EU slaps Google with record fine | Business| Economy and finance news from a German perspective | DW | 27.06.2017
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EU slaps Google with record fine

The EU's powerful anti-trust regulator has imposed a record fine on US tech behemoth Google, as punishment for giving its own online shopping service top priority in search results to the detriment of other services.

The European Union's competition watchdog on Tuesday imposed a record 2.42-billion-euro ($2.72 billion) fine on technology giant Google, arguing that the company abused its dominance as a search engine by giving illegal advantage to its own shopping service

"What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate," EU competition commissioner Margrethe Vestager said in a press release. "And, most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation."

According to EU rules, the company must now end its conduct within 90 days or face additional penalty payments of up to 5 percent of the average daily worldwide turnover of Alphabet, Google's parent company.

Belgien EU Kommission PK Google Wettbewerbsverstoß in Brüssel (Reuters/F. Lenoir)

Vestager: 'What Google has done is illegal under EU antitrust rules'

Crucially for Google, Brussels has demanded that the US firm change the business model for Google Shopping to meet the EU's concerns.

An elaborate investigation

Speaking to DW's Barbara Wesel after announcing the decision, Vestager said the EC's casework must "rely on facts, evidence and the case law."

"And we have found that we can prove first that Google is a dominant company, and second that it has abused its dominance in the shopping comparison market," she said.
Read: Barbara Wesel's full interview with EU competition commissioner Margrethe Vestager

Vestager noted that the equivalent of 1.7 billion search queries - or 5.2 terabytes of data - was analyzed as part of the Google investigation.

Investigators found that on average even Google Shopping's most highly-ranked rivals only appeared on page four of Google search results. Vestager said that 90 percent of user-clicks are on page one. "As a result, competitors were much less likely to be clicked on," she said.

More broadly, Vestager said, the probe has established that Google is dominant in general internet search in all 31 countries of the European Economic Area. This will affect other cases the European Commission (EC) might build against the internet giant's various businesses, like Google Images.

She also pointed out that anyone who suffered damages from "Google's illegal behavior can claim compensation in front of national courts."

'Respectfully disagree'

The penalty is likely to leave a bigger dent in Google's pride and reputation than its finances. Alphabet has more than $92 billion in cash, including nearly $56 billion in accounts outside of Europe.

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Google maintains that it's just trying to package its search results in a way that makes it easier for consumers to find what they want.

"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. That's why Google shows shopping ads, connecting our users with thousands of advertisers, large and small, in ways that are useful for both," Kent Walker, Google's senior vice president and general counsel, said in a statement.

Walker added: "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."

Despite being an EU record, the fine imposed is below the maximum possible of about 8.0 billion euros or 10 percent of Google's total revenue last year. Still, the EU's latest penalty has broken the previous record of 1.06 billion euros ($1.2 billion) set in 2009 against Intel, the US chipmaker.

Intense pressure

The decision comes a year after Vestager shocked the world and angered Washington with an order that Apple repay 13 billion euros in back taxes in Ireland.

The Google Shopping case, launched in 2010, is one of three against Google and of several against US companies including Starbucks, Apple, Amazon and McDonald's. The cases have stoked tensions with Washington and Brussels could now face the wrath of US President Donald Trump, who won office on his "America First" slogan.

The EU's decision comes after a long negotiation period with many twists and turns in which the two sides tried to settle the case amicably. Vestager's predecessor, the Spaniard Joaquin Almunia, made three attempts to resolve the dispute but in each case intense pressure by national governments, rivals and privacy advocates scuppered the effort.

When asked about potential retaliation from Washington, Vestager stressed the importance US officials accord to the rule of law. "What we have in common is that we build on the rule of law." She also rejected the talk of a "competition war" between Brussels and Washington, saying that the penalty imposed on Google "has nothing to do with any of that." 

"This is case work, this is antitrust, and what we have found is illegal behavior breaching European legislation," she told DW.

The commissioner also noted that regulators are making "good progress" in the EC's other Google probes into Android and search advertising, and that the "preliminary conclusion" is that they breach EU antitrust rules.

sri/rd (Reuters, dpa, AFP, AP)