The European Commission has fined Google €1.49 billion for anticompetitive clauses formerly in its AdSense contracts, while the company announced changes to its Android operating system to comply with a previous antitrust decision.
EU competition commissioner Margrethe Vestager said today that the commission fined Google for abusing its dominance in the online advertising market from 2006 to 2016. The internet giant illegally required third-party websites to display advertisements generated by Google’s Adsense software in preference to ads from its rivals’ software, Vestager said.
Adsense is an online advertising software that allows website operators to embed advertisements alongside search results when a third-party uses the search function on its webpage. Although Google faces some competition from smaller advertising brokers, it generally controls 75% to 90% of the national search engine markets of EU member states.
The enforcer issued a statement of objections to Google in 2016 that alleged the company included three types of unlawful clauses in its Adsense contracts with third-party websites, which Google calls its “direct partners”: exclusivity requirements, premium placement guarantees and the right to authorise competing ads.
The exclusivity clause initially prohibited websites using Adsense from embedding a rival advertising software. Google amended it in 2009 to allow its direct partners to use other software, but the premium placement guarantee obligated them to display a minimum number of ads from Google and place those ads in the most visible and prominent part of the webpage.
It also required its direct partners to obtain its written approval before changing the way they displayed ads from Google’s rivals – “right down to the size, colour and font of the ads,” Vestager said today.
The EU’s antitrust watchdog said these clauses amounted to an abuse of dominance because Google’s rivals were not able to compete on the merits. This was either because Google prohibited them outright from appearing on publisher websites, or because Google reserved for itself “by far the most valuable commercial space” on those websites, it said.
Google enforced these clauses at different times between 2006 and 2016, when it removed the clauses after receiving the commission’s statement, Vestager said.
A turning tide?
After announcing the EU’s third – and only outstanding – decision in its series of official investigations of Google, Vestager detailed the changes that the company has made to address the enforcer’s prior decisions. The commission fined the company €2.4 billion in June 2017 for prioritising its own comparison shopping services above those of its rivals, and a record-breaking €4.3 billion last July for requiring makers of devices with the Android operating system and mobile network operators to pre-install its web browser and search engines.
Unlike the AdSense case, where Google already has ceased the conduct of concern, the Shopping and Android decisions required Google to come up with solutions to the competition problems its behaviour caused.
Last October, Google amended its Play Store application licensing system so device makers can license the Play Store app without also having to include Google’s search app or browser on their Android devices – but now charges a fee for access to the store.
Google announced further anticipated changes in a blog post yesterday. It will now prompt Android users to select which web browser and search engine applications they wish to use, even if its own apps already have been installed onto the phone.
Vestager said this change has the potential to give users a “real choice” about which search engine or browser they want on their Android device, as rivals can be chosen where Google search and the Chrome browser have been preinstalled on the phone.
Google also said it will give users of its Shopping service direct links to comparison shopping sites alongside specific product offers from merchants. It has already stopped putting search results for its own products ahead of its rivals, as the commission ordered it to change this practice within 90 days of its 2017 decision.
The proposed changes show Google is “stepping up its efforts”, Vestager said. Before the enforcer fined the tech giant in 2017, rival shopping services only received 6% of user clicks, she said. That has now risen to 40%.
Although Vestager declined to give a “magic number” that would definitely show the online shopping market is adequately competitive, she said that the market has “developed a lot” since the enforcer issued its decision – and will continue to develop if consumers “use their opportunities to make choices”.
She added that the commission has no plans to penalise Google for failing to comply with the remedies laid out in the shopping decision, despite chief executives of 14 comparison shopping services accusing it of noncompliance last November.
However, in response to a question asking if the enforcer has closed all its cases against Google, Vestager said the enforcer is still looking into the search market for jobs and the market for local search. The European Commission reportedly sent questionnaires to Google’s rivals in October, asking whether they think it unfairly demotes local search competitors.
“We keep getting complaints from people who are concerned as to how these markets work, so we will keep doing our job also in those markets. For me the most important thing here is to enable user choice,” she said.
Michael Weber, the chairman of public policy think-tank Initiative for a Competitive Online Marketplace – known as ICOMP – said the €1.49 billion fine today is “minuscule compared to the big picture” and will have little effect.
He asked the EU and other governments to prohibit Google from tying or bundling its web browsers and mobile operating systems. Regulators should also work to enable users to easily locate Google’s competitors on all desktop and mobile devices, separate the Google search business from its “myriad” of other services, and reevaluate each cleared Google/Alphabet merger, he said.
Damien Geradin at Euclid Law in Brussels praised the commission for condemning “yet another” anticompetitive behaviour by Google – but said that nothing in the enforcer’s decision will help restore competition in the online search market.
“Thus, while Google will have to pay another fine, its practices have paid off in helping it to corner the market,” he said.
Moreover, Geradin noted that the decision only addresses one of Google’s “problematic” practices in the online advertising sector. Several recent studies, such as the Cairncross and Furman reports in the UK, have called for further investigations of this sector – which is “critically important” for preserving the viability of publishers, he said.
Andreas von Bonin, a partner at Freshfields Bruckhaus Deringer in Brussels, said the fine is unlikely to inflict any “lasting damage” on Google, but that the decision comes at a “crucial moment” for antitrust more generally as several authorities are analysing online advertising.
Abuse of dominance cases have experienced a “renaissance” due to the spotlight on allegedly dominant technology companies, he said, and these investigations show how consumer protection is “baked into” competition enforcement.
“Given strong political pressure globally for more intervention in the platform and data space, there’s every chance we can expect to see more enforcement activity in the future,” von Bonin said.
Brussels-based Linklaters partner Jonas Koponen noted that the European Commission’s three Google decisions have levied a “staggering” and “unprecedented” €8.25 billion total in penalties on the tech company – which is still below the EU’s 10% turnover fining cap.
Vestager’s comments, indicating the commission may not be finished with Google, make clear that the digital economy is “undoubtedly” a continuing priority for the commission, Koponen said. Practitioners expect more enforcement regarding abuse of dominance in the tech sector, he added.
Counsel to Google
Cleary Gottlieb Steen & Hamilton
Partners Thomas Graf and Robbert Snelders in Brussels, and Maurits Dolmans in London
Slaughter and May
Partner Claire Jeffs in Brussels
Daniel Beard QC