The European Commission has fined Google €1.49 billion, or 1.29% of Google’s turnover in 2018, for breaching EU antitrust rules. The commission said that Google abused its market dominance by placing restrictions on third-party websites which prevented Google’s rivals from placing ads on the websites. The restrictions relate to Google’s advertising contracts with publishers which favoured Google’s own ads over publishers (and thus competitors) ads. The company’s practices amount to an abuse of Google’s dominant position in the search ads intermediation market, the commission stated, since it prevented competition on merits: “Market dominance is, as such, not illegal under EU antitrust rules. dominant companies have a special responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in separate markets…”
European Commissioner for competition Margrethe Vestager said Google had “cemented its dominance in online search adverts and shielded itself from competitive pressure” and violated the EU’s antitrust laws. “The misconduct lasted over 10 years and denied other companies the possibility to compete on the merits and to innovate – and consumers the benefits of competition.”
Exclusivity clauses, controlling the appearance of competitors’ ads: How Google violated anti-trust laws
It is not possible for competitors in online search advertising such as Microsoft and Yahoo to sell advertising space in Google’s own search engine results pages. Therefore, third-party websites represent an important entry point for these other suppliers of online search advertising intermediation services to grow their business and try to compete with Google.
The commission noted that Google’s market share in the online search ads brokerage business was above 70% in the European Economic Area (EEA) for a decade starting 2006. Starting 2016, Google’s market share increased to over 90% in the national markets for general search, and above 75% in most of the national markets for online search. Google provided its ad brokering services to the “most commercially important publishers” via individually negotiated agreements. The commission said it reviewed hundreds of such agreements during its investigation and found that:
- Exclusivity clauses: Google’s exclusivity clauses in contracts with publishers prohibited them from placing search ads from competitors on their search results pages. “The decision concerns publishers whose agreements with Google required such exclusivity for all their websites.”
- Premium placements: Starting March 2009, Google began replacing exclusivity clauses with “Premium Placement” which meant that publishers had to reserve the most profitable space on their search results pages for Google’s ads and also request a minimum number of Google adverts. This, the commission said, “prevented competitors from placing their search ads in the most visible and clicked on parts of the websites’ search results pages”.
- Controlling competitors’ ads: The same period, Google introduced clauses requiring publishers to seek written approval from Google tweaking the way any rival adverts were displayed. This implied that Google could control “how attractive, and therefore clicked on, competing search adverts could be”.
The commission concluded that Google first imposed an “exclusive supply obligation” preventing competitors from placing any search ads on the profitable websites, and further introduced a “relaxed exclusivity” strategy and reserved the most valuable positions for its own search ads. Google’s rivals were faced with either an outright prohibition from appearing on publisher websites, or realized the Google had bagged the most profitable websites for itself. Google’s dominance in the EEA is evident with the company’s market share going up to 85% for most of 2006-2016. Moreover, the market saw high barriers to entry, with “very significant initial and ongoing investments required” develop and maintain a general search technology and a search advertising platform at scale.€
Google halted its contracts a few months after the commission issued a statement of objections requiring Google to, at a minimum, stop its illegal conduct. The commission said Google is also liable for damages brought in the courts of the Member States by any person or business affected by its anti-competitive behaviour. The new EU Antitrust Damages Directive makes it easier for victims of anti-competitive practices to obtain damages.
Previous penalties by the Commission on Google
- In June 2017, the Commission fined Google €2.42 billion for abusing its dominance as a search engine by giving an illegal advantage to Google’s own comparison shopping service.
- In July 2018, the Commission fined Google €4.34 billion for illegal practices regarding Android mobile devices to strengthen the dominance of Google’s search engine.