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Google Fined $2.7 Billion in E.U. Antitrust Ruling Google Fined Record $2.7 Billion in E.U. Antitrust Ruling
(about 2 hours later)
Google suffered a major regulatory blow on Tuesday after European antitrust officials fined the search giant about $2.7 billion for unfairly favoring some of its own search services over those of rivals. 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 search services over those of rivals.
The hefty fine, of 2.4 billion euros, marks the latest chapter in a lengthy standoff between the European Union and Google, which also faces two separate charges under the bloc’s competition rules related to Android, its popular mobile software, and to some of its advertising products. Google denies the accusations. 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 — the biggest ever in this type of antitrust case — Margrethe Vestager, Europe’s antitrust chief, has laid further claim to be the Western world’s most aggressive regulator of digital services from the likes of Google and Facebook. By levying the fine against Google — more than double the previous largest penalty in this type of antitrust case — Margrethe Vestager, Europe’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.
Ms. Vestager has already 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 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.”
Such focus on Silicon Valley firms has prompted accusations from some in the United States that Europe is unfairly targeting American companies. The bloc’s officials vigorously deny these claims. The focus on Silicon Valley companies has prompted accusations from some in the United States that Europe is unfairly targeting American companies. Officials in the bloc vigorously deny these claims.
But with the record antitrust fine against Google — the previous high, against Intel in 2009, was €1.06 billion — officials from the European Commission, the executive arm of the European Union, have gone significantly further than their American counterparts in determining what is, and is not, allowed to take place on the web. 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.
“What Google has done is illegal under E.U. antitrust rules,” Ms. Vestager said in a statement on Tuesday. “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 and the full benefits of innovation.” In targeting the activities of these digital giants, experts say, European authorities are laying down a marker for more hands-on control of how much of 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 for perceived abuses.
Google has repeatedly denied that it breached Europe’s tough competition rules, saying that its digital services have helped the region’s digital economy to grow and are used by hundreds of millions of Europeans each day. It has also said that significant online competition remains in Europe, including from the likes of Amazon and eBay. While the financial penalty 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 the region related to Android, its popular mobile software, and to some of its advertising products. Google denies the accusations.
Google rebuffed Europe’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.”“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.”
The antitrust ruling on Tuesday related to Google’s online shopping service, which the European Commission said had received preferential treatment compared with those of rivals in specialized search results. 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 Europe’s online search.
Analysts say the so-called vertical search products — also including those for restaurant and business reviews — represent a fast-growing percentage of Google’s annual revenue. 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.
While the fine is likely to garner much of the attention, focus will quickly shift to the changes that Google will have to make to comply with the antitrust decision. That may eventually lead to further fines if European authorities find wrongdoing. The complaints include many from American tech 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.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.
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 continue to monitor the company’s activities to ensure that it was complying with the ruling. 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.
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 tough 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 Europe’s investigation began almost a decade ago.Google has other options, including the removal of some of its specialized search services from Europe, or returning them to how they operated before Europe’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 to Europeans and those farther afield.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 to Europeans and those farther afield.
“The changes could have ramifications beyond Google Shopping, and might even impact Google’s operations in the U.S.,” a number of American companies that have filed antitrust complaints against Google said in a public letter before the ruling was released. The signatories included Oracle, News Corporation and Yelp. “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 the company. “Left unchecked, there are few limits to this gatekeeper power.”