Google Fined $1.7 Billion Over EU Antitrust, But What Does That Mean?

Google is a dominant force, both in terms of its position as a search engine and in many other aspects of online business. Despite their online dominance, the company is not above the law as they have found out on several occasions in recent years. Recently, Google was fined by the European Union for the third time in three years. Google, which is owned by Alphabet, was recently fined a staggering $1.7 billion by Margrethe Vestager, the European Competition Commissioner. Vestager explained that this was in relation to their AdSense advertising service and the anti-competitive practices used by Google.

She announced the fine in a tweet, citing Google’s illegal practices in search advertising brokering as the reason. Vestager went on to explain to her Twitter followers that Google was denying consumers of fair prices, innovative products, and the right to choose. The conclusion of Vestager’s team was that many websites had restrictive clauses in their contracts with Google, who powered their advertising and search features, that prevented them from hosting advertisements from other search engines. These third-party websites included businesses from many industries, including travel sites and online newspapers.

An infographic was used by the European Commission to give a visual representation of how the third-party websites were displaying Google’s advertisements in their search functions. The infographic showed how Google reserved the best spots for themselves, restricted advertisements from rivals, and controlled the appearance of rival advertisements. The European Commission did not simply jump to the conclusion that this was how Google was conducting the advertising element of their business. In fact, it has taken many years of research to reach this conclusion. They have been collating data since 2006 by reviewing hundreds of contracts that included advertisement clauses. According to their findings, Google began to phase out these restrictive clauses in 2009.

However, this does not mean that Google no longer restricted advertisements on third-party websites using exclusivity arrangements. All they did was to replace the clauses with a new clause; the premium placement clause. This clause imposed similar limitations with respect to the positioning of advertisements with the spaces that are the most profitable reserved only for Google advertisements.

Also in 2009, Google began to introduce further rules and regulations in their contracts with websites. These included demanding that websites seek written approval from Google prior to implementing any changes to the size, the color, and the way that any rival advertisements are displayed. In 2016, Google ceased to make these demands. However, this was months after they had been issued with a statement of objections from the European Commission. This means they did not take immediate action to sort out the situation.

This is only the latest fine that Google has received and follows two previous fines for different issues. The first of these was in September 2017 when they were fined $2.7 billion. This is related to their shopping service. They were then fined a whopping $5 billion, a record fine figure, in July 2018 for their abuse of the dominance of Android. The combined figure of the three fines received by Google so far is a staggering $9.4 billion. However, the search giant is appealing against the 2018 and 2019 fines.

While it is no secret that Google is a successful and profitable company, the latest fine will make a significant dent in the company’s accounts. In fact, it is the equivalent to 1.29% of their 2018 turnover. In relation to the high sum of the fine, Vestager says that the European Commission considers the gravity and duration of any infringement when deciding how much a company is fined. In the case of Google, the infringement lasted for over a decade.

Vestager has also confirmed that the European Commission will continue to monitor the behavior of Google in the marketplace to ensure that no further infringements occur. Despite criticizing the company’s conduct, she did give them praise for the effort they are now putting into complying with rulings. In response to the fines, Kent Walker, the senior vice president of global affairs for Google, has said that Google agrees that it is in everyone’s interest to have healthy and thriving markets. He also stressed that Google has already taken steps to address the complaints of the European Commission and there are more changes in the pipeline.