On March 20, the European Commission announced it was fining technology giant Google 1.49 billion, or about $1.67 billion U.S., for breaching the European Union’s antitrust rules for abusive practices in online advertising, Specifically, the European Commission said Google (NASDAQ: GOOGL) had abused its power by imposing restrictions on third-party websites like newspapers, blogs, travel services and other sites, effectively blocking ads from Google’s rivals from coming up in search results.
“Today the Commission has fined Google 1.49 billion for illegal misuse of its dominant position in the market for the brokering of online search adverts. Google has cemented its dominance in online search adverts and shielded itself from competitive pressure by imposing anti-competitive contractual restrictions on third-party websites,” said Commissioner Margrethe Vestager, who is in charge of competition policy for the European Commission, in a March 20 news release.
“This is illegal under EU antitrust rules. The misconduct lasted over 10 years and denied other companies the possibility to compete on the merits and to innovate – and consumers the benefits of competition,” Commissioner Vestager added.
Source: European Commission
Source: European Commission
The Commission found that Google had more than 70 percent market share between 2006 and 2016 in online search advertising intermediation in the European Economic Area (EEA). In national markets for general search, Google had market share above 90 percent and, in most national markets for online search advertising, Google had market share over 75 percent. This effectively shut out competitors like Microsoft and Yahoo unless they bought ads through an online search advertising intermediation service.
The Commission’s research included reviewing hundreds of agreements between Google and online search advertising intermediation services and found the following:
- Beginning in 2006, Google required an exclusive relationship with publishers that prohibited them from placing any search ads from Google’s competitors on their websites.
- Beginning in March 2009, Google required publishers to give Google “premium placement” on their search results pages with Google ad minimums. This prevented Google’s competitors from placing their own search ads where they would be easily visible by website visitors.
- At that same time, Google required publishers to notify them and request approval if the publishers changed the way ads from competitors appeared.
While market dominance is not illegal under EU’s antitrust regulations, the Commission expects companies that exhibit dominance like Google to not abuse their market position to restrict competition.
“Google has abused this market dominance by preventing rivals from competing in the online search advertising intermediation market,” said the Commission.
“Based on a broad range of evidence, the Commission found that Google’s conduct harmed competition and consumers, and stifled innovation. Google’s rivals were unable to grow and offer alternative online search advertising intermediation services to those of Google. As a result, owners of websites had limited options for monetizing space on these websites and were forced to rely almost solely on Google,” the Commission added.
The fine represents 1.29 percent of Google’s turnover in 2018 and both the duration and gravity of their violation of antitrust regulations. In addition to the fine, Google is subject to civil actions in the courts of its Member States if any affected business chooses to sue them for their anti-competition actions.
This is the third fine of this type against Google by the Commission. In June 2017, they fined Google 2.42 billion for abusing its dominance as a search engine, giving itself an illegal advantage for its own comparison shopping service. In July 2018, Google was fined 4.34 billion for illegal practices regarding Android mobile devices in an attempt to gain market dominance with the Google search engine. The fines for all three cases total about 8.25 billion, or $9.26 billion U.S. To date, Google has not paid any of the fees, reports The New York Times. On the first two cases, Google is appealing, and it is likely they will appeal the third.
Google is also in trouble on the General Data Protection Regulation front. In our February 1 Five on Friday, we reported that Google has been fined 50, or $57 million U.S., for not properly disclosing the data it was collecting from European users. Google also had not been obtaining express consent to use personal data for targeted ads on Google’s search engine. This is Google’s fourth fine since GDPR went into effect in May 2019, says The New York Times.
Google had its wrist slapped again, but will this make a difference? We don’t think so. In the fourth quarter of 2018, parent company Alphabet made $39.3 billion, a 22 percent increase in revenue over the fourth quarter of 2017. The company also reported net income of $8.9 billion for Q4 2018, or just over five times the amount of the third fine. We don’t think Google is worried about these fines. They won’t have a significant impact on their bottom line. They will drag out the appeals as long as they can, and if required to do so, they will pay their fines, but these fines are not punitive enough to get Google’s attention.