Google is expected to face fines from the European Union that top €1 billion ($1.1 billion) over allegedly abusing its market share in search, according to a report from the Financial Times.
There have been ongoing rumblings about Google breaching competition regulations in Europe. Here’s a rundown on the latest developments.
- In the next few weeks, the European Commission, the EU’s institute responsible for introducing and enforcing legislation, is expected to accuse Google of allegedly steering users toward its own Google Shopping service and products when people use Google Search, using its market share for an unfair advantage.
- This investigation has taken seven years. Joaquín Almunia, the previous European competition commissioner, tried to settle the case with Google three times between 2013 and 2014, but complainants rejected service changes Google proposed as part of the settlement deal.
- Originally, the investigation was broader than Shopping, examining Google’s other search verticals, like Maps and Travel.
- Current competition commissioner Margrethe Vestager started serving in 2014 and focused the case just on Shopping. She has previously been muscular in antitrust cases: Last year, she issued a €13 billion ($14.5 billion) tax bill to Apple for illegal state aid, as well as a €3 billion ($3.4 billion) cartel bill to five European truck makers.
- Google has faced antitrust claims in the past from the Federal Trade Commission but hasn’t been charged.
- At the country level, Spanish and Russian authorities have come to blows with Google over smaller claims.
- This is the first of three competition claims against the company being investigated at the European level.
The key numbers:
- Any potential fine will be capped at 10 percent of Google parent Alphabet’s revenue from last year and “up to 30 percent of Google’s shopping revenues times the number of years of the abuse,” according to the FT.
- Alphabet made €80 billion ($90 billion) in revenue last year.
- Google has 78 percent of desktop search engine market share, according to Net Market Share.
If the decision is that Google has abused its market share, it will have to work with the European Commission to adapt Search so it complies with competition law. Whether this is just on the Shopping vertical or has broader impact on Google’s Travel and Maps verticals will depend on the exact wording of the decision.
Google is expected to appeal any negative decision from the European Commission and waive any fine while the appeal is ongoing. As the case is ongoing, neither Google nor the European Commission would comment for this article.
Alternatively, Google could withdraw its Shopping service from Europe altogether.
Don’t expect that to happen anytime soon, though. “This will probably go on for another four or five years,” said Oliver Fairhurst, an associate at law firm Lewis Silkin.
Fairhurst said the benefactors will be Google competitors because they can rely on the decision to bring private damages actions against Google, and they will also potentially be able to compete with Google on their own platforms. “For EU-based tech companies, the playing field might get more level, allowing them to catch up with Google,” he said.
The publisher view:
As you’d expect, some publishers are happy to weigh in on whether Google has abused its market share. In a recent speech, Robert Thomson, chief executive of News Corp, which has long been a vocal opponent of the duopoly, referenced data from January that showed searching on Google Shopping predominantly surfaced Google products. (Google has since rectified this.)
“What does that tell us about the manipulability, the pliability of algorithms?” said Thomson. “In this age, utterly dominated by content distributors — the duopoly — at the expense of content creators — news organizations like ours — it is fair to say that the World Wide Web has not evolved in the manner that most civilized individuals had hoped, say, 15 years ago.”
The bigger picture:
This case is groundbreaking because Google hasn’t been forced to deal with antitrust concerns, said Rochelle Toplensky, the FT’s Brussels correspondent. “This would be the first time Google would have to broadly change its service and change how it does Search by a major antitrust enforcer.”
Much has been made about European authorities penalizing American tech companies, but it’s likely that these high-profile cases on companies like Google, Apple and Facebook are getting more attention than the smaller breaches of antitrust in Europe. “Dominant businesses have to be dominant in order to abuse a dominant position,” said Fairhurst.
In Google’s defense, said Fairhurst, Google’s Shopping comparison service has been pro-competitive: The company has added functionality that has meant that people have more choice over who to buy from online and increased their ability to shop around.
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