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European Union fines Google a record $2.7 billion for stifling online shopping competitors

The European Union slapped a record 2.42 billion euro ($2.72 billion) fine on Google for breaching antitrust rules with its online shopping service. (June 27, 2017) (Sign up for our free video newsletter here http://bit.ly/2n6VKPR)

The European Union slapped a record $2.7-billion fine on Internet giant Google on Tuesday for allegedly taking advantage of its dominance in online searches to direct customers to its own online shopping business.

European regulators gave the Mountain View, Calif., company 90 days to stop or face more fines of up to 5% of the average daily worldwide revenue of its parent company, Alphabet Inc.

Google says it is considering an appeal.

The European Commission, which polices EU competition rules, alleges Google elevates its shopping service even when other options might have better deals.

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The commission said Google “gave prominent placement in its search results only to its own comparison shopping service, whilst demoting rival services. It stifled competition on the merits in comparison shopping markets.”

“What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation,” EU Competition Commissioner Margrethe Vestager told reporters.

Google says it’s just trying to package its search results in a way that makes it easier for people 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, senior vice president at Google, said in a statement.

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“We will review the commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case,” he said.

The fine is the highest ever imposed in Europe for anti-competitive behavior, exceeding a 1.06-billion-euro penalty on Silicon Valley chip maker Intel in 2009.

But 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.

Vestager said the commission’s probe, which started in 2008, looked at some 1.7 billion search queries. Investigators found that on average even Google Shopping’s most highly ranked rivals only appeared on Page 4 of Google search results. Vestager said that 90% of user-clicks are on Page 1.

“As a result, competitors were much less likely to be clicked on,” she said.

It is up to Google to decide what changes it wants to make to comply with the commission’s ruling, but any remedy must ensure that rival companies receive the same treatment as Google Shopping.

“We will monitor Google’s compliance closely,” Vestager said.

She noted that any company or person who has suffered damages due to the company’s practices can make claims to national courts.

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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 might build against the Internet giant’s various businesses, such as Google Images.

She also noted that regulators are making “good progress” in their other Google probes into Android and search advertising, and that the “preliminary conclusion” is that they breach EU antitrust rules.

The commission has come under fire in the United States for a perceived bias against U.S. companies.

Vestager said that she has examined statistics concerning antitrust, merger control and state aid decisions and that she “can find no facts to support any kind of bias.”

Alphabet shares fell 2.5% on Tuesday to $948.09.

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UPDATES:

3:50 p.m.: This article was updated with Alphabet’s stock movement.

6:35 a.m.: This article was updated throughout with additional details and context, and with comments from Margrethe Vestager and Kent Walker.

This article was originally published at 3 a.m.


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