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.
Google faces fines of up to 10 percent of annual revenue
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.
It's this latter aspect that has drawn the Commission's ire. The statement of objections published today claims that Google's AdSense contracts imposed conditions on third-parties that broke antitrust laws. According to the Commission, these conditions include the following:
Exclusivity: requiring third parties not to source search ads from Google's competitors.
Premium placement of a minimum number of Google search ads: requiring third parties to take a minimum number of search ads from Google and reserve the most prominent space on their search results pages to Google search ads. In addition, competing search ads cannot be placed above or next to Google search ads.
Right to authorize competing ads: requiring third parties to obtain Google's approval before making any change to the display of competing search ads.
Speaking this morning, Vestager said such contracts "hindered competition and stifled choice and innovation to the detriment of consumers." Google and its parent company Alphabet now have 10 weeks to reply to these objections. "Magnificent innovation doesn't give you the right to deny others a fair chance to compete, innovate, and make it in these markets," said Vestager. "If the evidence shows Google has broken competition rules, we have a duty to act." It's worth noting that some of these complaints are already out of date. For example, Google changed its "exclusivity" clauses back in 2009.
The EU is unlikely to impose changes to Google's business without negotiation
What form any action the Commission will take is not clear. The EU has lodged a number of antitrust complaints against Google in recent years, but has yet to levy any fines or ask the company to change its business practices. When asked whether the EU would force any chances to Google's business model (these would be "intermediate measures") Vestager said: "The tricky thing is what would they be." She continued: "Basically they would be similar to eventual remedies if we get there by the end of the case." In other words, the Commission wants to work with Google on changes negotiated in the long run, rather than simply impose them in the short term.
As well as targeting the company's ad business, the Commission also sent Google "a broad range of additional evidence and data" regarding the EU shopping antitrust complaint. This was originally outlined in April last year, and accuses Google of prioritizing its own search results for products at the expense of delivering more relevant information to consumers. The new evidence compares Google's shopping services with Amazon and eBay. Google has argued that these two firms offer strong competition, and stop it from abusing its dominant position in the search market.
"Google has abused its dominant position"
Today, Vetsager rejected this claim and said that these other companies were more like customers, than competition, for Google. "Google has abused its dominant position by systematically favoring its comparison shopping service in its search result pages," said the Commission in a press statement.
Today's objections join a growing in-tray of antitrust complaints aimed at Google. The company has responded to charges against its shopping service made in April last year, and is currently waiting for EU investigators to reply. It's also preparing its rebuttal to antitrust charges made against Android in April this year, with the deadline for its reply recently extended from July 27th to September 7th. European regulators have also begun a probe into Google's mapping business, but have yet to issue a statement of objections in that case.
Google has yet to issue a formal reaction to the antitrust complaints, but said in a pair of tweets that it would "examine the Commission’s renewed cases and provide a detailed response in the coming weeks."
In reaction to EC: We believe our innovations and product improvements have increased choice for EU consumers and promote competition (1/2)— Google in Brussels (@GoogleBrussels) July 14, 2016
We’ll examine the Commission’s renewed cases and provide a detailed response in the coming weeks (2/2)— Google in Brussels (@GoogleBrussels) July 14, 2016