Google ‘respectfully disagrees’ as it is hit with record £2.1bn EU antitrust fine

Google plans to appeal against the fine for breaching EU antitrust rules, saying the Commission has ‘underestimated the value of fast and easy connections’ when it comes to product searches.

Google

Google has been hit with a record €2.42bn (£2.1bn) fine for breaching EU antitrust rules, and has been told to end the conduct within 90 days or face penalty payments of up to 5% of the average daily turnover of parent company Alphabet.

The European Commission released a statement today (27 June), stating that while Google has come up with “many innovative products and services”, its strategy for its comparison shopping service “wasn’t just about attracting customers by making its product better than those of its rivals”.

Commissioner Margrethe Vestager, in charge of competition policy, says: “Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.”

What Google has done is illegal under EU antitrust rules, as it denied other companies the chance to “compete on the merits and to innovate”, the ruling says.

“And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation,” she adds.

Google says it “respectfully disagrees” with the ruling. In a statement, Kent Walker, SVP and General Counsel at Google, says: “When you shop online, you want to find the products you’re looking for quickly and easily. And advertisers want to promote those same products. That’s why Google shows shopping ads, connecting our users with thousands of advertisers, large and small, in ways that are useful for both.

“We respectfully disagree with the conclusions announced today. We will review the Commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case.”

Why the EU fined Google

The fine was higher than many had expected and more than double some estimates. It follows a seven-year investigation by the European Commission.

An investigation by the Commission found Google systematically gave prominence to its own comparison shopping service, which means that when a consumer enters a shopping-related query into the Google search engine, its own results are displayed at or near the top.

It has also demoted rival comparison shopping services in its search results. Evidence shows that even the most highly ranked rival service appears, on average, only on page four of Google’s search results, and others appear even further down. Google’s own comparison shopping service is not subject to Google’s generic search algorithms, including such demotions.

The evidence shows that consumers click on results that are more visible or higher up in Google’s search results. Even on a desktop, the ten highest-ranking search results on page one receive around 95% of all clicks on generic search results, with the top result receiving about 35% of all the clicks. The first result on page two of Google’s generic search results receives only about 1% of all clicks.

This means that by giving prominent placement only to its own comparison shopping service and by demoting competitors, Google has given its own comparison shopping service a significant advantage compared to rivals.

As a result of Google’s illegal practices, traffic to Google’s comparison shopping service increased significantly, whilst rivals have suffered very substantial losses of traffic on a lasting basis.

Google’s comparison shopping service has increased its traffic 45-fold in the United Kingdom, 35-fold in Germany, 19-fold in France, 29-fold in the Netherlands, 17-fold in Spain and 14-fold in Italy.

Meanwhile, traffic to rival comparison shopping services dropped significantly. For example, the Commission found evidence of sudden drops of traffic to certain rival websites of 85% in the United Kingdom, up to 92% in Germany and 80% in France. Some competitors have adapted and managed to recover some traffic but never in full.

Further penalties

The Commission says its fine of £2.1bn takes into account of the duration and gravity of the violation, and has been calculated on the basis of the value of Google’s revenue from its comparison shopping service in the 13 European Economic Area countries concerned.

It has also told Google to stop its illegal conduct within 90 days of the decision. This means it has to apply the same processes and methods to position and display rival comparison shopping services in Google’s search results pages as it gives to its own comparison shopping service.

If the search giant fails to comply, it would be liable for further penalty payments of up to 5% of the average daily worldwide turnover of Google’s parent company Alphabet. Google is also liable to face civil actions for damages that can be brought by any person or business affected by its anti-competitive behaviour.

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Comments
  • Pete Austin 27 Jun 2017 at 3:46 pm

    Re: “the top result receiving about 35% of all the clicks”.

    The figures quoted here are biased because some searches are very simple and only have a few right answers, so if Google is doing its job properly people will always a link near the top. For example I search for “Marks and Spencer”instead of trying to remember their URL and am presented with links to nearby stores. I am never going to click links further down that aren’t to a branch of M&S.

    What matters are only the percentages for non-obvious searches, such as “houses in London”, where there is no right answer.

  • Ken Jones 27 Jun 2017 at 3:59 pm

    Does anyone know how Google has actually committed fraud here? Because if there is no evidence of actual fraud, then this is a shocking crackdown on free market practices from the EU, despite whether we agree with Google’s practices from a user and consumer point-of-view.

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