EC fines Google €1.49bn for abusing ad market dominance

The European Commission has fined Google for abusive practices in online advertising dating back to 2006

In the latest regulatory action against Google, the European Commission (EC) has fined the tech company €1.49bn for breaching European Union (EU) antitrust rules.

The EC said the fine took into account the duration and gravity of the infringement and was calculated on the basis of the value of Google’s revenue from online search advertising intermediation and in accordance with the commission’s 2006 guidelines on fines.

Investigators found that Google had abused its market dominance by imposing a number of restrictive clauses in contracts with third-party websites which prevented Google’s rivals from placing their search adverts on these websites.

In addition to the fine, the EC decision requires Google to stop its illegal conduct to the extent that it has not already done so after the commission issued a statement of objections in July 2016. Google is also required to refrain from any measure that has the same or equivalent object or effect.

The EC said Google was also liable to face civil actions for damages that could be brought before the courts of the EU member states by any person or business affected by its anti-competitive behaviour.

“Google has cemented its dominance in online search adverts and shielded itself from competitive pressure by imposing anti-competitive contractual restrictions on third-party websites,” said Margrethe Vestager, EC commissioner in charge of competition policy.

“This is illegal under EU antitrust rules. The misconduct lasted over 10 years and denied other companies the possibility to compete on the merits and to innovate – and consumers the benefits of competition.”

The EC said it was not possible for competitors in online search advertising, such as Microsoft and Yahoo, to sell advertising space in Google’s own search engine results pages. Therefore, third-party websites represent an important entry point for these other suppliers of online search advertising intermediation services to grow their business and try to compete with Google.

However, the EC investigators found that since 2006, Google had included exclusivity clauses in contracts for providing online search advertising intermediation services to publishers. This meant publishers were prohibited from placing any search adverts from competitors on their search results pages.

From March 2009, the EC said Google gradually began replacing the exclusivity clauses with so-called “Premium Placement” clauses. These required publishers to reserve the most profitable space on their search results pages for Google’s adverts and request a minimum number of Google adverts.

As a result, Google’s competitors were prevented from placing their search adverts in the most visible and clicked on parts of the websites’ search results pages.

Google also included clauses requiring publishers to seek written approval from Google before making changes to the way in which any rival adverts were displayed. This meant Google could control how attractive, and therefore clicked on, competing search adverts could be.

Therefore, the EC said Google first imposed an exclusive supply obligation, which prevented competitors from placing any search adverts on the commercially most significant websites. Then, Google introduced what it called its “relaxed exclusivity” strategy aimed at reserving for its own search adverts the most valuable positions and at controlling competing adverts’ performance.

EC investigators concluded that Google’s practices amounted to an abuse of its dominant position in the online search advertising intermediation market by preventing competition on the merits

Google’s practices covered over half the market by turnover throughout most of the period. EC investigators found that Google’s rivals were not able to compete on the merits, either because there was an outright prohibition for them to appear on publisher websites, or because Google reserved for itself by far the most valuable commercial space on those websites, while at the same time controlling how rival search adverts could appear.

EC investigators concluded that Google’s practices amounted to an abuse of its dominant position in the online search advertising intermediation market by preventing competition on the merits.

“Market dominance is, as such, not illegal under EU antitrust rules. 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,” the EC said in a statement.

Based on a broad range of evidence, the EC said it found that Google’s conduct harmed competition and consumers, and stifled innovation.

“Google’s rivals were unable to grow and offer alternative online search advertising intermediation services to those of Google. As a result, owners of websites had limited options for monetising space on these websites and were forced to rely almost solely on Google,” the EC said, adding that Google did not demonstrate that the clauses created any efficiencies capable of justifying its practices.

In June 2017, the European Commission fined Google €2.42bn for abusing its dominance as a search engine by giving an illegal advantage to Google’s own comparison shopping service.

More recently, in July 2018, the EC fined Google €4.34bn for illegal practices regarding Android mobile devices to strengthen the dominance of Google’s search engine.

Commenting on Google’s anti-competitive contracts at the time, commissioner Vestager said: “Amazon has developed an Android fork and would like manufacturers to use it, but this is not possible.”

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