Google vs the EU's antitrust complaints

Google has been hit with a record-breaking €2.42 billion ($2.7 billion) fine by the European Union for breaking antitrust law. The decision follows a seven-year investigation into the US company’s search algorithms, which ended with the judgement that Google had “abused its dominant position by systematically favoring” its own shopping comparison service. Today’s fine is the largest antitrust judgement handed out by the executive body of the EU, the European Commission, topping a €1 billion penalty given to Intel in 2009.

The primary target of the case is Google Shopping, a price-comparison feature built into the company’s search engine. The commission’s antitrust filing states that Google showed users results from Google Shopping “irrespective of [their] merits,” depriving rival price comparison sites of traffic. The EU argues that because Google is so overwhelmingly dominant in Europe, it should not be allowed to actively undermine competitors.

Android is the crown jewel in Google’s vast empire of software and web services, and its unprecedented success has inevitably attracted the scrutiny of European Union regulators. Today, Google steps up its public efforts to diminish European concerns over its mobile market dominance, and it’s doing it with the power of GIFs.

You don’t think we offer choice, says Google, but have you seen how little choice iPhone buyers are getting? All the preloaded apps on an iPhone come from Apple. 39 out of 47 preloaded apps on Windows 10 phones come from Microsoft. But less than a third of preloaded apps on Samsung’s Galaxy S7 come from Google. So what’s the big deal?

The European Union has a fresh target in its antitrust battle with Google: the company's lucrative ad business. This morning, EU competition commissioner Margrethe Vestager filed a statement of objections accusing the US company of abusing its control of the digital ad world. The complaint specifically targets AdSense, a service Google offers to other firms to help them place adverts on third-party websites. Supplementary objections to an existing antitrust complaint against Google's shopping services were also filed.

As with other ongoing antitrust complaints, Google faces fines of up to 10 percent of its annual revenue (a penalty of up to $7 billion) and could be forced to change its business model. This has the potential to be particularly damaging to Google, which last quarter generated $19 billion from its ad business — 90 percent of the company's total revenue. Google is by far the dominant player in this industry, and in the US last year claimed 64 percent ($30 billion) of all digital ad revenue, with Facebook taking the next largest slice ($8 billion). Google's advertising business includes selling space on its own web properties and offering services (including AdSense) to third parties.

Google may soon be hit with a record fine by the European Commission, as it seeks to punish Google and discourage other tech giants from taking advantage of their dominant market position. The Telegraph reports that the commission is currently planning to issue a 3 billion euro fine (about $3.39 billion USD) after finding that Google abused its search monopoly. Its highest fine to date is 1.1 billion euros, in 2009.

The fine could be issued within weeks, reports The Telegraph. It's possible the total will change, but the commission has significant leeway here: it's allowed to fine Google up to a tenth of its annual sales, allowing for a maximum fine of 3.3 billion euros. The fine would follow a seven-year investigation into Google's search practices.

On April 20th, 2016, the European Commission announced that its year-long investigation of Android had led it to believe that Google might be violating European Union antitrust laws. The Commission issued a statement of objections to Google and Alphabet (Google’s parent company), launching a formal antitrust case against them, along with a brief public statement that represents the best window into what is going on.

The EU believes that Google holds a dominant position in three related markets, and that it is using that position to distort competition. The EU claims that Google limits access to key aspects of the Android ecosystem by insisting that phone makers install Google search and Chrome apps. The EU also said that Google blocks phone makers from producing phones that run alternative versions of Android (a so-called anti-fragmentation agreement barring firms from using Android forks). Finally, the EU also believes that Google has illegally paid device makers and mobile phone companies to preinstall Google search exclusively.

The European Commission (EC) has this week formalized its antitrust investigation into Google's Android operating system in a set of objections sent to the Mountain View company. At issue is Google's dominance of the European smartphone market and the ways that the company is exploiting that position to promote its services and apps.

