GOOGLE has been fined €2.4 billion (£2.14bn) by the European Commission (EC) for abusing its dominant position as by far the world’s largest internet search engine.
It is the largest fine ever handed out by the EC which acts on behalf of the European Union, whose anti-trust regulations on fair competition were breached by Google. European Commissioner Margarethe Vestager said simply: “What Google has done is illegal under EU antitrust rules.”
Then came the whopping fine and an order for Google to stop its illegal practices within 90 days.
WHAT DID GOOGLE DO AND WHAT WAS FROOGLE?
IT was a rather sneaky use of Google’s powers that got them into what some observers have called an “old school” form of illegality.
Back in 2004, Google introduced Froogle into Europe, a service re-named Google Product Search in 2008 and which since 2013 has been called Google Shopping. Froogle and its successor services allow consumers to compare products and prices online and find deals from online retailers of all types, including online shops of manufacturers, platforms such as Amazon and eBay, and other re-sellers.
Perhaps because of the dreadful name Froogle, it was not a success at first, not by a long chalk. There were already comparison shopping markets on the worldwide web, and by 2006, Google had concluded that Froogle “simply doesn’t work” as stated in an internal document obtained by the commissioner.
All that changed in 2008 when Google, without any notice or informing anyone, started to give prominent placement to Froogle’s successor Google Product Search rather than show the results of Google searches fairly.
The EC stated: “By giving prominent placement only to its own comparison shopping service and by demoting competitors, Google has given its own comparison shopping service a significant advantage compared to rivals.”
In other words, Google cheated and has been caught doing so.
DID IT HARM OTHER SUCH SERVICES?
IT absolutely did. Google introduced this practice in all 13 European Economic Area countries where it has rolled out its comparison shopping service, starting in January 2008 in Germany and the UK. It extended the practice to France in October 2010, Italy, the Netherlands and Spain in May 2011, the Czech Republic in February 2013 and Austria, Belgium, Denmark, Norway, Poland and Sweden in November 2013.
Google’s comparison shopping service duly increased its traffic 45-fold in the UK, 35-fold in Germany, 19-fold in France, 29-fold in the Netherlands, 17-fold in Spain and 14-fold in Italy.
According to an official statement from the EC: “The Commission found specific evidence of sudden drops of traffic to certain rival websites of 85 per cent in the UK, up to 92 per cent in Germany and 80 per cent in France. These sudden drops could also not be explained by other factors. Some competitors have adapted and managed to recover some traffic but never in full.”
WHAT HAPPENS NOW?
THE EC has ordered Google to comply with the principle of giving equal treatment to rival comparison shopping services and its own service.
It has 90 days to do so. If Google does not comply, the company – part of the giant Alphabet Inc congolomerate based in California – then must pay a fine of around five per cent of Alphabet’s worldwide daily turnover, a figure thought to be around €10m, EVERY DAY.
Unsurprisingly, Google says it doesn’t agree with the EC decision: “We will review the Commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case.”
Alphabet’s share price fell sharply on the news breaking but had recovered slightly at the time of writing, probably because the firm has cash and liquid assets of more than $90bn. If the decision sticks it will really hurt when companies or individuals harmed by the Google malpractice start piling in their civil lawsuits. Under the new EU anti-trust Damages Directive, it is now much easier to take such cases.
DIDN’T THE AMERICAN AUTHORITIES TAKE ACTION AGAINST GOOGLE?
THE Federal Trade Commission has won against Google on other issues but the largest fine was $22.5 million. The company has also been on the receiving end of many lawsuits by individuals and companies.
On this particular issue, however, the American authorities backed off as far back as 2013 and as a result, the European Union regulators ended their cooperation with the Federal Trade Commission.
ISN’T THIS JUST THE EU TAKING ON THE AMERICANS?
YOU would expect Donald Trump to say so, except that Google was one of the 97 companies who signed a legal document opposing the President’s travel ban, so don’t expect any presidential tweets in their support.
Major American companies such as Rupert Murdoch’s News Corp and Oracle have also supported the EC decision in an open letter.
The EC is not finished with Google yet – it has already concluded that the search engine has abused its dominant position over mobile phone apps and services and also over AdSense, the Google service that allows targeted advertising. It will probably all end up in the courts and the chances are that Brexit will be more quickly resolved than these cases.
And if you want to know more... just google it.
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