Google Fined £2.14 Billion - What's all the fuss about?

The European Commission (EC) have landed Google with a record £2.14bn fine after ruling that the US internet giant had abused its market power by favouring its own shopping results in search.

Margrethe Vestager, Commissioner at the EC, said that

“Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors”

In Europe, Google has close to 90% share of internet searches – so 9 out of 10 searches made in Europe are made on Google as opposed to the smaller engines like Bing, Yahoo or Aol. This means Google clearly has a monopoly on Search in the EU and under european Law, no company can use such a position to give other services an unfair advantage.

When you search on Google for products like ‘fridges’ or ‘watches’ you’ll see at the very top a box full of product images and prices – this is Google’s product called Google Shopping. Advertisers pay to get clicks from this part of the search engine results in a similar way to paying for clicks from the Text Ads. Before the Google Shopping results were shown so prominently, other price comparison sites (remember these?!) such as Kelkoo would feature more prominently. This shift in prominence is what Google is being penalised for. The EC has claimed that not only have Google promoted their own Shopping results but they have demoted other results.

Sounds silly right? If you build and own a world leading service that is so good that everyone in the world wants to use it, why can’t you do whatever you want with it? Well, the “anti-trust” rules are in place to promote innovation which if you think about it is quite important. If Google were too dominant, noone else would bother to compete/innovate and innovation could potentially grind to a halt. It’s also not that healthy to have a single company monopolise the Internet.

For anyone other than Google, yes. But don’t forget the Search Engine giant has £67bn in cash reserves. Plus they make a cool £175 million PER DAY (by the way, the operating margin on that is a healthy 26%).

The fine is also just 30% of the maximum fine the EC has the power to deliver. The commission has the power to fine Alphabet (Google’s parent company) up to 10% of its annual revenue which in its last financial year was £70.8bn.

Google now has 90 days to reverse the unfair advantage, but what that specifically means is unclear. Shopping revenues have been growing rapidly for Google and will now make up a significant stream for them so there’s no chance Google will remove these results altogether and they’ll be extremely reluctant to demote them in any way. We’d be very shocked if they didn’t appeal the decision.

Google released a statement saying that they “respectfully disagree” with the EC’s conclusions and that they

“…will review the Commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case,”

Rest assured, we won’t be worrying just yet about not being able to run Google Shopping campaigns for our clients!