Penalty for Google
Almost EUR 1.5 billion will be a fine that Google has to pay for violating antitrust laws. The European Commission found that it was abusing its dominant position on the market because it uses many restrictive clauses in contracts with third party websites. They prevent competitors from placing their ads in the search results on those pages.
Commissioner Margrethe Vestager , responsible for competition policy, said:The Commission today fined Google EUR 1.49 billion for unlawfully abusing its dominant position in the search engine advertising intermediation market. Google strengthens its dominant position in the search engine advertising market and protects itself from competitive pressures by imposing anti-competitive contractual restrictions on third party websites. Such behavior is inconsistent with EU antitrust laws. It lasted more than ten years and took away other companies from competing by virtue and innovating, and robbed consumers of the benefits of competition.
Google’s strategy for intermediation in advertising services using search engines
Newspaper websites, blogs, or travel sites often have built-in search engines. If a user searches using such a search engine, both the search results and the ads in the search results appear on the page.
Through the AdSense for Search platform, Google places these advertisements on third party websites. Google acts here as an advertising broker, an intermediary between advertisers and website owners who want to earn money on the surface of the pages containing the search results. This means that AdSense for Search acts as an online intermediation platform for search engine advertising services.
From 2006 to 2016, Google was the largest search engine advertising intermediary in the European Economic Area (EEA): its market share was over 70%. during this period. In 2016, Google also had over 90 percent. shares in domestic markets in the area of general search engines and over 75 percent. shares in most of the national search engine advertising markets where it is present thanks to its flagship product, i.e. the Google search engine providing search results to consumers.
Competitors in the field of search engine advertising, such as Microsoft and Yahoo, are not allowed to sell ad space on search engine results pages. Accordingly, third party websites represent an important entry point for these other search engine advertising intermediation services to grow their business and be able to compete with Google.
Google provided advertising brokerage services using search engines for the most important contractors on the basis of individually negotiated contracts. The Commission has analyzed hundreds of such contracts and found that:
- Since 2006, Google has included exclusivity clauses in these contracts. This meant that its customers were forbidden from displaying any ads from Google’s competitors on their search results pages . The decision applies to website owners who have entered into such exclusivity agreements with Google on all of their sites.
- In March 2009, Google began to gradually move away from exclusivity clauses and instead used “best placement” clauses. They required website owners to reserve the best places on the results list for Google ads and specified the minimum number of Google ads required. This means that Google’s competitors have not been able to place their ads on the most visible and most clicked parts of the results pages .
- In March 2009, Google introduced clauses in contracts requiring its written consent for website owners to make any changes to the way competitors serve their ads. As a result , Google was able to check the attractiveness and popularity of competing ads .
Therefore, Google first introduced an exclusive service obligation , preventing competitors from posting any advertisements on the most commercially successful sites. Then the company started to apply the so-called Controlled exclusivity , designed to reserve the best positions for your performance and to control the position of your competitors’ results.
The practices of Google in the described period covered more than half of the market by volume of turnover. Other companies were unable to compete on the merits because there was either an explicit prohibition on displaying their results on third party sites or Google reserving the best commercially available positions on these sites for itself while controlling how competitors’ results were displayed.
Breach of EU antitrust laws
Google’s practices abuse the dominant position in the search engine advertising intermediation market and prevent other companies from competing with it using their strengths.
Under EU antitrust rules, market dominance as such is not illegal. However, companies that hold this position should especially not abuse it to restrict competition, neither in the market in which they dominate, nor in other markets.
Today’s decision shows that Google has been a dominant online search advertising intermediary in the EEA since at least 2006. This conclusion is based primarily on the fact that, for most of this period, Google’s market share was very high. large, because it exceeded 85 percent. It is a market with high entry barriers. These include the amount of initial and ongoing investment in the development and improvement of search technology, online advertising platforms, and a sufficient pool of website owners and advertisers.
Google has used its dominant position to prevent other companies from competing in the internet search advertising intermediation market.
Based on a wealth of documentation, the Commission concluded that Google’s conduct harms competition and consumers and jeopardizes innovation. The company’s competitors could not develop or offer advertising intermediation services using internet search engines alternative to Google’s services. As a result, website owners working with the company had limited opportunities to sell space on their sites and were almost completely dependent on Google.
The company has not demonstrated that the clauses described were intended to perform any function that would justify these practices.
Consequences of the decision
The fine imposed by the Commission of EUR 1,494,459,000 (1.29% of Google’s turnover in 2018) takes into account the duration and gravity of the infringement. In line with the Commission’s 2006 Fining Guidelines.
Google stopped its illegal practice a few months after the Commission raised concerns about the case in July 2016 . Under the decision, Google is required, at least, to stop illegal practices, if it has not already done so, and not to use any measures that could have the same or similar effects.
Persons or companies adversely affected by Google’s anti-competitive behavior can bring a civil action for damages against Google before a court in a Member State. The new EU Directive on antitrust damages actions makes it easier for victims to obtain compensation.
Other Google Matters
In June 2017, the Commission imposed a financial penalty of EUR 2.42 billion on Google for abusing its dominant position in the search services market by illegally favoring its price comparison engine.
In July 2018, the Commission fined Google EUR 4.34 billion for illegal practices involving Android mobile devices to strengthen the dominant position of the Google search engine.
Today’s decision is addressed to Google LLC (formerly Google Inc.) and Alphabet Inc., Google’s parent company.
The Commission’s investigation into the practices subject to this decision was launched as part of a broader investigation into the Google search engine (case 39740 ).