strategy relied on Google’s dominance in general internet search, instead of competition on the merits in comparison shopping markets.
According to the Commission, 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.
As a result, Google’s comparison shopping service is much more visible to consumers in Google’s search results, whilst rival comparison shopping services are much less visible.
The evidence shows that consumers click far more often on results that are more visible, i.e. the results appearing higher up in Google’s search results. Even on a desktop, the ten highest-ranking generic search results on page 1 together generally receive approximately 95% of all clicks on generic search results (with the top result receiving about 35% of all the clicks).
This means that by giving prominent placement only to its own comparison shopping service and by demoting competitors, Google has given its own comparison shopping service a significant advantage compared to rivals.
Google’s practices amount to an abuse of Google’s dominant position in general internet search by stifling competition in comparison shopping markets, the Commission concludes.
Following the demotions applied by Google, traffic to rival comparison shopping services on the other hand dropped significantly.
A representative of Google said in a statement that the company disagrees with the decision and will review it in detail as it considers an appeal.
The Commission states that yesterday’s decision is a precedent which establishes the framework for the assessment of the legality of this type of conduct. It has also already concluded that Google has a dominant position in two other cases, which are still being investigated: the Android operating system (mobile software) and AdSense (a tool for searching ads).