Google hit with record-high fine by the European Commission for abusing dominance

Date 4 jul. 2017
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Introduction

The company behind the US search engine Google Search, Google Inc. (hereinafter “Google”), has been fined a record DKK 18 billion by the European Commission for abusing market dominance as search engine in connection with Google Shopping.

 

 

The Case in brief

Google Inc. is a US software and IT company mostly known for the internet’s biggest search engine “Google”. In addition to the search engine, Google also provides a range of other services, including “Google Shopping”, a service which allows users to compare products and prices from different online vendors.

 

Google Shopping appears as ads with accompanying product images and prices at the top or at the right side of the search results when consumers search for a product in the search engine "Google". Google Shopping has had the same appearance and functionality since 2012. According to the European Commission, Google favored Google Shopping above other providers in that Google showed consumers searching on Google products from Google Shopping. Further, it was the opinion of the Commission that Google systematically placed competing price comparison services significantly further down in search results on Google Search.

 

Google has justified the placement of Google Shopping ads on Google by saying that it is highly beneficial to consumers because it allows them to find the product they are looking for quickly and easily. Google has also stated that consumers prefer an easy and quick price comparison rather than having to open a new price comparison website and make the search again. Google believes that this consumer demand is fulfilled by placing the ads from Google Shopping at or near the top of the search results on Google.

 

 

The European Commission's Assessment

It is against antitrust rules for companies holding a dominant position to abuse their dominance by conducting themselves in a manner aimed to exclude competitors from the market and thereby limit effective competition. An example of such conduct might be if a company uses its dominance in a certain market to gain advantages in another market, thereby distorting competition in the other market.

 

The European Commission was of the opinion that by calling particular attention to "Google Shopping", Google was denying consumers the benefits of free competition as well as the option to choose freely between comparison shopping services. Considering the gravity of the infringement, the European Commission levied a fine of DKK 18bn on Google. In accordance with the European Commission's guide to fines, the amount of the fine was calculated based on the value of the revenue which the price comparison service generated for Google in the 13 EEA countries concerned.

 

In addition to the fine, Google was instructed to cease this conduct within 90 days or pay sanctions of up to 5% of the average daily worldwide revenue in Alphabet, Google's parent company.

 

 

Our Comments

The fine levied on Google is the biggest fine the European Commission has given to a single company for breach of antitrust rules. Until now, fines of this volume have only been considered in linked cases with several parties involved.

 

Besides the fact that the sheer level of the fine is remarkable and invokes attention, the decision is perceived by many as a sign that the European Commission has become more bold and activist in its decisions.

 

The decision must be understood to mean that the European Commission intends to send a clear signal to companies providing services to others, while at the same time using those services to promote their own products, that any kind of favoring of their own products may be contrary to antitrust rules.

 

Furthermore, it is the first time that the European Commission has established that the fact that a dominant company has promoted itself and its own products on the internet to the disadvantage of competitors' products constitutes a breach of the antitrust rules.

 

If you have any questions or requests for additional information regarding the decision or the antitrust rules in general, you are welcome to contact Partner Pernille Nørkær (pno@mwblaw.dk) or Trainee Annika Brochorst (anb@mwblaw.dk).

 

 

The above does not constitute legal counselling and Moalem Weitemeyer Bendtsen does not warrant the accuracy of the information. With the above text, Moalem Weitemeyer Bendtsen has not assumed responsibility of any kind as a consequence of any reader’s use of the above as a basis for decisions or considerations