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This article was published on June 27, 2017

Google hit with record €2.4B fine for abusing EU antitrust laws to stifle rivals

Google hit with record €2.4B fine for abusing EU antitrust laws to stifle rivals
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In a shocking turn of events, Google has been handed a massive €2.4 billion fine by the European Commission after allegedly abusing its dominance as a search engine provider to give illegal advantage to its own shopping services.

The company is now forced to end the anti-competitive conduct within a window of 90 days. Otherwise, it will face penalty payments of up to five percent of the average daily global turnover of its parent company Alphabet.

“Google has abused its market dominance as a search engine by giving an illegal advantage to another Google product, its comparison shopping service,” the Commission stated in a press release.

“Google has come up with many innovative products and services that have made a difference to our lives. That’s a good thing,” commented Commissioner Margrethe Vestager. “But [this] strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals.”

“Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors,” Vestager further added.

According to the commission, such behavior is illegal under the EU antitrust rules. The reason for this is that it stifles growth opportunities for rivals and denies consumers “a genuine choice of services and the full benefits of innovation.”

The Commission’s decision for the fine essentially boils down to two anti-competitive patterns observed in Google’s strategy: giving more prominence to its own products and less to rivalling ones.

Currently, the company displays its own product listings at the top of search result queries – or very close to the top. While this is not strictly illegal, the problem is that the algorithms that govern the position of products in search results are allegedly giving Google products a priority over rivalling offers.

“Google has included a number of criteria in these algorithms, as a result of which rival comparison shopping services are demoted,” the Commission’s report reads. “[But its] own comparison shopping service is not subject to Google’s generic search algorithms, including such demotions.”

As a result, competing products are much less visible in search results.

Update: Google has since responded to these accusations on its official blog.

“When you shop online, you want to find the products you’re looking for quickly and easily. And advertisers want to promote those same products,” said Google Senior VP and General Counsel Kent Walker. “While some comparison shopping sites naturally want Google to show them more prominently, 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.”

Here is the rest of his statement:

We think our current shopping results are useful and are a much-improved version of the text-only ads we showed a decade ago. Showing ads that include pictures, ratings, and prices benefits us, our advertisers, and most of all, our users. And we show them only when your feedback tells us they are relevant. Thousands of European merchants use these ads to compete with larger companies like Amazon and eBay.

When the Commission asks why some comparison websites have not done as well as others, we think it should consider the many sites that have grown in this period–including platforms like Amazon and eBay. With its comparison tools, reviews, millions of retailers, and vast range of products from sneakers to groceries, Amazon is a formidable competitor and has become the first port of call for product searches.  And as Amazon has grown, it’s natural that some comparison services have proven less popular than others. We compete with Amazon and other sites for shopping-related searches by showing ever more useful product information.

When you use Google to search for products, we try to give you what you’re looking for. Our ability to do that well isn’t favoring ourselves, or any particular site or seller–it’s the result of hard work and constant innovation, based on user feedback.

Given the evidence, we respectfully disagree with the conclusions announced today. We will review the Commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case.