Much has already been written about yesterday’s announcement from the European Commission that Google is to be fined a record €2.42 billion for the abuse of a dominant market position amounting to a breach of EU antitrust rules. The decision relates to the separate shopping comparison service provided by the globally popular search engine provider.
Dominant market position
Google’s flagship search engine has the highest market share in all EEA countries apart from the Czech Republic and over 90% in most. This has been the case since at least 2008 which is the period which was investigated by the Commission. Google receives almost 90% of its revenue from adverts in its search function. The Commission also noted that in the search engine market there are significant barriers to entry for alternative providers. On this basis the Commission concluded that Google is “dominant in general internet search markets throughout the EEA”.
Abuse of dominant position
Google launch a separate shopping product in 2004 called ‘Froogle’ but this performed poorly despite numerous rebrands. This lead to a change of tack in 2008 whereby Google’s general search engine began giving greater prominence to Google shopping adverts and systematically demoting results from rival shopping comparison services.
The Commission found that Google had leveraged its dominance in the general search engine market to yield an illegal advantage in the comparison shopping market which they would not have enjoyed under genuine competition. This behaviour would be contrary to EU antitrust rules and Article 102 of the Treaty on the Functioning of the European Union.
The record fine is said to be in accordance with the Commission’s Guidelines, also taking into account the “duration and gravity of the infringement”. The decision requires Google to cease the prohibited conduct within 90 days. Failure to comply could result in non-compliance payments of up to 5% of the average daily worldwide turnover of Alphabet, Google’s parent company, which based on the company’s most recent financial reports could amount to about $14m a day.
Google will be able to afford the fine – Alphabet has global assets of over $172 billion – but it is clearly apparent that Google intend to appeal the decision and will be in a position to advance strong arguments on market definition. The view has been expressed in some sectors that the European Commission’s legal basis for the fine is comparatively weak and a significant response can be expected from Google and also potentially from the US Government. The decision immediately prompted calls from Silicon Valley for the Trump administration to intervene to protect the interests of American tech giants, Google, Apple, Facebook, and Amazon.
If you would like to discuss any of the issues covered in this article or require any advice about competition law issues, please contact Rod Lambert in the Brodies’ Public Law and Regulatory Team.
On June 28, 2017