Dr.iur.Gorana Kršikapa LL.M.

Of Counsel

26. 07. 2017.

Record fine imposed on Google

EU Commission imposes the record €2.42 billion fine on Google for abusing dominance as search engine by giving illegal advantage to own comparison shopping service. 

On 27 June 2017, the EU Commission has announced the imposition of the record €2.42 billion fine on Google for breaching EU antitrust rules in the Case 39740 Google Search (Shopping) (hereinafter “Google Decision”) taking into the account the duration and gravity of the infringement. Google has abused its dominant position in general internet search markets throughout the European Economic Area (EEA) by giving illegal advantage to another Google product, its comparison shopping service. The EU Commission has concluded that Google’s practices have stifled competition on the merits in comparison shopping markets, depriving European consumers of genuine choice and innovation. In addition, the EU Commission has used the occasion to clarify that the purpose of the Google Decision is neither to object to the design of Google’s generic search algorithms or to demotions as such, nor to the way that Google displays or organizes its search results pages. However, the EU Commission has emphasized that Google needs to use the same processes and methods to position and display rival comparison shopping services in Google’s search results pages as it does in respect to its own comparison shopping service by applying the principle of equal treatment.

Google is obliged to end the conduct within 90 days and to refrain from any measure that has the same or an equivalent object or effect. Otherwise, Google could face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, its parent company. Moreover, Google is also liable to face civil actions for damages that can be brought before the courts of the Member States by any person or business affected by its anti-competitive behavior.

The EU Commission referred to the Google Decision as “a precedent which establishes the framework for the assessment of the legality of this type of conduct”. There are currently two additional ongoing investigations against Google based on the EU Commission’s preliminary conclusion that Google has abused a dominant position: Case 40099 Google Android and Case 40411 Google Search (AdSense).

Google’s leading product is the Google search engine that provides search results to consumers. On the other hand, consumers pay for Google’s search service with their data. Nearly 90% of Google’s revenues come from adverts, such as those it shows consumers in response to a search query. In 2004 Google entered the separate market of comparison shopping in Europe. Comparison shopping services rely considerably on traffic to be competitive. In addition, there are also high barriers to entry in these markets, in part because of network effects.

Google has abused its market dominance in general internet search by giving its own comparison shopping service, as a separate Google product, an illegal advantage in the separate comparison shopping market by systematically giving it a prominent display placement, whereas at the same time subjecting rival comparison shopping services to Google’s generic search algorithms, including demotions (which lower a search entry’s rank in Google’s search results).

Taking into consideration the evidence showing that consumers click far more often on results that are more visible, i.e. the results appearing higher up in Google’s search results, Google’s comparison shopping service is much more visible to consumers in Google’s search results than the comparison shopping services of its competitors. This means that by giving prominent placement only to its own comparison shopping service and by demoting competitors, Google has given its own comparison shopping service a significant advantage compared to rivals. The EU Commission concluded that Google’s illegal practices allowed Google’s comparison shopping service to make significant gains in traffic at the expense of its rivals and to the detriment of European consumers, depriving them of the benefits of competition on the merits, namely genuine choice and innovation.

Paper image created by Kstudio – Freepik.com

TSG