Google hit with €2.4B fine for breaching EU competition rules

Google has been fined a record €2.42 billion (AU$3.61 billion) for breaking competition rules. The European Commission accused the online media giant of abusing its market dominance as a search engine.

The fine follows a seven-year investigation by the EC after it received dozens of complaints from competitors claiming that Google abused its position as the world leader in search market. The website is said to be giving its own Google Shopping service an unfair advantage over other retailers.

“But Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals. Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demanding those of competitors,” Commissioner Margrethe Vestager said.

“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.”

Google entered separate market of comparison shopping in Europe in 2004 with “Froogle,” later renamed Google Product Search in 2008 and then Google Shopping in 2013. The product allows consumers to compare products and prices online, as well as find deals from online retailers and resellers.

It was learnt that Google was aware that Froogle’s market performance was relatively poor. To push its own product ahead of competition. Google began to implement a fundamental change in strategy in 2008. The commission found out that it has given prominent placement to Google Product Search in its search engine and has demoted rival comparison shopping services in its search results. This allows the Google product to be much more visible to consumers.

Google’s actions allowed its own comparison shopping service to make significant gains in traffic while its rivals suffer substantial losses of traffic on a lasting basis. The company has also stifled competition on merits in comparison shopping markets, thereby depriving European consumers of real choice and innovation.

The company has 90 days to stop its “illegal conduct” or face higher fines. The amount, €2.42 billion, is the highest ever imposed by the Commission.

Google expecting to pay fine

Alphabet, which owns Google, said that it would review the formal decision made by the Commission but it expected to “accrue the fine in the second quarter of 2017.” In its Form 8-K filing, which is a report of unscheduled changes at a company that could be of importance to its shareholders of the Securities and Exchange Commission in the US, Alphabet appears to have accepted to pay the fine.