The European Commission has fined Google Inc. a record-breaking €2.42 billion – approximately $3.575 billion Canadian – for breaching EU antitrust rules, after concluding that the Mountain View, Calif.-based tech giant abused its dominance of the search engine market to give another product, Google Shopping, an illegal advantage in the online commerce market.
In a June 27 statement Margrethe Vestager, the EU commissioner in charge of competition policy, said that while Google has developed many products and services that have changed modern life, the company’s support for Google Shopping was anything but innovative.
“Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals,” she said. “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,” Vestager continued. “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.”
Launched in 2004, Google’s EU-based comparison shopping service, initially called “Froogle” before being re-named “Google Product Search” in 2008 and “Google Shopping” in 2013, allows consumers across the continent to compare products online, seeking out deals from online retailers including manufacturers’ websites, platforms such as Amazon and eBay, and other resellers. It was a crowded market with several established players and, according to the EU, at least one internal document from 2006 stated that “Froogle simply doesn’t work”.
So from 2008 onward, the Commission found, Google began to change its strategy, relying on its dominance in internet search to systematically place Google Shopping at or near the top of relevant search results.
“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,” the Commission said in its June 27 report. “Google’s own comparison shopping service is not subject to Google’s generic search algorithms, including such demotions.”
Unsurprisingly, research shows the 10 highest-ranking generic results on on the first page of a Google search generally receive approximately 95 per cent of all clicks, the Commission reported – an advantage as significant for Google Shopping as it was a breach of EU antitrust rules.
“Market dominance is, as such, not illegal under EU antitrust rules,” the Commission reported. “However, dominant companies have a special responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in separate markets.”
And Google, it said, has dominated the Internet search market in all 31 European Economic Area countries since 2008 – except in the Czech Republic, where it has dominated since 2011 – exceeding 90 per cent in most.
The company had introduced its practice of using Google searches to boost Google Shopping in the 13 countries where the latter was introduced, the commission said, including: Germany, the U.K., France, Italy, the Netherlands, and Spain.
Google has 90 days to end the practice or faces penalty payments worth up to 5 per cent of its parent company Alphabet’s average daily worldwide turnover.
It also could face civil suits from any person or business affected by its anti-competitive behaviour, the Commission said.
