Commission Crackdown on Google Domination

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Google recently sought to appeal a record €2.4bn fine ordered by the European Commission in June this year. The Commission stated that the internet giant had abused its market dominance as a search engine by giving an illegal advantage to its own shopping comparison website.

Google was given 90 days (deadline of 28 September) to comply with the ruling. After this date, the company faced penalty payments of up to 5% of the daily average worldwide turnover of its parent company, Alphabet. Google filed an appeal on 11 September 2017, challenging the fine. Interestingly, the last minute appeal did not include a request for an interim order to suspend the Commission’s decision to provide equal treatment to competitors.

The Commission placed the onus on Google to implement a compliant fix rather than providing the company with comprehensive guidance. Google submitted its proposal to comply with the Commission’s ruling at the end of August. This has not been made public, but was described as a step in the “right direction” by the regulator.

Background

Between 2008 and 2013, Google introduced its shopping comparison website in 13 EEA countries. From 2008 onward it consistently placed its own shopping comparison service at or near the top of its search engine results. Rival comparison sites appeared in Google’s search results on the basis of generic search algorithms, resulting in their shopping services being demoted and a decrease in traffic to their sites. On average, evidence showed that even the most highly ranked competitor appeared on Page 4 of Google’s search results.

In 2010, The Commission launched an antitrust investigation following allegations that Google had abused its dominant position as an online search engine, violating Article 102 TFEU. Its investigation stemmed from complaints by several companies including price comparison services Foundem and Ciao, as well as French legal search site eJustice. They argued that Google had provided its own service an unfair advantage.

In the ruling which followed, the Commission cited EU antitrust rules which place special responsibility on dominant companies to not abuse their powerful market position or restrict competition.

European Commissioner for competition, Margrethe Vestager stated: “[Google] denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.

Increased Scrutiny on Tech Firms

The Commission has advised that it will monitor Google’s compliance closely and has obligated the company to provide periodic reports of its actions. It’s probable that this increased scrutiny will impact other Google owned services, with the ongoing Commission investigations into Google’s Android operating system and AdSense policy likely to be a growing concern for the company.

The main implication of this decision is that the Commission has found Google to be a dominant company in the internet searching field — a finding which will now influence the additional EU antitrust investigations into its behaviour. In her official statement, Vestager noted that “today’s decision is a precedent, which can be used as a framework to analyse the legality of such conduct.

Google is not the first tech enterprise to find itself in hot water with the Commission. Earlier this year, Amazon agreed a set of legally binding commitments with the regulator, confirming that it would no longer enforce or introduce anti-competitive clauses in agreements with e-book publishers. The commitments, agreed under Article 9 of the EU’s Antitrust Regulation, allowed the Commission to conclude proceedings without reaching a decision on whether an infringement had taken place.

This was arguably a sensible decision on Amazon’s part, considering the parallels to the Microsoft case concluded in 2013, in which the Commission fined the company €561 million for failing to comply with its commitments to offer users a browser choice screen to enable users to choose their preferred web browser. Amazon will need to demonstrate clear compliance with the agreed commitments over a 5 year period in order to avoid a similar fate.

US based chipmaker Qualcomm also suffered a significant setback in July this year when the General Court denied its appeal to suspend a daily fine of €580,000. The fine was enforced by the Commission after the company failed to submit information requested in relation to ongoing antitrust investigations. The Commission issued formal Statements of Objections against Qualcomm in 2015, relating to predatory pricing and exclusivity payments.

What Next?

The General Court has the discretion to cancel, increase or reduce the fine imposed against Google.  Successfully appealing the fine would be a difficult task for the company, as the Court rarely rule against the Commission on Competition cases. In the event of an unsuccessful appeal at the General Court, Google may choose to appeal to the ECJ, but this would be limited to questions of law only.

The ECJ’s recent decision in the long running Intel case does however provide some scope for amendment, as it backed Intel’s appeal of a €1.06bn fine and referred the case back to the General Court to reconsider. Intel’s appeal centred upon the General Court’s omission to consider the ‘AEC’ test: an analysis that determines whether a dominant company’s competitors are as efficient in the same field. The General Court now needs to properly evaluate this test and consider whether it agrees with the Commission’s verdict that Intel forced an equally efficient competitor out of the market. This judgment has the potential to cause issues for the Commission and increase the likelihood of other companies, such as Google, successfully appealing against its decisions.

Google is also liable to face civil actions from individuals and businesses affected by its anti-competitive behaviour. Claims can be brought before the national courts of the EEA countries concerned.

With the appeal process likely to take years to conclude, it is yet to be seen how the decision will affect ongoing cases against Google and other Tech firms. It is clear however, that the Commission will take a firm stance on any finding of anticompetitive behaviour and impose significant financial penalties. 

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