European Commission targets Google parent Alphabet Inc. with $2.71 Billion fine for antitrust

The European Commission has fined Google’s parent, Alphabet Inc. $2.71 billion for allegedly favoring its own comparison shopping service in search results. 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.

Google is already considering an appeal, but if the decision is upheld it will force Google to change the way is presents search results in Europe. By artificially and illegally promoting its own price comparison service in searches, Google denied both its consumers real choice and rival firms the ability to compete on a level playing field, European regulators assert.

According to the ruling, Google has 90 days to stop its illegal activities and explain how it will reform its ways or face fines of up to 5% of the average daily worldwide turnover of its parent company Alphabet. Based on the company’s most recent financials, that amounts to about $14m a day.

Broader Implications

The fines leveled upon Google, while significant, are not in themselves damaging to the company in any material way. However, the implications of the decision and potential for additional sanctions may result in requiring Google and many other companies to change the way they do business. For example the ruling could impact “voice-enabled assistants” which many are projecting will replace the search engine as it is seen today. You merely speak and the search is done. Silicon Valley talks about “ambient tech,” where digital assistants slowly replace all of our devices, and answers come from Google’s digital assistant, or others like Alexa or Siri.

The EU’s contention that the company must give “equal treatment” in its search results to businesses that might compete with Google in other ways. Because Google’s search engine iscontrolling, it hurts shopping competitors by putting Google’s own product ads for, say, new barbecue grills, on top of any search results from their sites for “smart phones.”

Origin of Complaints

The initial complaints came from rivals and were lodged with the commission in 2009. Many of the companies that complained said they had been adversely affected by Google’s search algorithms for years beforehand. A formal investigation began in 2010. The initial complaints were all about comparison shopping – ie looking for the best price for goods across different websites.

The Commission alleges that when people do a shopping search, the results they get back are weighted towards Google’s services even if those results are not the most relevant.

Competition commissioner Margrethe Vestager said the matter could set a precedent for the way it judged other complaints about Google.The watchdog said she was also considering investigating Google’s conduct when people searched for hotels and flights, and got maps in their results. The commission has also received complaints about how Google scrapes websites and uses the content it finds and on how it works with its advertising partners.

Ms Vestager also announced her team had launched a separate investigation into Google’s mobile operating system Android. She said the commission was concerned that Google was abusing its dominance in the smartphone and tablet market to give its own services, such as search, more prominence.

 

Also, if  the decision stands, Google and other firms will have to alter products that—like Google’s search engine—have become more than just tools, but dominant gateways to the wider internet. This could affect Amazon, Facebook or anyone else offers to search for products or services.  Google general counsel Kent Walker said the company will review the decision and consider an appeal, adding that “we respectfully disagree with the conclusions announced today.”The European Union believes that Google has too much control over internet traffic both to its own and competing comparison-shopping websites. Merchants pay a small feeeach time a user clicks through a search to the merchant’s site. In its decision, the EU detailed what it said were years of abuses, including demoting the results of rivals and artificially promoting its own shopping service above all other results. Those changes led to what the EU said was a 45-fold traffic increase in the U.K. and a 35-fold increase in Germany, with drops of traffic to rivals of 85% in the U.K. and 92% in Germany.

Jeffrey Newman represents whistleblowers