#Google: European Commission imposes €2.42 billion fine for abusing its dominant market position

The European Commission has fined Google €2.42 billion for breaching EU antitrust rules. Google has abused its market dominance as a search engine by giving an illegal advantage to another Google product, its comparison shopping service.

The company must now end the conduct within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, Google's parent company.

Commissioner Margrethe Vestager, in charge of competition policy, said:

"Google has come up with many innovative products and services that have made a difference to our lives. That's a good thing. But Google's strategy for its comparison shopping service wasn't just about attracting customers by making its product better than those of its rivals. Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.

"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."

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Comparison shopping services rely to a large extent on traffic to be competitive. More traffic leads to more clicks and generates revenue. Furthermore, more traffic also attracts more retailers that want to list their products with a comparison shopping service. Given Google's dominance in general internet search, its search engine is an important source of traffic for comparison shopping services."

Market dominance is not a problem per se, but it must not effect competition on the merits. A company should not be allowed to abuse a dominant position in one area to become dominant in another area.

Google disputes that it is dominant, but the Commission says that they hold 90% of the search-engine users.  The fine reflects the serious and sustained nature of Google's abuse of its dominant position.  Google must make sure that it complies, the European Commission will monitor its compliance. If it does not comply it will pay a further fine, and anyone how has made a loss because of Google's actions can request damages in a national court.

From 2008, Google began to implement in European markets a fundamental change in strategy to push its comparison shopping service. This strategy relied on Google's dominance in general internet search, instead of competition on the merits in comparison shopping markets:

Google has systematically given prominent placement to its own comparison shopping service: when a consumer enters a query into the Google search engine in relation to which Google's comparison shopping service wants to show results, these are displayed at or near the top of the search results.

Google has demoted rival comparison shopping services in its search results: rival comparison shopping services appear in Google's search results on the basis of Google's generic search algorithms. Google has included a number of criteria in these algorithms, as a result of which rival comparison shopping services are demoted. Evidence shows that even the most highly ranked rival service appears on average only on page four of Google's search results, and others appear even further down. Google's own comparison shopping service is not subject to Google's generic search algorithms, including such demotions.

As a result, Google's comparison shopping service is much more visible to consumers in Google's search results, whilst rival comparison shopping services are much less visible.

In April 2015 the European Commission sent a ‘statement of objections’ to Google on comparison shopping service alleging the company has abused its dominant position in the markets for general internet search services in the European Economic Area (EEA) by systematically favouring its own comparison shopping product in its general search results pages.

The Commission's preliminary view is that such conduct infringes EU antitrust rules because it stifles competition and harms consumers. The outcome of that investigation has found that there was abuse of a dominant position.

At the time, Competition Commissioner Margrethe Vestager said: "The Commission's objective is to apply EU antitrust rules to ensure that companies operating in Europe, wherever they may be based, do not artificially deny European consumers as wide a choice as possible or stifle innovation."

Background

The Commission continues its ongoing formal investigation under EU antitrust rules of other aspects of Google's behaviour in the EEA, including the favourable treatment by Google in its general search results of other specialized search services, and concerns with regard to copying of rivals’ web content (known as 'scraping'), advertising exclusivity and undue restrictions on advertisers.

Google Android

The Commission is also carrying out a separate antitrust investigation into Google's conduct as regards the mobile operating system Android. The investigation will focus on whether Google has entered into anti-competitive agreements or abused a possible dominant position in the field of operating systems, applications and services for smart mobile devices.

Comparison shopping

Comparison shopping products allow consumers to search for products on online shopping websites and compare prices between different vendors. The preliminary conclusion of the Commission's investigation opened in November 2010 is that Google gives systematic favourable treatment to its comparison shopping product (currently called 'Google Shopping') in its general search results pages, e.g. by showing Google Shopping more prominently on the screen. It may therefore artificially divert traffic from rival comparison shopping services and hinder their ability to compete on the market.

The Commission is concerned that users do not necessarily see the most relevant results in response to queries - this is to the detriment of consumers, and stifles innovation. The Commission's preliminary view is that to remedy such conduct, Google should treat its own comparison shopping service and those of rivals in the same way. The formal investigation was initiated after commitment proposals from Google were thought to be insufficient to address its competition concerns.

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