On 20 March 2019, the European Commission (Commission) announced that it had fined Google LLC and Alphabet Inc. (Google) €1.49 billion (AU$2.4 billion) for abusing its market dominance in the market for the brokering of online search adverts.
The decision follows a number of other large fines imposed by the Commission against Google, including a €2.42 billion fine in June 2017 for abuse of dominance in relation to the way that Google positioned its Google Shopping search results (previously blogged about here), and a €4.34 billion fine in July 2018 for abuse of dominance in relation to its imposition of certain restrictions on Android device manufacturers.
This case related to a service that Google offered to owners of websites called ‘AdSense for Search’. AdSense for Search allowed website owners to create a custom search engine for their website and to monetise the search result pages with targeted ads.
Google’s provision of these ‘search advertising intermediation services’ to commercially significant publisher websites (such as newspapers) took place via individually negotiated agreements. Google included in these agreements certain exclusivity clauses, which underwent several incarnations over time:
- since 2006, publishers have been prohibited from placing search adverts from competitors on their search results pages;
- from March 2009, these clauses were replaced with ‘Premium Placement’ clauses requiring publishers to reserve the most profitable space on search results pages for Google’s adverts (which prevented Google’s competitors from placing their adverts in the most prominent parts of the website’s search results pages); and
- also from March 2009, publishers were required to seek written approval from Google prior to changing the way that rival ads were displayed (meaning that Google could control how attractive competing search adverts could be).
The findings of the Commission
In its press release, the Commission noted that Google was “by far” the strongest player in this market in the EEA, with a market share above 70% throughout the relevant period (and exceeding 85% for most of that time). The Commission also noted that the market was subject to high barriers to entry due to the significant investments required to develop technology, and to develop a user base on both sides of the two-sided market (i.e. publishers and advertisers).
According to the Commission, Google’s practices prevented its rivals from competing on their merits – either because they were prevented from appearing on publisher websites, or because Google reserved for itself the most valuable advertising space on those websites. Accordingly, the conduct amounted to an abuse of Google’s dominant position in the online search advertising intermediation market. In the Commission’s view, Google’s conduct “harmed competition and consumers, and stifled innovation.”
In its recent Digital Platforms Enquiry Preliminary Report, the Australian Competition and Consumer Commission (ACCC) noted that it was undertaking a number of investigations into digital platforms, including:
- investigating whether access restrictions imposed by a digital platform on a third-party app developer may raise issues under section 46 of the CCA; and
- investigating a number of potential breaches of the ACL by digital platforms.
Although unconfirmed by the ACCC, the first of these investigations is believed to relate to Google’s conduct in removing the ‘Unlockd’ application from its Google Play Store and AdMob advertising marketplace. This conduct was also the subject of a civil case against Google by Unlockd alleging misuse of market power, though the proceedings were ultimately discontinued after the plaintiff went into administration.
As part of the Preliminary Report, the ACCC also proposed a number of preliminary recommendations to address what it regards as the dominance of certain digital platforms, including Google. The ACCC’s preliminary recommendations relevantly include:
- amendments to the merger laws;
- asking digital platforms to provide advance notice of acquisitions to enable sufficient time for a thorough review;
- tasking a regulatory authority with monitoring, investigating and reporting on whether vertically integrated digital platforms are engaging in discriminatory conduct (including anti-competitive conduct) by favouring their own interests over those of advertisers or competitors; and
- requiring suppliers of operating systems for mobile devices, computers and tablets to provide consumers with options for internet browsers, and requiring suppliers of internet browsers to provide consumers with options for search engines.
Interestingly, one day before the European Commission’s decision, Google announced that it would begin asking users of Android smartphones in Europe which browser and search apps they would like to use. Whether Google’s Australian entity follows suit (in light of the ACCC’s preliminary recommendation that this should be required) remains to be seen.