Antitrust Ruling Seen Setting Precedent for Any Future Actions on Other Google Services

The EC fined Google 2.4 billion euros ($2.72 billion) for abusing its market position as a search engine and ordered it to clean up its act within 90 days. The decision on the company's comparison shopping service finds, for the first time, Google is dominant in the general internet search market, which under EU law means it bears a special responsibility not to abuse its dominance, Competition Commissioner Margrethe Vestager said at a Tuesday news briefing. That finding sets precedent that can be used to determine whether Google also is breaching competition rules in other "vertical" comparison search markets such as mapping, hotel and flight search markets, she said. Rivals cheered the decision, while the tech industry worried it will hurt innovation. Google said it's considering an appeal.

Google's flagship search engine product annually makes around $80 billion worldwide from advertisements it shows in response to search queries, Vestager said. The more people click on ads, the more revenue, she said. In 2008, Google changed its strategy, giving its own products significantly better treatment in search results and demoting rivals' products, she said. Google shopping services are much more visible to consumers than competitors', whose links are less likely to be clicked, she said. The investigation showed rival products received 90 percent fewer clicks after Google's demotions, she said. About 95 percent of user clicks on desktops are on the first page of a Google search result, with an even stronger tendency on mobile devices, Vestager said.

The probe showed Google is dominant in general internet searches in all 31 countries of the European economic area, creating high barriers to entry, Vestager said. It now must give rival comparison shopping services treatment equal to its own product, she said. It's up to Google to decide how to do that, but it can't simply replace the current system with other practices that have an equivalent antitrust effect, Vestager said. The EC will monitor compliance "closely" and if the search engine fails to comply, it will face penalties to be decided in a separate EC decision, she said.

The ruling can be used as a framework to examine Google's conduct in other search markets, said Vestager. It shows that in Europe, "companies must compete on the merits," she said. Asked if she's cutting off the possibility of settlement in the other search market cases, Vestager said each inquiry is separate and she has reached no conclusions in them. The EC is making good progress on its investigation of Google's Android business practices (see 1604200001) and AdSense, she said.

Anyone damaged by the illegal behavior can seek compensation in national courts, said Vestager. U.K.-based Foundem, the lead complainant, filed a claim in civil court in 2012 to recoup some of the substantial damage it suffered from Google's practices, CEO Shivaun Raff said at a news briefing. The lawsuit was stayed in 2015 but now that the EC decision has been issued, the stay will be lifted, she said. Raff earlier said that barring Google's immensely harmful search manipulation practices is far more important (see 1706190007).

Google "respectfully" disagreed with the EC conclusions, saying it will review them "as we consider an appeal." The decision "underestimates the value of" the fast and easy connections Google's service enables, Senior Vice President-General Counsel Kent Walker blogged. While some comparison sites "naturally want Google to show them more prominently, our data show that people usually prefer links that take them directly to the products they want, not to websites where they have to repeat their searches," he said.

Chilling Effect?

The decision is a "game-changer," said European Consumer Organisation Director General Monique Goyens. It confirmed consumers don't see what's most relevant for them on the top search engine, but rather what's best for Google, she said: "Now, we need to see real changes to the company's business practices."

U.S. regulators now should take more seriously the challenges posed by Google and other tech giants, said the News Media Alliance. U.S. authorities have been "asleep at the switch" for too long, it said.

The ruling got cheers from the Initiative for a Competitive Marketplace, whose members include a range of e-commerce businesses, many "seeking damages payments from Google in court for its anti-competitive behaviour." The Open Internet Project, allied with ICOMP, praised ending the case "after 4 years of delays caused by the search engine in finding a compromise."

The Computer & Communications Industry Association, whose members include Google, said the decision is "a worrying step away from the key objectives of competition law enforcement." If the result is to force Google to undo more than 10 years of search engine evolution, EC competition rules would not live up to their promise of spurring innovation, said CCIA Europe Director Jakob Kucharczyk.

The decision barring Google from favoring its own ads over those of rivals is "unprecedented" and "stands on shaky ground," said Garrigues (Brussels) EU competition law attorney Alfonso Lamadrid at a Tuesday CCIA news briefing. It's like asking a TV station or newspaper to give competing programs and publications the same treatment as its own with no revenue in return, he said. Whenever a business has developed a product that it successfully integrates with another product, it must treat it equally with those of rivals, said Pablo Ibanez Colomo, London School of Economics associate competition law professor. That's an "extraordinary" and far-reaching argument, he said at the briefing. Consumers could hardly have more choice in buying products online, said Lamadrid.

The EC isn't claiming harm to consumers or competition, but inferred that harm because competitors' traffic decreased, said Colomo. Harm to consumers should be the focus of antitrust enforcement, and the EC "should demonstrate in concrete terms how consumers have been harmed," said Technology Policy Institute Senior Fellow Thomas Lenard in a statement. TechFreedom President Berin Szoka also blasted the EC for protecting some companies against more successful ones, rather than protecting consumers. The fine will come to be remembered, along with the EU's "decade-long prosecution of Microsoft, as yet another Bruxellois attempt to plan a future that never happened," he wrote. The EU "has effectively decided that some companies have become too big to innovate," said Information Technology and Innovation Foundation President Robert Atkinson.