The EU has finally nailed Google to the tune of $2.7 billion, after a lengthy investigation. To put that into context, it amounts to 3% of parent company Alphabet’s turnover. A penalty this large is certain to prompt an appeal by the company, which might argue it is being singled out because it is big and successful (and not European) – as well as being innocent.
Is the EU penalty warranted or is it excessive? Is this a case of innovation-envy by the EU? It is hard to believe that such a huge penalty would be levied in the US, where, for example, in 2013 Google settled with US enforcers without a penalty after agreeing to change some of its search practices.
Some have hinted that the EU perceives its markets and consumers as requiring more protections than those in the US, where the broader legal environment has different interpretations of competition, free speech, privacy and tax standards. The fine follows a seven-year investigation by EU regulators, and is the largest ever handed out by the Commission. This decision was a long time coming, and comes after many previous fines against US firms for anti-competitive practices… though none quite as large!
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A company the size of Google, which enjoys such a massive market share, is inevitably on every regulator’s radar. Oliver Fairhurst, a competition law specialist at legal firm Lewis Silkin in London maintains that,
“The decision shows the exceptionally high standard that dominant businesses such as Google can be held to where otherwise lawful activity can become unlawful simply by virtue of the market share they have.”
Though the fine is bad enough on its own to rankle Google executives, what may keep them up at night is the notion that Europe’s competition commissioner, Margrethe Vestager, hinted it could act as a “precedent” to guide investigations of Google’s other businesses. It may also embolden Google’s competitors to press for further government regulation and sanctions in EU courts.
Moving methodically to the front burner is a case with a potentially more damaging outcome for the company. The EU competition enforcer has charged Google with using its Android mobile operating system to crush competitors. This is more worrisome because it is used in so many smartphones.
Vestager pooh-poohed any suggestion that this was some kind of witch hunt motivated by envy or animosity. She said,
“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.”
She added that the company was “not allowed to abuse their power in one market to give themselves an advantage in another market … Our investigation has proved Google has done exactly that.”
In a nutshell, the case revolves around Google’s shopping service, where, when it comes to online shopping, Google has a 90% share of all business. The shopping service appears at the top of Google’s search results for relevant searches – above rival price comparison services. The European Commission says the placement means Google is thus abusing its dominant position in the European search engine market – hence, the anti-competition penalty.
The European Commission, which polices EU competition rules, alleges Google elevates and showcases its shopping service even when other options might have better deals. In addition to the fine it levied, it gave the Mountain View company 90 days to stop, or face fines of up to 5% of the average daily worldwide turnover of parent company Alphabet. This could amount to an astronomical figure.
In a statement issued immediately after the ruling, Google said it “respectfully” disagreed, and was considering whether to appeal. It maintains that it has been merely trying to package its search results in a way that makes it easier for consumers to find what they want. But make no mistake: Google, and many American companies, are in the EU’s crosshairs.