Brussels Vs. Google: The €1 bn EU fine and the US response

Press conference by Margrethe Vestager, Member of the EC, on the Review of the State aid General Block Exemption Regulation
Date: 17/05/2017 Location: Brussels – EC/Berlaymont
© European Union Source: EC – Audiovisual Service Photo: François Walschaerts

The European Commission is about to impose more than one billion euros fine to Google as a result of online shopping service search abuse according to the Financial Times. If the above is implemented, it would be the highest penalty in the history of anti-competitive behavior after Intel’s case in 2009.

The repercussions for Google, except for the financial impact, would be to cause serious changes to the multinational’s business plan. Therefore, the tech giant is most likely to take the case to the European courts in order to avoid implementing such alterations.

Alphabet, the parent company of Google, has been losing as its stock’s price fell since last Thursday when the latter was published. However, it seems that it bounces as the market is coming back to normal waiting for the official announcement by the EC in the coming weeks.

The main point though would be the response of the U.S. to the current developments regarding Brussels’ antitrust enforcement to the American company. Will U.S. publicly criticize the EU for charging Google with abuses of market dominance?

EC shows its teeth to the tech giant

The Commission is most likely to impose one billion euros fine to Google by the end of August showing that the EU eventually “punishes” market dominance in online shopping search even after seven years of investigation. Google’s antitrust case has been under investigation for a long time now with no agreement reached for none of the three charges. Thus, the financial penalty that is about to be enacted for one of them moves forward the investigations.

However, the U.S. firm is about to appeal against it in European courts which may delay the decision. Kent Walker, Google’s general counsel, had said last November in a blog post that the EC “lacks evidence and its claims are wrong as a matter of fact, law and economics”.

Will Google be affected?

Alphabet has the money to pay for the fine, which will probably be imposed, as it held more than 90 billion dollars of total revenues at the end of March. Furthermore, Google´s stock fell after it was known that that it will have to pay 1 billion euros as a fine for its online market abuse but manage to regain its losses as the stock market return to normal.

However, one of the major problems for the tech multinational is how it will manage to cope with its online operations which will have to change and adapt to the European standards. The worst case scenario though would be to be fined for the way it limits mobile phone providers who use its Android software. If the latter is materialized, then Google’s risk will be extremely high as 79% of EU people access internet through their smartphones which mostly operate Android software.

U.S. will not criticize EU’s decision on Google

The United States is most likely not going to respond negatively either publicly or behind the scenes regarding the EU stance on the antitrust case of Google. Makan Delrahim who is a President’s Trump nominee for the position of U.S. Assistant Attorney General for Antitrust stated, when asked about the proper role for antitrust in a high-tech economy, the following: “Antitrust has a vital role to play in the high-tech, ecommerce economy to protect consumers. Actions by firms that threaten competition in the high-tech, ecommerce economy, whether by merger or conduct, should be investigated and pursued if the investigation uncovers an antitrust law violation.”

Moreover, when Google’s case began in 2011, both the U.S. Department of Justice and EU were on the same side opposing to the tech firm. Google has been given several chances to defend itself and to come up to a mutual agreement with the European Commission. It even has the chance to go to the EU courts to reverse the situation even if the judges of the EU Court of Justice have never overruled the EU antitrust authority before.

All in all, Google’s antitrust case is progressing with the EC to start imposing high record fines to the tech company discouraging any company to follow Google’s path while U.S. stays uninvolved. However, Google will not fall without a fight as its business strategy highly contradicts EU’s antitrust policies. It seems that this case will keep on for several years if Google decides to take it to the EU Courts of Justice.

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