Antitrust: Commission fines Google €1.49 billion for abusive practices in online advertising

Vestager 2019

Margrethe Vestager, Member of the EC in charge of Competition, will held a press conference on an antitrust case.The European Commission has fined Google €1.49 billion for breaching EU antitrust rules. Google has abused its market dominance by imposing a number of restrictive clauses in contracts with third-party websites which prevented Google’s rivals from placing their search adverts on these websites. © European Union, 2019.

This article is brought to you in association with the European Commission.


The European Commission has fined Google €1.49 billion for breaching EU antitrust rules. Google has abused its market dominance by imposing a number of restrictive clauses in contracts with third-party websites which prevented Google’s rivals from placing their search adverts on these websites.

Commissioner Margrethe Vestager, in charge of competition policy, said: “Today the Commission has fined Google €1.49 billion for illegal misuse of its dominant position in the market for the brokering of online search adverts. Google has cemented its dominance in online search adverts and shielded itself from competitive pressure by imposing anti-competitive contractual restrictions on third-party websites. This is illegal under EU antitrust rules. The misconduct lasted over 10 years and denied other companies the possibility to compete on the merits and to innovate – and consumers the benefits of competition.”

 

Google’s strategy for online search advertising intermediation

Websites such as newspaper websites, blogs or travel sites aggregators often have a search function embedded. When a user searches using this search function, the website delivers both search results and search adverts, which appear alongside the search result.

Through AdSense for Search, Google provides these search adverts to owners of “publisher” websites. Google is an intermediary, like an advertising broker, between advertisers and website owners that want to profit from the space around their search results pages. Therefore, AdSense for Search works as an online search advertising intermediation platform.

Google was by far the strongest player in online search advertising intermediation in the European Economic Area (EEA), with a market share above 70% from 2006 to 2016. In 2016 Google also held market shares generally above 90% in the national markets for general search and above 75% in most of the national markets for online search advertising, where it is present with its flagship product, the Google search engine, which provides search results to consumers.

It is not possible for competitors in online search advertising such as Microsoft and Yahoo to sell advertising space in Google’s own search engine results pages. Therefore, third-party websites represent an important entry point for these other suppliers of online search advertising intermediation services to grow their business and try to compete with Google.

Google’s provision of online search advertising intermediation services to the most commercially important publishers took place via agreements that were individually negotiated. The Commission has reviewed hundreds of such agreements in the course of its investigation and found that:

  • Starting in 2006, Google included exclusivity clauses in its contracts. This meant that publishers were prohibited from placing any search adverts from competitors on their search results pages. The decision concerns publishers whose agreements with Google required such exclusivity for all their websites.
  • As of March 2009, Google gradually began replacing the exclusivity clauses with so-called “Premium Placement” clauses. These required publishers to reserve the most profitable space on their search results pages for Google’s adverts and request a minimum number of Google adverts. As a result, Google’s competitorswere prevented from placing their search adverts in the most visible and clicked on parts of the websites’ search results pages.
  • As of March 2009, Google also included clauses requiring publishers to seek written approval from Google before making changes to the way in which any rival adverts were displayed. This meant that Google could control how attractive, and therefore clicked on, competing search adverts could be.

Therefore, Google first imposed an exclusive supply obligation, which prevented competitors from placing any search adverts on the commercially most significant websites. Then, Google introduced what it called its “relaxed exclusivity” strategy aimed at reserving for its own search adverts the most valuable positions and at controlling competing adverts’ performance.

Google’s practices covered over half the market by turnover throughout most of the period. Google’s rivals were not able to compete on the merits, either because there was an outright prohibition for them to appear on publisher websites or because Google reserved for itself by far the most valuable commercial space on those websites, while at the same time controlling how rival search adverts could appear.

image_EN

 

Breach of EU antitrust rules

Google’s practices amount to an abuse of Google’s dominant position in the online search advertising intermediation market by preventing competition on the merits.

Market dominance is, as such, not illegal under EU antitrust rules. However, dominant companies have a special responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in separate markets.

Today’s decision concludes that Google is dominant in the market for online search advertising intermediation in the EEA since at least 2006. This is based in particular on Google’s very high market shares, exceeding 85% for most of the period. The market is also characterised by high barriers to entry. These include very significant initial and ongoing investments required to develop and maintain general search technology, a search advertising platform, and a sufficiently large portfolio of both publishers and advertisers.

Google has abused this market dominance by preventing rivals from competing in the online search advertising intermediation market.

Based on a broad range of evidence, the Commission found that Google’s conduct harmed competition and consumers, and stifled innovation. Google’s rivals were unable to grow and offer alternative online search advertising intermediation services to those of Google. As a result, owners of websites had limited options for monetizing space on these websites and were forced to rely almost solely on Google.

Google did not demonstrate that the clauses created any efficiencies capable of justifying its practices.

 

Consequences of the Decision

The Commission’s fine of €1 494 459 000 (1.29% of Google’s turnover in 2018) takes account of the duration and gravity of the infringement. In accordance with the Commission’s 2006 Guidelines on fines (see press release and MEMO), the fine has been calculated on the basis of the value of Google’s revenue from online search advertising intermediation in the EEA.

Google ceased the illegal practices a few months after the Commission issued in July 2016a Statement of Objections concerning this case. The decision requires Google to, at a minimum, stop its illegal conduct, to the extent it has not already done so, and to refrain from any measure that has the same or equivalent object or effect.

