Tuesday 25 October 2016

Google facing fines of up to €6bn as EU accuses giant of rigging online systems

Published 16/04/2015 | 02:30

Google had sought to avoid fines and sidestep any finding that it violated antitrust laws by trying for two years to reach a settlement with the EU.
Google had sought to avoid fines and sidestep any finding that it violated antitrust laws by trying for two years to reach a settlement with the EU.

The EU has thrown the legal book at Google, with competition commissioner Margrethe Vestager formally accusing the US giant of rigging its search engine and its Android smartphone system to disadvantage rival firms.

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"In the case of Google I am concerned that the company has given an unfair advantage to its own comparison shopping service, in breach of EU antitrust rules," she said.

"I have also launched a formal antitrust investigation of Google's conduct concerning mobile operating systems, apps and services. Smartphones, tablets and similar devices play an increasing role in many people's daily lives and I want to make sure the markets in this area can flourish without anticompetitive constraints imposed by any company."

The investigation could result in multi-billion euro fines and new limitations on Google's business activities in the EU market that makes up an estimated one-third of revenue.

"Google now has the opportunity to convince the Commission to the contrary," said Vestager. "However, if the investigation confirmed our concerns, Google would have to face the legal consequences and change the way it does business in Europe."

The charges are the culmination of four years of regulatory scrutiny of the world's biggest search and online ads firm. Under Vestager, the EU stepped up the probe in December, when regulators sought additional information from rivals involved in internet maps, travel and other services.

With Google commanding almost all of the search market in some European countries, critics including Microsoft and Expedia are fed up with the company, which they say highlights its own web services in query results at the expense of rivals.

While many legal hurdles would remain, Vestager has several levers she could use to penalise Google, including hefty fines and potential changes to how it presents its own services in search results.

Google, which employs almost 5,000 people in Dublin, had sought to avoid fines and sidestep any finding that it violated antitrust laws by trying for two years to reach a settlement with the EU. Negative feedback from rivals forced the EU to abandon such a pact. Competitors objected to Google's proposal that they pay for their services to be displayed next to Google's above search results.

Vestager took a fresh look at the case and pledged to meet with Google and its opponents before deciding the way forward. Guenther Oettinger, the EU's digital commissioner, expects "far-reaching" steps from her soon, he told 'Die Welt' on Sunday.

For Google, the European market contributes about 35pc of its revenue. Its market share in search exceeds 90pc in most European markets, compared with about 65pc in the US.

One instrument that the EU wields is the right to fine the company as much as 10pc of its annual revenue. It previously fined Intel €1.06bn and ordered that it abandon price rebates to computer manufacturers that used only its chips. Microsoft was fined more than €2.24bn in its decade-long antitrust battle with the EU.

Fining Google 10pc of its annual sales would cost it $6.6bn, based on last year's revenue. That would be among the largest levied against a company in this type of case. The EU has never demanded the maximum, however, and such a fine would be easily absorbed by the company's $64.4bn in cash, equivalents and short-term investments.

The EU also can demand that the company change how search results are generated or displayed. That would not only impinge on Google's autonomy in how it runs its core business but could also slash revenue. A search today for coffee bars in London on Google's Irish service, for example, will highlight results for the company's Google+ feature, which includes info on regional shops. Yelp and TripAdvisor say the Google+ results are unfairly promoted above better information from their services.

Google needs to change search results that lift the ranking of its own services, said Christoph Klenner, secretary general of the European Technology and Travel Services Association in Brussels. The EU may insist that it reduce the screen real estate reserved for paid ads to give more website providers a chance to appear among the top results without paying.

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