Google has been hit with a record-breaking €2.4 billion fine by the EU over its antitrust case

Google CEO Sundar Pichai. Picture: Getty Images (File)
  • The European Commission has hit Google with a record-breaking €2.4 billion fine in an antitrust case.
  • Google has also been ordered to change its practices to promote the shopping services of its competitors, or be fined up to 5% of worldwide daily turnover.
  • It seems likely to further erode the uneasy relationship between much of Silicon Valley and Europe.
  • The ruling also opens the door to further legal action being taken against Google by competitors.
  • Google says it “respectfully disagree[s]” and is considering whether to appeal the ruling.

LONDON — Google has been hit with a record-breaking fine of €2.4 billion ($US2.7 billion, or £2.1 billion) by European regulators.

The European Commission accused the Californian technology giant of abusing its dominant position and promoting its own shopping service in its search results over those of its competitors.

 

The culmination of an investigation into Google’s business practices going back nearly a decade, it is a mammoth ruling, more than twice as big as the previous largest.

It seems likely to further enflame tensions between European regulators and some sector Silicon Valley — and it opens the door to legal action from Google’s competitors in national courts across Europe, as well as further investigations of Google’s businesses by the Euopean Commission.

You can read the full statement from the European Commission here »

In a statement, 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.”

The fine is far larger — more than twice as much — as the roughly €1.1 billion that was expected prior to the announcement.

The previous largest monopoly case was a €1.06 billion (£932 million) fine targeting Intel in 2008, Bloomberg reported (3% of its sales at the time).

Google must now change its behaviour within 90 days or face “penalty payments” of up to 5% of the daily worldwide turnover of parent company Alphabet, the Commission said. In 2016, Alphabet’s global revenues were $US90 billion.

In a statement issued immediately after the ruling, Google said it “respectfully” disagreed and was considering whether to appeal. 

“When you shop online, you want to find the products you’re looking for quickly and easily. And advertisers want 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.  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,” a spokesperson for the company said in an email.

But, as Business Insider’s Jim Edwards argues, Google’s record-breaking fine and its troubles in Europe are “entirely of its own making.” The fine follows complaints by multiple companies about Google’s practices in displaying its own results above links to competitors in search results.

Google could face further legal action from competitors

Competition commissioner Margrethe Vestager brought formal charges against Google in 2015, and cited Google’s practices as far back as 2008 as examples of “illegal” behaviour.

“Google’s illegal practices have had a significant impact on competition between Google’s own comparison shopping service and rival services. They allowed Google’s comparison shopping service to make significant gains in traffic at the expense of its rivals and to the detriment of European consumers,” the Commission said in its statement announcing the fine.

It also opens the door to companies allegedly affected by Google’s business practices taking action against the company — opening the door to further potential penalties: “Finally, Google is also liable to face civil actions for damages that can be brought before the courts of the Member States by any person or business affected by its anti-competitive behaviour. The new EU Antitrust Damages Directive makes it easier for victims of anti-competitive practices to obtain damages.”

Significantly, the Commission has ordered Google to change how it displays its search results to promote its competitors. It “orders Google to comply with the simple principle of giving equal treatment to rival comparison shopping services and its own service … Google has to apply the same processes and methods to position and display rival comparison shopping services in Google’s search results pages as it gives to its own comparison shopping service.”

The case sits alongside two other antitrust investigations: One over Android, its mobile operating system, and another relating to its online search advertising business.

Silicon Valley’s relationship with Europe is already uneasy

Tim cook apple ceoJustin Sullivan/Getty ImagesApple CEO Tim Cook.

The record-breaking fine seems likely to further erode already tense relationships between American tech giants and the European regulators. Last year, Apple was hit with a record €13 billion (£11.3 billion) tax bill after the Commission, led by commissioner Margrethe Vestager, ruled its tax arrangements in Ireland amounted to “state aid.” (Apple and Ireland both challenge this.) This rocky relationship stretches back a decade, with the landmark antitrust case against Microsoft in in the 00’s.

That said, some American tech firms support the European Commission’s approach. Yelp, Getty Images, News Corp, and other companies signed a letter to Vestager in support on Monday, Politico reported. “As U.S.-based companies, we wish to go on record that enforcement action against Google is necessary and appropriate, not provincial,” they wrote.

In a blog post published in November 2016, Google general counsel Kent Walker argued that the European Commission, in preparing its original complaint, “failed to take into account the competitive significance of companies like Amazon and the broader dynamics of online shopping.Our response demonstrated that online shopping is robustly competitive, with lots of evidence supporting the common-sense conclusion that Google and many other websites are chasing Amazon, by far the largest player on the field.”

This story is developing…

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