On 27th June, the tech giant has been slapped with a fine of EUR 2.42 billion, the largest fine ever handed by the European Commission’s Directorate General of Competition (DG Comp) in Brussels. The European Commission (EC) is an institution responsible for ‘guarding the treaties’. One of its tasks is to ensure the Member States’ and companies’ (like Google) compliance with the EU law.
The fine was imposed after DG Comp found that Google violated competition laws (Article 102 of the Treaty on the Functioning of the European Union – TFEU). The company has been accused of ‘abusing its dominant position within the internal market’ of the EU.
Since 2008, Google has consistently been the dominant search engine in most of the EU countries, with a market share of over 90%. The number represents the amount of search engine users who prefer Google over its competitors. Google has allegedly used its status to squeeze out rivalling shopping comparison services, while prominently placing its own Google Shop service.
To illustrate the problem, a customer who would search for a new pair of sandals for the summer would be met by the below result when searching sandals on Google:
While Shop on Google is highlighted on the very top of the first page of the search, the competing traders are only found on page 4. Clearly, Google opts to promote its own product while demoting those of rivals.
Margarethe Vestager, European Commissioner for Competition said: ‘what Google has done is illegal under EU anti-trust laws. It denied other companies the chance to compete on the merits and to innovate.’
As a search engine, Google is committed to offering the most relevant results in relation to what is typed in the search bar. However, with its current status as the go-to search engine, Google has illegally expanded into product placement.
Instead of providing the most relevant search results, following their general pre-2008 algorithm, Google has since been giving priority to Google services, even when they were not the most relevant search results. The European consumer has thereby been ‘denied a genuine right of choice of services and the full benefits of innovation’. This led to a DG Comp decision that the US tech giant must now treat its rivals in the same way as it treats its own shopping comparison service, Google Shopping.
In response, Google criticised the EC for failing to take the prominence of online shopping giants Amazon and eBay into account and that Commission officials wrongly assessed the ease with which customers can switch away from Google to rival services (the ‘click away’ argument).
Google must pay the Commission’s fine of EUR2 424 495 000. The company has also been given 90 days to comply with DG Comp decision and amend its algorithms/ search filters to remove discriminatory treatment against its competitors; it can be fined an extra 5% of the daily worldwide sales turnover of its parent company Alphabet for as long as it fails to do so.
Foundem, which triggered the complaint, suggested that Google should abandon the biased Universal Search service, leaving just the core algorithm that ranks sites fairly.
Philip Bentley QC, a partner at American Law firm McDermott Will & Emery Stanbrook based in Brussels, described the Google fine as ‘just the tip of the iceberg’. He foresees that many other companies, including Microsoft, Foundem, Hot-maps and Expedia, will begin complaining about the way Google has been wielding its power in the markets for online maps, shopping, and travel. In Mr Bentley’s words, the current fine can be used as a stepping stone to ‘open the floodgates’ to more lawsuits.
DG Comp’s decision to impose the record-breaking fine not only acts as a major challenge for Google. It also showcases the determination by which DG Comp will go after international tech giants who abuse their dominant position in an effort to protect the interests of the EU consumers in the future.