European Commission fines Google a record €2.42 billion for abuse of dominance in search, and it's just the start

The European Commission today announced that it has fined Google €2.42 billion(approx $2.7 billion USD) for breaching EU antitrust rules. Google abused dominance as search engine by giving an illegal advantage to its own comparison shopping service. Back in 2011, Microsoft filed a formal complaint with the European Commission as part of the Commission’s investigation regarding this antitrust case against Google.

When a user enters a query into the Google, results from Google’s comparison shopping service are displayed at or near the top of the search results. Google included a number of criteria in their ranking algorithms so that rival comparison shopping services are demoted in the search rankings. To make the matter even worse, Google’s own comparison shopping service is not subject to Google’s generic search algorithms, including such demotions.

After Google started this abusive practice, Google’s comparison shopping service has increased its traffic 45-fold in the United Kingdom, 35-fold in Germany, 19-fold in France, 29-fold in the Netherlands, 17-fold in Spain and 14-fold in Italy.

Commissioner Margrethe Vestager, in charge of competition policy, said: “Google has come up with many innovative products and services that have made a difference to our lives. That’s a good thing. But Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals. Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.

What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.”

Google must now change the way its shopping search results work within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, Google’s parent company.

It is important to note that EC has already come to the preliminary conclusion that Google has abused a dominant position in two other cases, which are still being investigated. One of them is related to the Android OS in which EC is concerned that Google has stifled choice and innovation in a range of mobile apps and services by pursuing an overall strategy on mobile devices to protect and expand its dominant position in general internet search.

If found guilty the EU has the power to fine Google up to 10 percent of its annual revenue (around $9 billion) for each violation.

With Google’s Android having more than 75% market share in Europe, an appropriate remedy would be unbundling the Google Play store from other Google services, which would allow  vendors to release competitive devices without furthering Google’s Search monopoly and may open the door to Microsoft releasing an Android phone that is not crippled by lack of apps.

Google is likely to appeal, which may delay any real response to the fine for some years, but the magnitude of the judgement may cause the company to be more proactive about opening their services and maintaining a level playing field, which would be good news for all concerned.