Regulation

Google Hit With $2.7B Fine By The European Commission For Anti-Competitive Practices

The European Commission has spoken when it comes to Google — and as of today, it has spoken loudly.

Google has been ordered to pay 2.4 billion euros ($2.7 billion) in fines by the European Union’s financial enforcers, who have determined that Google cooked its search results so as to benefit its own shopping services — and disadvantage the services of others.

Apart from the hefty fine, the EC has given Google 90 days to “stop its illegal conduct” and offer other price comparison services the chance to compete on a balanced playing field.

“Google’s strategy for its comparison-shopping service wasn’t just about attracting customers by making its product better than those of its rivals,” said Margrethe Vestager, the EU’s antitrust chief. “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.”

The ruling found that Google does not apply its own shopping service to its algorithm — which ranks search results on quality and relevance to the user — and that this constitutes a very unfair advantage.

How Alphabet Inc. choses to comply with the binding order is up to its discretion — but is has 60 days from today to put some sort of plan together that it can run it by the EC. Failure to comply means it could be subject to paying finds of up to 5 percent of its daily revenue.

The ruling comes at the end of a seven-year investigation of Alphabet’s business practices urged on by the complaints of several small shopping sites — and the series of large players that joined them — that demand Google either be sanctioned or perhaps even broken up for the ways it has used search to unfairly tip the market toward itself. News Corp., Axel Springer SE and Microsoft Corp were among the complaining firms.

Critics of the move, particularly stateside, have complained that the EC is targeting successful American firms that operate overseas.  The EC notes that the focus on Google comes because of the clearly notable effects it has on the markets it operates in.

“As a result of Google’s illegal practices, traffic to Google’s comparison-shopping service increased significantly, whilst rivals have suffered very substantial losses of traffic on a lasting basis,” the EU said, citing figures of a 45 percent increase in traffic for Google’s service.

And Google is just getting warmed up with the EC — it also has two other issues currently facing investigations for its Android mobile phone software and the AdSense online advertising service.

“Vestager is proving she means business,” said Thomas Vinje, a lawyer who represents FairSearch, a group of companies that complained to the EU.

Alphabet, at present, has about $90 billion in cash on hand — which means the $2.7 billion fine is close to a rounding error as far as the bottom-line effect of the figure.  The bigger issue for Google is the fact that regulators are now demanding they change online shopping searches since it is both a massive area of sales growth and important weapon in its ongoing war for digital dominance with rivals at Amazon and Facebook.

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