The European Union’s antitrust regulator recently slapped Google with a record $2.7 billion in fines for favoring its own comparison-shopping service in search results over that of competitors. If this decision is upheld by E.U. courts, it could force Google to fundamentally change how it serves search results for users in both Europe and worldwide.
This decision is the culmination of a nearly seven-year-long investigation by Brussels into the tech giant’s alleged violations of Europe’s strict antitrust and anti-monopoly laws. Investigators successfully argued that by favoring its own shopping service and ads in its search results, Google exerts monopolistic power that creates unfair barriers to competition. Google has forcefully denied all claims of wrongdoing and has vowed to appeal the ruling, a process that’s expected to take several years as it plays out in the E.U. court system.
The steep penalty — more than double the previous largest fine in a European antitrust case — is the latest example of the E.U. taking a hardline stance when it comes to regulating the power and influence of major tech companies. The $2.7 billion fine comes as E.U. regulators are also weighing another potentially record-setting penalty over Google allegedly pressuring mobile manufacturers to pre-install the company’s Chrome and Search software on devices.
If upheld, the verdict would be a sharp blow to Google, which has a nearly 90 percent market share for online search among Europe’s 500 million citizens. At the heart of this case is Google’s greatest piece of intellectual property: The algorithms powering the most-used search engine in the world. This case could require Google to reveal the mechanics of its search technology to regulators (and therefore competitors), which the company fears would impact its dominance in search and tech.
The ongoing battle between Google and Europe
“In Europe, companies must compete on the merits regardless if they are European or not,” the E.U.’s top antitrust official Margarethe Vestager said in a statement. “What Google has done is illegal under E.U. antitrust rules.”
In recent years, the European Union’s antitrust regulator has launched similar investigations into alleged tax avoidance by Apple and Amazon. The E.U.’s perceived focus on reining in Silicon Valley firms has sparked accusations that the bloc is unfairly targeting U.S. companies while ignoring similar but smaller-scale wrongdoings from European tech companies. The European Union denies these allegations of selective enforcement and insists their aim is to lay a framework for the broader regulation of online commerce and privacy.
This battle for greater regulatory control is expected to take months or years to play out, as the European Commission (the enforcement wing of the E.U.) implements the verdict. According to the ruling, Google must now submit detailed proposals to European authorities on how it plans to change its supposedly monopolistic behavior. Critics argue that the E.U.’s persistent focus on U.S.-based tech companies has given the bloc an outsized say in how the internet is regulated, even though European firms account for a much smaller proportion of the global tech industry.
The consequences for tech and marketing
This new verdict is compounded by a previous ruling on the case that collapsed when Google failed to satisfy the demands of E.U. regulators. In light of this prior failed agreement, some analysts and rival tech firms are calling for more dramatic regulations to how Google serves search results, which could also affect how Google operates in the U.S. and elsewhere.
One proposal would require Google to place ads purchased through competitors’ services alongside its own digital advertising. For marketers, this could actually be a net positive: More services competing to sell ads in the same space will naturally lead to lower prices for consumers, rather than having a single firm acting as a ‘gatekeeper’ as Google does now. Google would be forced to keep PPC and AdWords prices competitive thanks to pressure from its rivals.
Another more far-reaching proposal is to establish an independent monitoring agency to more closely watch Google’s digital services and business activity in Europe. This oversight could encompass Google’s algorithms, which would open up the search engine’s inner workings to both regulators and rivals. A move like this could have dramatic reverberations throughout the industry — Google has long maintained a competitive edge thanks to the ‘secret sauce’ of algorithms that ensures its search engine delivers relevant and top-quality results.
Revealing this tech to the public would allow competitors like Yahoo and Bing to immediately engineer comparable features in their engines, which would inevitably undercut Google’s entrenched worldwide dominance. This transparency would also allow tech-savvy marketers to glean deeper insights about how to game Google’s algorithms to boost their own rankings.
If the E.U. and Google are entirely unable to reach a compromise, a last-resort solution could see Google establishing a Europe-specific version of its entire search engine and all associated services. This is one of the more unlikely outcomes due to the cost Google would incur in setting up European-only services, as well as the bureaucratic hassles that would crop up for companies that operate internationally.
Setting a precedence
In the near term, the E.U.’s decision will produce some minor benefits for online marketers who operate in Europe in the form of lower ad rates, increased competition, and greater transparency and clarity around Google’s under-the-hood operations.
At a minimum, Google is likely to revert its Shopping service to a prior version for European users. This change would push paid Shopping ads beneath organic results, making them less attractive to marketers and reducing Google’s overall ad revenue. (Currently, Google lists paid ads in and atop the Shopping carousel that appears at the top of commercial-intent searches.)
Alternatively, Google may elect to swap out one or two of the top paid slots and replace them with organic results. While this wouldn’t necessarily devalue individual ads themselves, marketers may simply decide it’s not worth it to pay for an ad spot when they could instead aim to boost their content’s page-rank so it occupies an organic slot.
On a broader level, many analysts see this pending ruling as the first step in establishing more consistent and unified regulations around the tech sector’s activity in Europe, much like the tough new data-protection rules that were recently enacted across the continent. If this antitrust case is taken as a precedent, it could mark the establishment of a much tougher regulatory climate across the Europe and jumpstart similar pending litigation in places like Brazil and South Korea.
Other tech firms and companies across the continent are eager to use this case as precedence in their own complaints against Google, and analysts expect that the next year will see a surge in legal complaints brought against the tech giant. Regardless of how long it takes to resolve this specific verdict, Google’s headaches in Europe are just beginning.