After a years-long investigation, the commission found that Google takes “illegal advantages” in the online marketplace by using its dominance as a search engine to ensure its comparative pricing service quells the competition, which, in the commission’s estimation, has “denied European consumers the benefits of competition, genuine choice of service and innovation.”
The tech giant’s investors took the ruling in stride and shares of Google’s parent company, Alphabet Inc., were down 0.9 percent to $944.18 in morning trading on Wall Street.
Head of the antitrust commission Margrethe Vestager admitted Google has “come up with many innovative products and services that have made a difference in our lives,” but said that doesn’t cancel out its allegedly illegal market actions.
“Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals,” Vestager said. “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.”
The commission added Google has “systematically given prominent placement” to its comparison service since 2008, and the 2.42 billion euro fine “reflects the serious and sustained nature of Google’s violations of EU antitrust rules.”
In a statement, Google’s senior vice president and general counsel Kent Walker alluded to the commission’s investigation focusing on paid advertisements, that often go directly to retail web sites and are given priority on Google.
“When you shop online, you want to find the products you’re looking for quickly and easily,” Walker said. “And advertisers want to promote those same products. That’s why Google shows shopping ads, connecting our users with the thousands of advertisers, large and small, in ways that are useful for both. We believe the European Commission’s online shopping decision underestimates the value of those kinds of fast and easy connections. 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 web sites where they have to repeat their searches.”
Walker went on to argue that ads only show up in its price comparison feature when user feedback “tells us they are relevant” and added “thousands of European merchants use these ads to compete with larger companies like Amazon and eBay.”
Google intends to review the commission’s decision and is considering an appeal.
Google in 2004 first entered Europe’s comparison shopping market, which the EU considers its own marketplace, with “Froogle.” In 2008 it was renamed “Google Product Search” and since 2013 has been called “Google Shopping.”
In 2008, Google made what was described as a fundamental change in its European strategy in order to push its comparison service, and the commission said Google was aware of the service’s poor performance relative to other competitors already in the market. The commission cited an internal Google document from 2006 that said “Froogle simply doesn’t work.”
The new strategy purportedly relied on Google’s “dominance in general internet search, instead of competition on the merits in comparison shopping markets,” according to the commission.
Specifically, the commission said Google’s comparison shopping service, and those products on it, always appear at the top of a user’s search results, while rival services and their products are “demoted,” often not appearing until page four of Google’s search results.
The commission also noted that users rarely go past the first page of Google search results, with the first result on page two of a given search receiving just 1 percent of all clicks, according to its research.
As for Google’s purportedly intentional demotion of rival comparison services, the commission found in its investigation that the company applies a generic search algorithm to rival results, while its own comparison results are not subject to such an application.
“As a result, Google’s comparison shopping service is much more visible to consumers in Google’s search results, whilst rival comparison shopping services are much less visible,” the commission said.
The commission went on to note that since 2008, when Google began to “stifle” competitive services, it’s seen traffic increase exponentially in places like the U.K., France and Spain, among many other European countries. Meanwhile, after being pushed down in Google’s results, other comparison search services lost nearly all of their traffic.
Beyond the 2.4 billion euro fine, which was calculated based on Google’s revenue over the years from its comparison service in 13 European countries, the company is being asked to “comply with the simple principle of giving equal treatment to rival comparison services” in its search by applying the same methods to others as its does its own.
Google has 90 days to comply and also has to present the commission with a plan for compliance and report its actions for at least 60 days.
Should Google fail to comply with the directive, it would be subject to further penalties equal to up to 5 percent of the “average daily worldwide turnover” of its parent company, Alphabet Inc.
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