July 21, 2017
The EU Commission has fined Google €2.42 billion for breaching EU antitrust rules in a decision handed down on 27 June 2017. The Commission ruled that Google had abused its market dominance as a search engine by promoting its own comparison shopping service “Google Shopping” in its search results at the expense of those of its competitors.
Failure to end its anti-competitive practices within 90 days of the ruling will result in additional penalty payments of up to 5% of the average daily turnover of Google’s parent company Alphabet.
Comparison shopping services allow consumers to compare products and prices online from many different online retailers. Most of the revenue of these service providers comes from pay-per-click advertisements shown to consumers in response to a search query.
Almost 90% of Google’s revenue comes from such advertisements.
Comparison shopping services rely on consumer traffic in order to be competitive. The more traffic, the more clicks on the adverts and the more revenue generated. More traffic also leads to more retailers wanting to list their products with the comparison shopping service.
The Google search engine has market dominance in Europe with a 90pc share of internet searches. It therefore has the power to direct how internet users navigate the web. A high percentage of consumers therefore access the comparison shopping service via the Google search engine.
The Commission found that over the years in order to increase traffic to its own comparison service via its own search engine and thus increase advertising revenue, Google relied on a search algorithm which placed the results from its own comparison shopping service at the top of the list in response to consumer queries while placing the results from rival comparison services further down the list.
Evidence has shown that consumers tend to consult the results placed higher up on the list and ignore results placed lower down the list.
The Commission found that by acting in this way Google abused its dominant position in general internet searching by restricting competition in comparison shopping markets and “denying European consumers a genuine choice of services and full benefits of innovation”.
As stated above, Google must cease its illegal practices within 90 days of the ruling. The company must also 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.
Google may also be liable for damages to any person or business affected by its any competitive behaviour.
Google have said that they will appeal the ruling and many of Google’s competitors have called for an independent committee to oversee the company’s digital services in Europe.
Two other cases against Google for anti-competitive practices are currently being investigated by the Commission.