Google fined $1.5 bn by EU Commission for antitrust violations

The European Commission has just announced another antitrust fine for Google. The latest fine — $1.49 billion — relates to its search ad brokering business, which involves Google selling advertising space related to searches carried out on third party websites.

Speaking at a press conference, EU competition commissioner Margrethe Vestager said the search giant — “by far the biggest” search ad broker in the region, with its AdSense platform taking a share in Europe of “well above 70% since 2006” — had engaged in illegal practices in order to “cement its dominant market position”.

“Today’s decision is about how Google abused its dominance to stop websites using brokers other than the AdSense platform,” said Vestager, noting that the Commission looked at more than 200 tailored agreements with major sites which use AdSense — finding at least one clause that harmed competition.

“There was no reason for Google to include these restrictive clauses in its contracts except to keep rivals out of the market,” she added, saying the Commission’s conclusion is that between 2006 and 2016 Google’s behavior was illegal under EU antitrust rules.

“It prevented its rivals from having a chance to innovate and to compete in the market on their merits.”

The fine is the third major penalty the EU has levied against the tech giant in as many years, and closes its last open probe of the firm. Google was fined a record €4.3 billion last year for abusing its market dominance in mobile, and €2.4 billion the year before that for manipulating shopping search results. Google is currently appealing both cases.

Vestager said the Commission found three types of anti-competitive restriction in Google’s contracts — including exclusivity provisions, which were included in contracts from 2006 and prevented “the most important partners from sourcing search ads from Google’s rivals on any of their websites”; and premium ad placement provisions which Google added to contracts from 2009 “to replace over time the existing explicit exclusivity provisions”, thereby not directly preventing partners from sourcing ads from Google but requiring they take a minimum of search ads from Google — “and put them in the most visible and most profitable parts of the page”.

The commissioner described the upshot as: “The best website space was still reserved for Google.”

The third Google contract clause restriction the Commission found put controls on how partner websites could display rival search ads.

“Under this clause website owners would have to get the written approval from Google before changing the way they displayed search ads of Google’s rivals — right down to the size, the color and even the font of those ads,” she explained, going on to emphasize the “strong network effects” that work in search advertising, as in many digital markets — requiring that “to compete effectively you need to build scale”.

The policy under scrutiny dates back to 2006. Then, Google started selling customers its AdSense for Search product. This let companies like retailers and newspapers place a Google search box on their website. When visitors used the search box, Google showed them ads and split the commission with the website’s owners.

But, Google also made customers sign contracts forbidding them from including rival search engines on their sites alongside Google’s own. In 2009, Google allowed the inclusion of rival search engines as long as Google’s was more prominent. In 2016, around the time the EU announced its case, the company removed these terms altogether.

In a press statement, Google’s SVP of global affairs, Kent Walker, said: “We’ve always agreed that healthy, thriving markets are in everyone’s interest. We’ve already made a wide range of changes to our products to address the Commission’s concerns. Over the next few months, we’ll be making further updates to give more visibility to rivals in Europe.”

Google’s climb-down reflects, in part, AdSense’s diminishing importance for the firm. The business was a steady earner, but never a major component of the company’s revenue. According to Bloomberg, AdSense contributed less than 20 percent of the company’s income in 2015 and has declined ever since. “If you look at the annual reports, AdSense is less and less relevant,” Bloomberg Intelligence analyst Aitor Ortiz told the publication.

During the press conference this morning, commissioner Vestager also offered updates on Google’s responses to its other antitrust fines. For example, with regards to its manipulation of shopping search results, Vestager said that changes Google made after the EU’s case increased the visibility of rivals from 6 percent of search results to 40 percent.

Vestager also noted that in response to the antitrust case made against Android, Google has decided this week to give users a choice about the browser and search engine they use on their phones (rather than simply pre-installing Google’s own services).

“We’ve seen in the past that a choice screen can be an effective way to promote user choice,” said Vestager. “It is welcome that Google is stepping up its effort and we will watch closely to see how the choice-screen mechanism evolves.”

Although today’s fine brings an end to EU’s current trilogy of open probes, the organization is still looking at a number of other areas of Google’s business and could open new cases in future. Vestager mentioned the search market for jobs and local listings as areas of scrutiny.

“We keep getting complaints from people who are concerned about how these markets work, so we will keep doing our job,” said Vestager. “For me, the most important thing here is to enable user choice.”