EU’s Vestager hits Google with €2.42 billion fine

The case will stoke tension between Brussels and Washington, where EU critics detect thinly-veiled protectionism.

The European Commission issued Google a fine of €2.42 billion Tuesday for abusing a dominant position over internet search, concluding a landmark inquiry that dragged on for seven years and handing Silicon Valley its largest regulatory setback to date.

Margrethe Vestager, the European commissioner for competition, said the company systematically manipulated its results page to promote its own Google Shopping service and push smaller rivals down its search rankings. The Danish commissioner, who has championed a hard line against Google in her enforcement action and in her speeches, gave the American tech giant 90 days to make key changes to the way it does business in Europe — with a warning to get its wider house in order.

“We congratulate you for being successful. But the applause stops when you stop competing on the merits,” Vestager said at a news conference, adding that the decision “is a precedent which can be used as a framework to analyze the legality” of other Google services.

The Commission said the fine of €2,424,495,000 reflected the seriousness and the duration of the abuse. Its case focused on 13 European countries.

The inquiry, which Google and EU officials tried and failed to settle on three occasions in the face of political and business opposition, will set a precedent that regulators  across the globe will be sorely tempted to imitate. It confirms Europe’s position as the leading regulatory check on the sprawling tech firms — Google, Facebook, Amazon and Apple — that have come to dominate the internet economy.

“When you shop online, you want to find the products you’re looking for quickly and easily. 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,” said Kent Walker, Google senior vice president and general counsel.

Walker said Google “respectfully disagrees” with Vestager’s conclusions and will review the decision as it considers an appeal.

Appeal likely

The Commission continues to pursue two charges issued last year against Google’s Android operating system and its advertising business.

Symbolically, Vestager chose to announce her verdict on the day the heads of Europe’s 28 national competition authorities were in Brussels, presenting a united front for what is Europe’s most significant and most controversial antitrust case in at least a decade.

The Commission’s decision instructs Google to ensure its give “equal treatment” rival comparison shopping services equally to its own Google Shopping service — although how it does so is up to the search engine, which has 60 days to inform the Commission of its plans.

Vestager also warned Google that it must refrain from “any measure that has the same or an equivalent object or effect,” in what appears to be a veiled reference to concerns over Google’s other vertical search services, like local, flights or news.

Google must comply to the Commission’s satisfaction or risks daily fines capped at around €12.5 million a day.

In principle, Google has two months to appeal once it receives the decision — and in all likelihood will do so.

Investigators concluded that, starting in 2008, Google used its dominant position over internet searches — it computes some 90 percent of internet searches in Europe — to annex a connected shopping market. By promoting or favoring its own Google Shopping service, the search giant severely weakened smaller websites that allowed users to compare products’ prices and features.

“Since the beginning of each abuse, Google’s comparison shopping service has increased its traffic 45-fold in the United Kingdom, 35-fold in Germany, 19-fold in France, 29-fold in the Netherlands, 17-fold in Spain and 14-fold in Italy,” the Commission said in a statement.

The case establishes a new kind of legal abuse, with potentially big implications for Google’s wider business, and other powerful firms — from Amazon to large manufacturers.

The sanction breaks the previous record of €1.06 billion imposed on Intel.

Google has long argued that the Commission ought to fully account for the role played by Amazon over the last decade in transforming online shopping and putting many price comparison sites out of business. Its powerful growth is a sign of healthy competition, Google argues.

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Transatlantic divergence

The case is bound to stoke tensions between Brussels and Washington, where some politicians view the Commission’s antitrust enforcement as thinly-veiled protectionism. Eyes in the Commission will be trained on the twitter page of U.S. President Donald Trump as the U.S. wakes up to the news.

Perhaps more importantly, Vestager’s verdict lays bare the remarkable divergence between the U.S., which created modern anti-monopoly laws but is increasingly shy of using them, and Europe, which has adopted them with gusto. The U.S. Federal Trade Commission in 2013 closed its own probe of Google after accepting relatively minor concessions.

The European case’s origins date back to 2009, when product comparison website Foundem filed the first EU antitrust complaint against Google. The inquiry has since attracted more than 30 additional complainants ranging from Microsoft to Yelp to Deutsche Telekom and in sectors ranging from online travel search to news. Three settlements came and went amid visceral opposition from complainants — espoused most clearly by Mathias Döfner, the CEO of German media giant Axel Springer — and from political power brokers in Paris and Berlin.

Axel Springer is a co-owner of the European edition of POLITICO.

All the complainants except Microsoft, which struck a global peace deal with Google, will scrutinize the decision to see how it affects their particular gripe, and some are likely to file civil damages claims.