Google Fined Record $2.7 Billion in E.U. Antitrust Ruling
Google Fined Record $2.7 Billion in E.U. Antitrust Ruling
By MARK SCOTT JUNE 27, 2017
Google suffered a major blow on Tuesday after European
antitrust officials fined the search giant a record $2.7 billion for unfairly
favoring some of its own services over those of rivals.
The penalty, of 2.4 billion euros, highlights the
aggressive stance that European officials have taken in regulating many of the
world’s largest technology companies, going significantly further than their
American counterparts.
By levying the fine against Google — more than double the
previous largest penalty in this type of antitrust case — Margrethe Vestager,
the European Union’s antitrust chief, also laid claim to being the Western world’s
most active regulator of digital services, an industry still dominated by
Silicon Valley.
“In Europe, companies must compete on the merits
regardless if they are European or not,” she said on Tuesday. “What Google has
done is illegal under E.U. antitrust rules.”
The apparent focus on Silicon Valley has prompted
accusations from some in the United States that the European Union is unfairly
targeting American companies. Officials in the bloc vigorously deny those
assertions.
Still, in recent years, Ms. Vestager has demanded that
Apple repay $14.5 billion in back taxes in Ireland, opened an investigation
into Amazon’s tax practices in Europe and raised concerns about Facebook’s
gathering and handling of data. The companies deny any wrongdoing.
In targeting the activities of these digital giants,
experts say, European authorities are laying down a marker for more hands-on
control of how the digital world operates. And while the $2.7 billion fine
announced on Tuesday is tiny compared with Google’s $90 billion in annual
revenue, it highlights the region’s willingness to dole out sizable penalties.
Shares of Google fell for a second straight day on the
news. The stock declined 2.5 percent on Tuesday, a steeper decline than the
broader Nasdaq.
While the fine will garner attention, the focus will most
likely shift quickly to the changes that Google will have to make to comply
with the antitrust decision, potentially leaving it vulnerable to regular
monitoring of its closely guarded search algorithm.
Europe’s latest efforts to rein in technology companies
stem from continuing unease that Silicon Valley has come to dominate how the
continent’s 500 million citizens interact online.
“Europe is setting the agenda,” said Nicolas Petit, a
professor of competition law and economics at the University of Liège in
Belgium. “It’s always been like that.”
In her statement on Tuesday, Ms. Vestager said that
Google held a dominant position in online search, requiring the company to take
extra measures to ensure that its digital services did not crowd out those of
rivals.
The antitrust decision related to Google’s online
shopping service, which the European Commission, the executive arm of the
European Union, said had received preferential treatment compared with those of
rivals in specialized search results.
Analysts say such so-called vertical search products —
also including those for restaurant and business reviews — represent a
fast-growing percentage of Google’s annual revenue. The company does not break
out earnings figures for this unit in its financial reports.
The search company is facing two separate antitrust
charges in Europe related to Android, its popular mobile software, and to some
of its advertising products. Google denies the accusations.
Google rebuffed the European Union’s claims on Tuesday,
saying that its services had helped the region’s digital economy grow. It has
also said that significant online competition remains in Europe, including from
companies like Amazon and eBay.
“We respectfully disagree with the conclusions announced
today,” Kent Walker, the company’s general counsel, said in a statement. “We
will review the commission’s decision in detail as we consider an appeal, and
we look forward to continuing to make our case.”
GOOGLE’S ANTITRUST BATTLES
·
April 2015 Europe’s antitrust officials accused
Google of favoring some of its own search services linked to online shopping
over those of rivals.
·
April 2016 The region’s antitrust authorities
filed charges against Android, claiming Google unfairly required cellphone
makers to preinstall its services and offered manufacturers improper financial
incentives to favor Google’s products.
·
July 2016 Europe’s competition watchdog said
Google had abused its dominant position when offering some of its online
advertising tools as part of search services on third-party websites.
Google’s Response
Google denies any wrongdoing in the cases. It says
consumers can freely use alternative online search products, rivals are welcome
to offer their own digital services that compete directly with those of Google
and smartphone makers are not required to use its digital services as part of
Android.
Despite Google’s denials, the record fine — the previous
high, against Intel in 2009, was €1.06 billion — represents a bloody nose for a
company that holds a market share of more than 90 percent in online search in
Europe.
Several other antitrust complaints related to other
specialized search results have been filed in Europe against Google, and Ms.
Vestager said Tuesday’s announcement could “be used as a framework” in those
investigations.
That may eventually lead to further fines if European
authorities find wrongdoing. The complaints include many from other American
technology companies, including Oracle, News Corporation and Yelp, which have
been vocal advocates of large fines against Google.
Google has 90 days to respond to the European
Commission’s demands, or face penalties of up to 5 percent of the average daily
global revenue of Alphabet, its parent company. European officials said on
Tuesday that they would regularly monitor the company’s activities to ensure
that it was complying with the ruling.
Under European rules, the company — and not the regulator
— must come up with proposals to guarantee that it treats competitors fairly
when people make online search queries. The authorities can demand that Google
make further changes if they are not satisfied with the initial proposals.
Analysts and many of Google’s competitors have called for
an independent monitor to oversee the company’s digital services in Europe,
which could include oversight of its search algorithms, some of Google’s most
important intellectual property. The company is likely to fiercely oppose such
a move.
Google has other options, including the removal of some
of its specialized search services from Europe, or returning them to how they
operated before the European Union’s investigation began almost a decade ago.
Whatever the outcome, analysts say they expect a
protracted legal battle that will continue for several years as both Google and
its rivals fight to define how search services are provided in Europe and
elsewhere.
“Google’s search engine has played a decisive role in
determining what most of us read, use and purchase online,” said Shivaun Raff,
a co-founder of Foundem, a British comparison-shopping site that was the first
company to file a complaint against Google.
“Left unchecked, there are few limits to this gatekeeper
power.”
James Kanter contributed reporting.
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