Finally, Google is also liable to face civil actions for damages that can be brought before the courts of the Member States by any person or business affected by its anti-competitive behaviour. The new EU Antitrust Damages Directive makes it easier for victims of anti-competitive practices to obtain damages.

 

Other Google cases

In June 2017, the Commission fined Google €2.42 billion for abusing its dominance as a search engine by giving an illegal advantage to Google’s own comparison shopping service.

In July 2018, the Commission fined Google €4.34 billion for illegal practices regarding Android mobile devices to strengthen the dominance of Google’s search engine.

 

Background

Today’s decision is addressed to Google LLC (previously Google Inc.) and Alphabet Inc., Google’s parent company.

The Commission’s investigation into the conduct covered by the present decision began as part of the broader Google Search investigation (case 39740).

On 14 July 2016, the Commission sent a Statement of Objections to Google setting out its preliminary views that the company had abused its dominant position by artificially restricting the possibility of third party websites to display search advertisements from Google’s competitors.

Article 102 of the Treaty on the Functioning of the European Union (TFEU) and Article 54 of the EEA Agreement prohibit the abuse of a dominant position.

Fines imposed on companies found in breach of EU antitrust rules are paid into the general EU budget. This money is not earmarked for particular expenses, but Member States’ contributions to the EU budget for the following year are reduced accordingly. The fines therefore help to finance the EU and reduce the burden for taxpayers.

More information on today’s decision is available on the Commission’s competition website in the public case register under the case number 40411.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Impact of high-fats food regimen on immune activity, tumor growth.

European Youth Capital 2019 announced: Novi Sad, Serbia

Germany fears that Americans and Russians want to partition Europe again

Governments and non-state actors need to take urgent action to meet Paris Agreement goals

Parliament to ask for the suspension of EU-US deal on bank data

Trump ostracized by his party and world elites but still remains in course; how can he do it?

College read-out by HR/VP Josep Borrell on the New Transatlantic Agenda for Global Change

Don’t let the virus quarantine your mind –Ways to strengthen “Mental” immunity

Benefits of rural migration effect often overlooked, new UN report suggests

At Ministerial session, UN regional office in Beirut to focus on technology for sustainable development

Is it time we were all given the ‘right to disconnect’ from work while at home?

More people now plan to get a COVID-19 vaccine than in December

Decarbonizing shipping – why now is the time to act

Somalia: UN congratulates Puntland region’s newly-elected President

Why the minutes and the months matter most to young people during the COVID-19 crisis

Looking for European Youth at 2021 Youth Day “European Youth in China”: Short Video Contest Announcement

Supply chains have been upended. Here’s how to make them more resilient

Coronavirus Global Response: European Union organises a humanitarian air bridge to Côte d’Ivoire

Rule of law in Poland: MEPs point to “overwhelming evidence” of breaches

Talent is worldwide. Opportunity is not. How can we redistribute it?

DPRK reports ‘little progress’ since historic June 2018 summit with US

Four lessons from Africa on building effective business ecosystems

Writing a greener story in Asia and the Pacific amidst COVID-19 outbreak

Burned in the Amazonian forest: Your health may be in danger

A new paradigm for collaboration: mission-based ecosystems

Guinea-Bissau: Upcoming elections vital to prevent ‘relapse’ into instability, says UN envoy

8 amazing facts to help you understand China today

Refugee crisis update: EU lacks solidarity as migration figures drop

5 ways to boost sustainable trade in the world’s poorest countries

Here’s how the WTO can help address plastic pollution

We are ‘burning up our future’, UN’s Bachelet tells Human Rights Council

How digital remittances can help drive sustainable development

The rise and rise of media on your mobile phone – in one chart

From drones to health data, how Japan can power ahead

This company lets you set your own salary

UN chief appeals to G7 leaders for ‘strong commitment’ and political will to tackle climate emergency

A Sting Exclusive: “Digital iron curtain makes no sense in 5G era”, by China’s Ambassador to EU Mr. Zhang Ming

Peatlands are under threat. Here’s why we must act now to save them

Climate activist Greta Thunberg urges MEPs to put words into action

State aid: Commission approves €20 million voucher scheme to support access to broadband services by students in Greece

More state aid to big firms, no special provisions for the SMEs

No better year for the EU’s weak chain links

Better understanding the psychological impact caused by the COVID-19 Pandemic

A European student just sets the question of the day: What kind of education policies are missing in Europe?

‘Once lost, hearing doesn’t come back,’ World Health Organization warns on World Hearing Day

We had the hottest June ever this year – this is what happened around the world

Despite violence, ‘tremendous hunger’ for peace in Afghanistan: top UN official

The more we learn about Antarctica, the greater the urgency to act on climate change

FROM THE FIELD: Crisis in Kassala FROM THE FIELD: Crisis in Kassala

The current devaluation of primary health care professionals

Q and A on the draft digital copyright directive

Green Deal: How MEPs wish to channel EU investment to sustainable activities

‘Words must never be met with violence’ urges UN, following Taliban threat to journalists

Promoting rule of law and fundamental rights in the EU

Chart of the day: When do young Europeans leave home?

‘Urgent need’ to stop Mali violence with ‘effective’ military response: UN expert

WEF Davos 2016 LIVE: “No other problem has jeopardised the EU as much as the refugee question” Joachim Gauck, President of the Federal Republic of Germany, cries out from Davos

Could switching between summer and winter time end in 2021?

4 key steps towards a circular economy

14 ways to protect your mental health in the pandemic, according to Public Health England

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s