Google is reportedly planning to spin off its online shopping services operation into a separate business unit to satisfy European Union regulators' demands that the company level the playing field for rival comparison-shopping sites.
The standalone Google Shopping unit will have to bid with other shopping sites for ad placement on top of Google's product search results page, Bloomberg News reported Sept. 26 citing unnamed sources. The new unit will also need to rely on own revenues to bid for the ad slots, Bloomberg said.
Google declined to comment to eWEEK about the Bloomberg report.
EU regulators in June slapped Google with a record $2.9 billion fine for abusing its dominance in online search to promote its own shopping services site over that of rivals.
Several companies have complained that when users conduct product searches in Google, the top results are all paid product advertisements that link back to Google's shopping site. Rivals have claimed the practice robs them of organically generated search traffic to their sites and denies users true choice.
Google itself has claimed that its practice of highlighting paid advertisements in search results has made it easier for users to find products and services that they're looking for. The company has denied the practice robs others of native search traffic to their sites.
After investigating the claims and counterclaims, EU regulators determined that Google's practice of highlighting its own online shopping site via paid ads was unfair to competitors given its dominance in the search engine space.
In slapping the massive fine on the company, the regulators also gave Google 90 days to ensure that rival online shopping services get as much prominence in search results as Google gives to its own links. The deadline for meeting that requirement expires Thursday Sept. 28. After that, the company faces fines of up to 5 percent of its daily revenues for failure to comply.
Google has appealed the fine. At the same time Google has also submitted a proposal to the EU outlining how the company plans to comply with the equal play requirement while the appeals process works its way through the EU regulatory system.
Earlier this month there were news reports that Google had proposed an auction system that would let rival sites bid for any spot on top of the results page when people use Google to search for specific products. Many comparison-shopping sites had rejected the rumored proposal arguing that Google was essentially using its muscle in the online search space to force rival sites to pay for top placement in product search results.
It's unclear how the new proposal to spin out Google Shopping into a separate unit will go down with EU regulators and to operators of rival shopping services.
On the one hand, such a move would separate Google's search business from its shopping service. But rival sites would still need to bid for and to pay for placement on the search results page—something they have already rejected. Google will still continue to collect money for the top spots on the results page whether from its own separate unit or from rival shopping sites.
Google's proposal would seem to address EU demands that the company level the playing field for other sites, says Ezra Gottheil, an analyst with Technology Business Research Inc. "However, since Alphabet is effectively taking money from one pocket and putting it in another, I think the problem remains," he said. "I assume this objection has been considered, but this looks like a situation where the EU is looking for a divestment," and got it, he said.