EU levies record fine of $2.4 bln against Google
View(s):(Economist.com) – Margrethe Bestager, competition commissioner for the European Union, knows how to make a splash with large numbers.
Almost a year ago she ordered Apple, the world’s biggest technology firm, to settle taxes owed of up to $13 billion, a sum vaster than any had expected.
On June 27 she announced that she wants Google, the online-search giant, to pay a fine of €2.4 billion ($2.7 billion) for having given its price-comparison shopping service preferential treatment in its search results over rival offerings—abuse of market dominance, says the EU.
The fine is more than double the largest amount ever imposed in a European antitrust ruling and around twice as large as experts watching the progress of the case were expecting. In the end, as in past cases, it may be lowered.
Even before the decision was announced, Google had suggested that it will appeal. Yet just as significant as the headline-grabbing number are the ruling’s details and Ms. Vestager’s accompanying remarks, which offer clues about two other antitrust cases against Google that are pending in Brussels, as well as likely future ones.
The case at hand dates back to 2008 when Google (according to the EC) started systematically to give its own comparison-shopping results particularly prominent placement. It displayed them in an attention-grabbing format at the top of its search results.
At the same time, says the commission, Google demoted links to rival offerings such as Foundem, one of the firms which originally took the case to Brussels. It showed them only on page four (on average) of search results, where users rarely venture.
Ms. Vestager’s predecessor, Joaquín Almunia, wanted to avoid a big antitrust confrontation with a US firm and tried three times to settle the case with Google. But Ms. Vestager, who started in the job in late 2014, has taken a more aggressive approach, of which her decision this week forms a part.
Google has a market share in Internet search of 90 per cent in most European countries, the commission asserted.
Using this position to favour Google’s own services or to downgrade rival ones is a violation of European competition law, as it sees it.
The €2.4 billion fine is based on the “duration and gravity” of the infringement and was calculated on the basis of the value of Google’s revenue in Europe from its comparison-shopping service.
Google’s counter-argument, some of which it had laid out before this week’s announcement, has two main parts. First, it says its search service is far less dominant than it appears since consumers look up products on many other sites, including Amazon and eBay.
Second, it notes that the commission has failed to prove that there is a correlation between its behaviour and the poor performance of competing comparison-shopping services after 2008.
In a blog post published after the announcement, Kent Walker, the firm’s general counsel, added that the changes made after that date did benefit consumers broadly.
“Our data show that people usually prefer links that take them directly to the products they want, not to websites where they have to repeat their searches,” he wrote.
It will take months or years until the European Court of Justice, to which Google will now make an appeal, makes a final ruling. But unless Google can convince its judges to stay the commission’s decision, it will have to transfer €2.4 billion into an (interest-bearing) escrow account.
Within 90 days it will also have to devise a solution for its European sites so that search results for its own comparison-shopping service and those of rival ones are treated equally.
The commission will then assess whether the proposed solution guarantees fair treatment.