What’s the deal with… that gigantic Google fine?

On 27 June 2017 the European Commission announced “Google has abused its market dominance as a search engine by giving an illegal advantage to another Google product, its comparison shopping service” and fined Google an eye-watering €2.42bn.

If Google does not stop the abusive conduct within 90 days, it will also be liable for penalties of up to 5 per cent of the average daily worldwide turnover of Alphabet, Google’s parent company.

Article 102 of the Treaty on the Functioning of the European Union (TFEU) prohibits “abuse of a dominant position within the internal market or any substantial part of it.

Showing abuse of a dominant position requires a three-stage analysis:

  • (i) define the “relevant market”;
  • (ii) show the undertaking in question is “dominant” on the relevant market; that is, able to act effectively independently of competing undertakings; and
  • (iii) show it has exploited that dominant position to obtain an unfair advantage over its competitors or exploit consumers, for example, by creating artificial shortages or imposing monopoly pricing.

In this case the Commission defined the relevant markets as “general internet search markets.” It found Google to have a market share in excess of 90% in most EEA countries, and to have been dominant since at least 2008. Google’s high market share created a circle of profitability which acted to shut out potential competitors: “The more consumers use a search engine, the more attractive it becomes to advertisers. The profits generated can then be used to attract even more consumers. Similarly, the data a search engine gathers about consumers can in turn be used to improve results.”

Simply having a dominant position is not illegal. The Commission analysed about 5.2 Terabytes of actual search results from Google (around 1.7 billion search queries), sent questionnaires to several hundred companies, conducted surveys and experiments and examined documents from Google and others.

The Commission found “[Google] gave prominent placement in its search results only to its own comparison shopping service, while demoting rival services. It stifled competition on the merits in comparison shopping markets.” The effect was to boost its own traffic “45-fold in the United Kingdom, 35-fold in Germany, 19-fold in France, 29-fold in the Netherlands, 17-fold in Spain and 14-fold in Italy.

This had a predictable detriment on competitors: “The Commission found specific evidence of sudden drops of traffic to certain rival websites of 85 per cent in the United Kingdom, up to 92 per cent in Germany and 80 per cent in France.”

Those competitors will surely be considering the merits of a claim against Google on their own account.

Google has announced it is appealing the decision. It is likely to claim its dominance in general internet search does not give it power in the market for comparison shopping services. Conversely, the Commission has already taken the preliminary view that Google may also have abused its dominant position in two other areas, related to the Android smartphone and to its Adsense platform. This battle is by no means over.

Susan Hall is the head of technology and an intellectual property partner at Clarke Willmott