The European Commission fined Google 1.49 billion euros, or 1.69 billion dollars, for abusing its online search advertising dominance through restrictive contracts with third-party websites. The penalty marks the search giant's third major antitrust fine in Europe over a two-year period, following previous actions targeting shopping comparison and Android mobile practices.
AdSense Contracts and the Ten-Year Search Monopoly
Google built its dominance in online search advertising by imposing restrictive contractual terms on third-party websites utilizing its AdSense for Search boxes. These boxes earn the websites ad revenue, with Google acting as the broker. The European Commission stated Wednesday morning that the search giant acted as a broker for ad revenue while illegally forcing partner sites to give Google advertisements the most prominent placement on their results pages for a decade.
The penalty amounts to €1.49bn, or £1.28bn. The case accuses Google of abusing its market dominance by restricting third-party rivals from displaying search ads between 2006 and 2016, during which publishers were also required to obtain Google’s explicit approval every time they wanted to change how competing search ads were displayed.
“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 anti-trust rules,”
Margrethe Vestager, European Commission Competition Commissioner
European regulators argued that the contractual hurdles stifled market competition and prevented alternative advertising networks from gaining traction. Vestager stated that 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.
Alphabet Profits and Regulatory Escalation in Europe
The fresh penalty arrives against a backdrop of massive financial returns for Google parent company Alphabet. Pre-tax profits reached $30.7bn, or £23bn, in 2018, up from $12.66bn in 2017. Advertising remains the primary engine behind these earnings.
For more on this story, see Google Fined €1.49 Billion for Restrictive Search Contract Terms.
This latest enforcement action is part of an escalating series of antitrust penalties levied by Brussels against the technology conglomerate over consecutive years. The new penalty comes on top of a $2.7 billion fine—noted as €2.42bn in 2017—received for disadvantaging other comparison-shopping providers on its results pages, and last year's $5 billion fine—recorded as a record €4.34bn—for abusing its position in the Android ecosystem by using its popular mobile operating system to block rivals.
Product Changes and Industry Response
In response to regulatory pressure, Google changed its AdSense contracts with large third parties, giving them more leeway to display competing search ads. Kent Walker, Google's global affairs chief, emphasized in a statement that the company has always agreed that healthy, thriving markets are in everyone's interest.
“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.”
Kent Walker, Google global affairs chief
Google is appealing both of its previous fines, but it is also scrambling to appease the Commission over the issues that led to the previous penalties, as more fines may follow if Vestager's office does not think Google has fixed the problems at hand. Late Tuesday, Walker wrote in a blog post that the company would ask its European Android users—both old and new—which browser and search apps they would like to use. One of the core issues leading to last year's fine was Google's tactic of forcing Android phone manufacturers to preinstall its search engine and Chrome browser. Walker wrote that Google was doing more to ensure that Android phone owners know about the wide choice of browsers and search engines available to download to their phones, a move highly reminiscent of Microsoft's “browser ballot” a decade ago.