"Our preliminary view is that Google has abused its dominant position," said the European commissioner for competition, Margrethe Vestager, in a press conference. Vestager said that Google's licensing practices mean that "tablet and smartphone manufacturers [are] not free to choose which search engines and which browsers to install on their devices. This hampers competing browser and search providers."

Earlier this year, the European Union accused Google of monopolistic practices, alleging that, among other things, it unfairly prioritized its comparison shopping service when users searched for things to buy. Google has since commented on these charges — which could theoretically result in a fine of $6.6 billion — but has now issued a formal 130-page response, suggesting that the company is settling in for a long fight.

Following the European Union's formal accusation of antitrust practices by Google, the company has now officially responded. Not surprisingly, Google is arguing that the "allegations are incorrect," and that its search practices haven't harmed consumers.

The European Union has formally accused Google of illegal, monopolistic practices, stating that the American company abused its position as market leader by prioritizing its own services in search results and diverting traffic away from its competitors. The company could be fined up to 10 percent of its yearly earnings or as much as $6 billion. The EU also announced today that it was launching a further investigation into the Android operating system which could result in additional fines.

"In the case of Google I am concerned that the company has given an unfair advantage to its own comparison shopping service, in breach of EU antitrust rules," said EU competition commissioner Margrethe Vestager. "Google now has the opportunity to convince the Commission to the contrary. However, if the investigation confirmed our concerns, Google would have to face the legal consequences and change the way it does business in Europe."

Google has been the target of repeated anti-trust scrutiny in Europe over the last decade. Today Financial Times is reporting that the European parliament is on the verge of taking even more drastic steps, preparing a plan that would call for the break up of the search giant, specifically the "unbundling [of] search engines from other commercial services."

The European Commissioner for Competition Joaquín Almunia has deemed Google's proposal to halt an antitrust investigation unacceptable. Speaking on Spanish radio, Almunia was clear that Google's offer does not solve the Commission's concerns that Google abuses its dominant position in search. "The latest proposals are not acceptable in the sense that they are not proposals that can eliminate our concerns regarding competition," said Almunia. "At this moment, there is little time left but the ball is still in Google's court ... within a short timeframe, the ball will be there and then it will be the moment to take decisions."

Google has been under antitrust investigation since 2010, and has attempted to halt the investigation by proposing remedies to the European Commission's concerns. The latest of these came this fall, when Google submitted a new set of remedies that were initially received favorably by the Commission, with Almunia even going so far as to say "with the significant improvements on the table I think we have the possibility to work again."

EU regulators are reportedly prepared to accept Google's proposed solution to a two-year antitrust investigation into its search and advertising practices. While the text of the offer hasn’t yet been made public, it will force Google to change how it labels certain vertical search results in the EU, such as those for airplane tickets or hotel prices, but won’t require any changes to its underlying search algorithm, says The New York Times, citing two anonymous sources briefed on the agreement. Unlike its settlement with the US FTC, the agreement will reportedly be legally binding for five years, but crucially it won’t state that Google abused its monopoly power, or require the company to pay any fines. The changes won't show up for at least another month while others in the industry consider the plan in a process called market testing, which top antitrust regulator Joaquín Almunia has said would be necessary before a final solution is reached.

The EU investigation hinged on four concerns, each of which has been touched on in the settlement. Firstly, competitors were concerned that Google was featuring search results from its own specialized services like Google+ Local more frequently than those from competitors like Yelp. Under the agreement, Google will have to prominently show three links from its competitors’ services for every one of its own, and it will need to clearly mark which of the results come from its own services. A second concern related to how Google displayed search results from competing services — under the agreement, search services will be able to have their results removed from Google’s vertical search results without hurting their overall page rank for non-specialized searches.

Google submitted a formal settlement offer to the European Union today, in a move to end the EU's two-year probe into allegedly anti-competitive behavior by the company. Google is answering allegations that it promotes its own services through search and has colluded to stifle competition in the advertising market. As one EU commissioner told Bloomberg, "To avoid abuse we need to guarantee that users of the search engine have a choice and that search results have the highest possible quality."