The European Commission has fined Google a record-breaking €2.42bn (£2.14bn) after ruling that the company abused its power to promote its own shopping comparison service at the top of search results.
The ruling is the culmination of a seven year investigation into Google Shopping, which was spurred by complaints from Microsoft, among others. The Commission has the power to levy fines up to 10 per cent of a firm’s annual revenue, which was over $90bn (£70.8bn) for Google last year, but with $172bn in assets on hand, parent firm Alphabet is unlikely to see a significant dent in its bank account.
Google has signalled it may appeal the ruling, which states that the company must end its anti-competitive practices within 90 days or face a further penalty up to five per cent of Alphabet’s average daily worldwide earnings. Based on the company’s most recent financials, that amounts to around $14m.
“Google has come up with many innovative products and services that have made a difference to our lives,” said Commissioner Margrethe Vestager, who is in charge of competition policy. “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 that 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’s shopping comparison service launched in Europe in 2004, initially named ‘Froogle’, then re-branded to ‘Google Product Search’ in 2008 and finally ‘Google Shopping’ since 2013. The service allows consumers to compare products and prices online and find reals across a variety of retailers, including platforms like Amazon and eBay.
With a number of comparison shopping services already established in 2004, Google’s product initially struggled to compete, with an internal document from 2006 stating “Froogle simply doesn’t work”. However, given that comparison shopping services rely largely on traffic to be competitive, Google was able to use its search dominance to change this.
From 2008 onwards, Google fundamentally changed strategy in European markets when it came to comparison shopping, displaying its own service prominently when consumers searched for products, and demoting rivals, who appeared on average on page four of search results.
“When you shop online, you want to find the products you’re looking for quickly and easily,” said a Google spokesperson in response to the ruling. “And advertisers want to promote those same products. That’s why Google shows shopping ads, connecting our users with thousands of advertisers, large and small, in ways that are useful for both.
“We respectfully disagree with the conclusions announced today. We will review the Commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case.”