What the EU antitrust ruling could mean for Google search

 

The EU’s antitrust watchdog this week fined Google €2.4 billion ($2.7 billion) for manipulating search results to favor its own shopping services over those offered by competitors. The fine is the largest antitrust penalty issued by the European Commission (EC), which gave Google 90 days to give “equal treatment” to competing services in its search results. How the company does that could have far-reaching implications for its operations across Europe, experts say, though it may be years before the issue is fully resolved.

The EC investigation stems from a 2010 complaint filed by rival online shopping services, which claimed that Google’s search engine unfairly promoted its shopping comparison product, Google Shopping, over their own. In a decision announced Tuesday, the EC said that Google indeed “abused its market dominance” in giving an “illegal advantage” to its own shopping service.

“What Google has done is illegal under EU antitrust rules,” said Commissioner Margrethe Vestager in a statement. “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."

The ruling could “pave the way for possible future cases.”

The decision specifically addresses how Google treats shopping comparison services, but experts say it could set a precedent for how the company’s search engine — the core of its business — operates as a whole. Peter Whelan, an associate law professor at Leeds University, says in an email that while the decision does not touch upon other Google search functions such as images or maps, the fact that Google was found to be in a dominant market position “will now pave the way for possible future cases… in other areas of its search services.” Google is also facing antitrust probes in Brazil, and has been under investigation by antitrust regulators in South Korea.

Google disputed the EC’s decision in a blog post published Tuesday, arguing that Google Shopping — which displays images and links for various products at the top of search results — are more useful for consumers.

“When you use Google to search for products, we try to give you what you’re looking for,” writes Kent Walker, Google’s chief counsel. “Our ability to do that well isn’t favoring ourselves, or any particular site or seller — it’s the result of hard work and constant innovation, based on user feedback.” Walker also cited Amazon as a “formidable competitor” in the shopping space, countering accusations of monopolistic practices, and said that Google is considering filing an appeal.

“The ball is firmly in Google’s court.”

The EC added that it’s Google’s “sole responsibility” to ensure that its search practices comply with European regulation and that it must “explain how it intends to do so.” If Google fails to change its practices within 90 days, Alphabet, its parent company, would face penalty payments of 5 percent of its daily global turnover. Whelan says that without specific guidance on how to ensure equal treatment for competing services, “the ball is firmly in Google’s court.”

“There do not seem to be any easy or obvious solutions to remedy the Commission’s concerns,” Whelan said in an email. “It is possible that Google will have to offer a search engine with reduced features in Europe to comply with the decision.”

One option would be for Google to adjust its search algorithm, or to prominently display links to competing services alongside its own. As Recode notes, however, such changes would likely lead to a decrease in advertising value. (Google Shopping began displaying paid links in 2012.) A more drastic move would be to pull its Shopping product from Europe altogether. As Search Engine Land points out, that’s what the company did in 2014, when it shut down Google News in Spain following legislation that would have required it to pay media outlets.

US businesses and officials have previously accused European regulators of unfairly targeting American companies through various legal cases. In addition to two ongoing antitrust probes into Google’s AdSense service and Android operating system, European officials have in recent years launched tax avoidance investigations into Apple, Amazon, and Starbucks. The US Federal Trade Commission opened an antitrust investigation into Google’s search practices in 2012, but the case was settled one year later.

“The EU has effectively decided that some companies have become too big to innovate.”

“The EU has effectively decided that some companies have become too big to innovate,” Robert Atkinson, president of the Information Technology and Innovation Foundation, a Washington-based think tank, said in a statement following the Google Shopping decision. “The EU’s actions have created a cloud of uncertainty that will make large tech companies overly cautious about making changes to the user experience and service offerings that would benefit consumers.”

But some of Google’s US competitors have welcomed the EC’s fine, describing it as a necessary measure to ensure a level playing field. “I think it’s a strong signal by the European Commission in response to Google stifling competition on the internet and diminishing consumer welfare,” says Luther Lowe, vice president of public policy at Yelp, adding that it could be “the first domino” in similar decisions from regulators around the world. Yelp is one of seven companies and trade groups that signed a letter this week in support of the EU’s fine, and has been an outspoken critic of Google’s practices.

If Google appeals this week’s decision, as many expect it to, it could be years before the matter is fully resolved. In the meantime, the ruling could provide the basis for civil lawsuits from competing services, creating more legal problems for Google.

“On the basis of this decision, many people will bring cases and ask for damages,” says Ioannis Lianos, chair of global competition law and public policy at University College London. “So it might be quite a lot of money and a lot of trouble for Google for a few years.”