What the EU $2.7 Billion Fine Means for Google Global Search Business
What the EU $2.7 Billion Antitrust Fine Means for Google Global Search Business
Google now has the dubious distinction of incurring the largest fine ever imposed on a company by the European Union. The EU’s competition chief Margrethe Vestager announced June 27 that Google had been slapped with a $2.7 billion fine on the grounds that the search engine giant violated antitrust laws. In a statement, Vestager said Google's business practices harmed competitors and consumers. The move centered on Google’s activities in shopping and search after years of investigation. But there’s much more to the story than Google Shopping, its comparison shopping services. This slide show will cover what ultimately convinced the EU to levy a record-breaking fine against Google.
Google Hit With Biggest Antitrust Fine in EU History
Google was slapped with a $2.7 billion fine, the biggest fine the EU has ever levied against a company. The move came after years of investigation into allegations that Google unfairly promoted its own shopping search services over those owned by smaller EU competitors. In a statement, Vestager said that Google “denied European consumers the benefits of competition.”
Google Responds to the Fine
Google Senior Vice President and General Counsel Kent Walker responded to the fine, saying the company must “respectfully disagree with the conclusions.” However, Google didn’t fire back at the claims; it said it will review the EU’s decision and “consider an appeal.” In other words, this thing might not be over.
EU Says Google Illegally Used Its Dominant Market Position
According to the EU, Google used its “market dominance” in search to provide “illegal advantages” to Google Shopping, a service that lists products for sale through its search. Competitors operating their own shopping services argued that Google pushed them down in results to benefit its own offering.
How Powerful Is Google, Really?
At the center of the EU complaint is an argument that Google is the dominant force in the search market with monopoly power. While Google has denied those claims, the EU has pointed to its 90 percent-plus search market share in most European countries as proof of its overwhelming position. The EU believes Google has “special responsibilities” to ensure competition in the marketplace.
Competitors Large and Small Complained About Google
The EU’s accusations were bolstered by complaints from companies either backing or backed by an organization called FairSearch, which was formed in 2010. It counts several prominent companies among its members, including Microsoft, Yelp and Yandex. All argued that Google was abusing its position as a dominant force and should be curbed.
Those Competitors Are Jubilant About the Fine
It didn’t take long for FairSearch companies to tout the EU’s decision. In letters released June 27, the companies celebrated the decision and said it would go a long way in improving competition in the marketplace. They also argued that a similar action should happen in the US.
Could Google Find Itself Under Investigation in the U.S.?
That brings us to the question: Could Google face a similar fine at the hands of the U.S. Federal Trade Commission? It’s technically possible, and now, with the EU fine in place, it might be easier. However, most antitrust experts say Google is at no risk of facing a fine in the U.S., and American regulators aren’t looking to target its shopping services.
The Fine Won't Cripple Google's Finances
A fine of $2.7 billion would cripple the finances of all but the biggest companies. But it’s worth noting that during the first quarter of the year, Google generated a $5.4 billion profit. This year, it’s on pace to make more than $20 billion. A $2.7 billion fine means little to a company of that magnitude.
What Are the American-EU Implications?
There has been some chatter that the EU’s decision to target Google, an American company, could strain relations between the Eurozone and the U.S. There is already some tension between the EU and the U.S. over fines assessed against Apple over its tax payments, and some observers see the Google fine as more salt in the wound. But so far nobody is calling for a trade war.
There’s More Trouble Ahead
This isn’t the end for Google. While the company could pay the fine and move on, the EU’s European Commission, the competition watchdog run by Vestager, is also investigating whether the company violated antitrust laws related to search ads and Android. It’s possible Google could get hit with fines amounting to many more billions of dollars.