Google Was Fined $1.7 Billion By The European Union

Alphabet’s Google was fined €1.49 billion ($1.7 billion) by the European Union for limiting how some websites could display ads sold by its rivals, the tech giant’s third antitrust penalty from the bloc since 2017.

Wednesday’s decision, which is smaller than the total of €6.76 billion ($7.67 billion) levied against Google in two previous decisions, is the last among formal charges the EU’s antitrust regulator has so far filed against the tech giant, drawing to a close at least one part of the nearly decadelong investigation into the company.

The fine deals with abusing the dominance of its search engine to block competitors in the niche market of selling text ads on the search results that appear on third-party websites.

It doesn’t come with a specific order to change Google’s business practices because the commission says Google ended the last type of anticompetitive behavior at issue in the case shortly after charges were filed nearly three years ago.

“Google has cemented its dominance in online search adverts and shielded itself from competitive pressure by imposing anticompetitive contractual restrictions on third-party websites,” said Margrethe Vestager, the EU’s antitrust chief. “This is illegal under EU antitrust rules,” she added.

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Even though Google has stopped this behavior in 2016, Ms. Vestager said that “at a minimum our decision requires Google to put a stop to those restrictions or any other restrictions with an equivalent effect and not to reinstate them.”

Google’s senior vice president of global affairs, Kent Walker, said, “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.”

In the past, the company has said that while it believes it behaved legally with the business at issue in Wednesday’s decision, it ended the allegedly anticompetitive behavior to resolve the issue expeditiously.

The latest ruling continues a run of heavy antitrust enforcement from the EU against Google, led by Ms. Vestager. But some antitrust experts and Google rivals say that Wednesday’s relatively narrow decision, along with Google’s continued dominance of areas the European Commission has investigated over the last decade, from mobile phone search to online shopping ads, suggests that current antitrust enforcement is too slow and toothless to deal with fast-moving tech giants—and needs updating.

“I think Google has outmaneuvered the commission in many ways,” said Alec Burnside, a competition lawyer at Dechert LLP who has represented complainants against Google in other cases. “There is great soul searching in the antitrust community about whether the rulebook is adequate for this.”

In the U.S., Elizabeth Warren, the Massachusetts Democrat running for president, called for the breakup of some big tech firms. Ms. Vestager, however, has been reluctant to endorse corporate splits and defended the EU’s more targeted responses.

“We try with the casework, with cease and desist orders, with follow-up, to have a competitive marketplace,” Ms. Vestager said during an appearance at a conference in Texas earlier this month. “I hope we won’t have to turn to this tool of very last resort.”

Google, to be sure, has had to make significant changes to how it operates in the EU to comply with the bloc’s rulings, and people close to the company say they now must consider these decisions when launching new products. They also say it is too early to judge the effect of the most significant EU finding in July 2018 that Google had abused the dominance of its Android operating system for mobile devices to entrench its search engine and Chrome web browser. Google only began implementing its remedy to comply with that ruling in October.

Google also faces other preliminary investigations into its conduct in the EU, including into its handling of local search results, Ms. Vestager said Wednesday, but it isn’t clear if or when those cases might lead to any formal charges.

Some antitrust experts note as well that enforcement action is designed to remove hindrances to competition, not to push for specific market outcomes. That is why some argue that antitrust investigations and remedies must be implemented more quickly to have an impact before it is too late. A recent report conducted on behalf of the U.K. government also recommended that when evaluating mergers, antitrust officials should assign more weight to the future, not just current, consumer welfare.

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The EU has also exerted pressure on Google to improve the remedies it has made in the two previous cases. On Tuesday, Google said it would make additional concessions it has made in an effort to put the complaints against its behavior to rest. Those concessions include plans in coming months to ask all existing Android users in Europe whether they would like to use rival search engines or web browsers on their phones.

“It is welcome that Google is stepping up its efforts with regard to the Google Android decision,” Ms. Vestager said Wednesday, noting the commission will monitor the rollout.

At issue in the latest case is a service called AdSense for Search, in which Google allows website owners to monetize search results that appear on their own websites.

The European Commission found that Google’s contracts with websites at times breached antitrust rules by unfairly restricting how third-party websites could integrate ads sold by Google competitors into the search results on those sites. Google began to change some of those practices—including eliminating an exclusivity clause—in 2009, and made other changes shortly before the EU filed its formal charges in 2016.

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Google pulled in $20.98 billion—or about 15% of its overall revenue—in 2018 by selling ads on other companies’ websites. But that percentage is down from 17% of revenue two years earlier. It isn’t clear how much came from the so-called AdSense ads in third-party search results, but the company has previously said AdSense for Search is a “legacy business” that is shrinking.

Ms. Vestager said Wednesday that the smaller fine reflected the fact that brokering search ads on other websites was a smaller business during the period of infringement than those in the EU’s prior decisions.

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