EU Slaps Google With Record $2.7 Billon Fine Over Shopping Search

The European Commission levied the $2.7 billion after finding that Google is using its search market dominance to promote its own shopping site over competing sites.

Google, EU, European Union, Vestager, antitrust, online search, search results, AdSense for Search

The European Commission Tuesday slapped Google with a record $2.7 billion fine for abusing its search engine dominance to promote its own comparison-shopping site over that of rivals.

The Commission has given Google 90 days to change the manner in which it displays links to rival sites in search engine results or face additional penalty payments of up to 5 percent of parent company Alphabet's daily worldwide revenues.

Margrethe Vestager, the European Commissioner for competition who spearheaded the investigation of Google's business practices in the EU said Google's practice of promoting its own comparison-shopping site is illegal under EU antitrust rules.

"Google's strategy for its comparison-shopping service wasn't just about attracting customers by making its product better than those of its rivals," Vestager said in a statement announcing the fine. Rather, the company abused its dominance to play up its own service while demoting those of rivals.

"It denied other companies the chance to compete on the merits and to innovate, Vestager said. "And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation."

In a statement Google disagreed with the decision and said it is considering an appeal. "When you shop online, you want to find the products you’re looking for quickly and easily," the company noted. "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," the company said.

The fine is the result of complaints by multiple price comparison sites about Google giving its own online shopping service an illegal advantage in search results.

Rival shopping sites have said that when users search for products on Google Search, the company gives prominent placement in the results to paid product ads on its own shopping site while deliberately downplaying more relevant results from other sites.

They have claimed the practice has robbed them of traffic to their sites and restricted the choice that users would otherwise have if products from other sites were displayed properly.

The European Commission said its investigation showed that Google's practice of playing up its own service had indeed had a significant negative impact on the competition.

Google's shopping site has seen significant traffic improvements in recent years while that of other comparison-shopping sites have dropped precipitously as a result of Google's unfair behavior, the Commission held.

In the U.K. for instance, traffic on Google's shopping site has in increased 45-fold in recent years while traffic to certain rival websites in the UK have dropped by over 85 percent.

Analysts in the U.S. reacted with dismay to the EU ruling.

In comments to eWEEK, Larry Downes, project director at Georgetown University's Center for Business and Public Policy said there's no justification for the EU fine. "The EU, as recently as the 2015 Digital Single Market initiative has redefined the meaning of antitrust to be any behavior by a U.S. Internet company that highlights the failure of EU companies," he said.

Even if Google were to pay the fine, the bigger problem is the proposed remedy, Downes said. The Commission's decision requires Google to essentially give equal treatment to rival comparison-shopping sites, as its own service. In other words, Google has to apply the same processes and methods that it uses for its own comparison-shopping site to rival comparison services.

"It suggests either that Google somehow line up any and all rival comparison shopping services equally in the search results," but leaves unclear how exactly that goal could be achieved.

"And what defines a rival site?" Downes asked. "The complainants mentioned are tiny EU companies, so apparently anyone who claims to be a “rival” must now get equal treatment—including millions of new comparison sites that will be created immediately to take advantage of the EU’s offer of free real estate on Google’s page."

Charles King, principal analyst at Pund-IT said he expected a large fine. "But I still find the size of the EU's penalty surprising," King said. The vagueness of the EU's regulatory investigation and penalty assessment process EU lends the proceedings an air of "making it up as they go along," he said.

The decision highlights the challenges that globally focused companies like Google face when they compete in markets with widely different rules, regulations and expectations, he said.

 "A related issue is how the market landscape will change as a rules-averse U.S. President and Congress follows a laissez-faire approach to industry regulation," King said. "Companies that can't adapt to the way the EU and other regions do business are likely to run into significant problems further down the road."

If this week's ruling is an indication, Google could face even more trouble ahead.

The European Commission is currently investigating Google for potential antitrust violations on two other fronts. One of the investigations pertains to whether certain Google Android bundling requirements has stifled choice and innovation in the mobile market. The other involves Google's Adsense advertising platform and whether the company is preventing websites from sourcing ads from rivals.

Jaikumar Vijayan

Jaikumar Vijayan

Vijayan is an award-winning independent journalist and tech content creation specialist covering data security and privacy, business intelligence, big data and data analytics.