On 27 June 2017, the European Commission announced its decision to fine Google EUR 2.42 billion for abusing its dominant position by illegally favouring its own comparison shopping service in its search results. The fine follows a seven-year investigation and unsuccessful commitment negotiations and is the largest ever imposed on a single company by the Commission. Failure to remedy the allegedly anti-competitive conduct within 90 days could lead to additional fines of up to 5% of Google's average daily worldwide turnover for each day of non-compliance.
Google launched its own comparison shopping service in 2004, initially called Froogle and ultimately renamed Google Shopping. The Commission alleges that, following years of relatively poor market performance, from 2008 onwards Google started to systematically favour its own service when a consumer used the Google search engine to look for products.
Internet search and comparison shopping service: multi-sided markets
The Commission contends that Google abused its dominant position in general internet search by stifling competition in a separate, associated market for comparison shopping services. Both products, search engines and comparison shopping services, form part of multi-sided markets. In these markets, while the product is free to users, the commercial operators' revenues depend to a large extent on online advertisements. In addition, an essential feature of multi-sided markets is the existence of network effects as the more attractive the product is to users, the more valuable the product becomes for advertisers and the more revenue the operator of the product generates, which can subsequently be used to attract more users.
Dominant position in the market for internet search
The starting point of the Commission's assessment is that, during the relevant period, Google was dominant in each relevant national market for general internet search throughout the EEA. Its share of internet searches exceeded 90% in most EEA countries. In addition, the Commission noted that there are high barriers to entry in part due to network effects described above.
Google's abusive practices
The Commission concluded that Google had (i) systematically given prominent placement to its own comparison shopping service (typically at or near the top of the search results), whilst (ii) demoting search results of competing comparison shopping services (through its search algorithms), making them less visible for consumers.
This had the effect that Google's comparison shopping service made significant gains in traffic to the detriment of its competitors, depriving consumers of their choice to buy and compare products online and competitors of their necessary access to customers.
A heated debate to come
Although the decision has not yet been published, it is clear that the Commission's reasoning will spark huge debate. Likely topics of controversy include the competitive pressure stemming from merchant platforms, such as Amazon and eBay, to which customers can directly navigate, whether competitors' loss of traffic is truly due to the prominent placement that is given to Google's comparison shopping service and the degree to which any anticompetitive effects outweigh the – in itself – procompetitive conduct on the market where Google is dominant.
This article was published in the Competition Law Newsletter of July 2017. Other articles in this newsletter:
- Recent European Commission merger decisions signal an increased focus on innovation
- ACM fines Dutch rail operator (NS) for an alleged abuse of dominance
- New Belgian Act on damage claims for competition law infringements