European Union vs. Google

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Since 2010, the European Union has launched three separate antitrust investigations into Google for violating the EU's competition laws due to its dominant position in the market. These cases have resulted in formal charges against Google related to Google Shopping, Google AdSense and the Android operating system. To date, Google has been found guilty of antitrust behavior in the cases related to Google Shopping and Android, and has been fined over €6 billion.

Google Shopping charges[edit]

On 10 November 2010, the European Commission opened a formal investigation into Google's search algorithm, following a number of complaints issued by smaller web companies that Google was downgrading their placement in results returned in Google's search results, and that Google was preferentially favoring their own products over competitors. The EC's investigation also considered if there were issues with Google's terms of use for Google AdSense that prevented those using AdSense to not use advertising from Google's competitors.[1]

On 15 April 2015, five years into the investigation, the EC issued its first Statement of Objections towards Google related towards its preferential treatment of its Google Shopping product (including Google Product Search) in search results.[2]

The specific complaints issued by the EC included:[3]

  • Google's search results predominate display Google Shopping results regardless of the merits of how well the Google Shopping results met the results of the search query.
  • Google does not apply its system of penalties, a predefined set of parameters to lower the placement of shopping results, to its own Google Shopping results as it did to other competitors.
  • Google had already attempted a shopping product, Froogle, but which it did not give any preferential treatment, and as a result, performed poorly. In contrast, Google Shopping was given favorable placement in Google's search result, allowing the service to achieve higher rates of growth.
  • Google's favoring of Google Shopping thus had a negative impact on consumers and innovation.

Decision and impact[edit]

On 7 June 2017, Google was found guilty and was charged €2.4 billion (about US$2.7 billion), the largest such antitrust fine issued by the EC.[4] Google has denied the European Union's accusations against them and made a statement claiming “its services had helped the region's digital economy grow”.[5] The fine represented just over 2.5% of Google's 2016 revenue.[6]

Those who are in competition with Google are pushing for their company to be individually monitored, for fear of losing more business to the dominant search engine. This would include investigating and overviewing Google's most prized search page algorithm, PageRank. The EU's Competition Commission decided to monitor their decision and Google's compliance with it, due to its obligation to report to the EUCC on a regular basis (every four months). Although the issue seems like it is at a close, the European Commission believes it will continue for some time.

In order to comply, Google is effectively separating its comparison shopping service into its own company after the fine. The Google Shopping service still will be a part of Google, but will run completely separately with its own revenues and profits. This move will allow Google to avoid further fines, according to Bloomberg, as it complies with the European Union's order of allowing even treatment to businesses, no matter if they compete with Google or not.[7]

However, even though Google is complying in part, the company is still appealing the decision. Google responded in its appeal papers to the EU Antitrust Fine by stating that the EU chair misstated facts and did not show enough evidence to prove that their site hurt rivals. Google wants the fine either overturned or reduced. The appeal was based on six arguments, with two of them being that the court did not prove that Google favored its own shopping service by placing paid ads on top the search results. Two of them stated that the courts misstated facts and evidence, and the other two argued that a fine was not warranted as a possible penalty.[8]

Google AdSense charges[edit]

While investigating the case related to Google Shopping, the EC found additional evidence related to potential antitrust issues related to Google AdSense, and issued a Statement of Complaints on 14 July 2016. These complaints were centered on how Google licensed AdSense to their direct partners:[9]

  • Google required direct partners to exclusively to Google's AdSense and could not engage with Google's competitors;
  • Google required that partners take a minimum number of Google ads and predominately place them above any other advertising, nor could place ads from other services above or alongside Google's ads;
  • Google required partners get confirmation from Google before making any changes for how they displayed Google's competitors' ads.

This case, as of December 2018, still remains under investigation by the EC.

Android and mobile apps charges[edit]

Prior complaints[edit]

The EC's actions to investigate Google's approach to the Android operating system was predicated on two complaints it had received. The first complain came from FairSearch. FairSearch was established in 2010 as a coalition of travel-related web companies including Expedia and TripAdvisor to try to fight against Google's proposed acquisition of ITA, which had developed airfare search software.[10] The group shifted towards becoming more of a Google watchdog group, looking at all instances of Google's activities which they considered were potentially anti-competition. Companies like Microsoft, Nokia, and Oracle joined the group to support this broader effort.[11] Prior to their attention to the Android system, FairSearch issued complaints to the EC over how Google's search engines would preferentially weight results from Google's own services or its partners over others, as part of antitrust investigations conducted by the EU since 2010.[12] In April 2013, the European branch of FairSearch filed a formal complaint to the EU, who were still investigating Google from previous complaints, citing that Google's practices with Android violated various EU's antitrust laws. The complaint identified that Google required any original equipment manufacturer (OEM) wanting to install Google's suite of Android apps, including access to the Google Play Store, had to license the entire suite and feature them predominately on the mobile device.[12]

A second anti-trust complaint against Google was filed by Aptoide in June 2014, an alternative marketplace for Android apps. Aptoide asserted that Google's approach to Google made it difficult for alternatives to the Google Play store to be installed, and that some of the components that were once part of Google's Android Open Source Project were moved into the Google Mobile Services suite, including Gmail, Google Maps, and the Play Store.[13]

EU's investigation[edit]

On 15 April 2015, the European Commission started an official investigation against Google following on the complaints filed by FairSearch and Apotoide and its own internal evaluation of these complaints over about a year. The EC stated that the company may have taken unlawful actions to maintain Google's dominant position in the mobile market by how it licensed its suite of Android applications. The new investigation was announced alongside the EC's findings in its antitrust investigation into Google's search engine practices, but otherwise treated as a separate action against Google.[14]

The Commission identified three points of concern in the first Statement of Objections:[15]

  1. Whether Google actions impede development of the market of mobile devices and access of competitors thereto by demanding or encouraging smart phone manufacturers to pre-install Google apps and services on their devices.
  2. Whether Google suppressed attempts of smart phone and tablet PC manufacturers willing to install Google apps on their devices to run on modified and potentially competitive versions of Android.
  3. Whether Google unlawfully impeded the market development by way of tacking the installation of certain Google apps with the use of other apps of this company or its software interface.

Google countered to this investigation that their practices with Android were no different with how Apple, Inc. or Microsoft bundles their own proprietary apps on their respective iOS and Windows Phone, and that OEMs were still able to distribute Android-based phones without the Google suite of apps.[16]

During the investigation, Google formed Alphabet Inc., a holding company for Google's various subsidiaries, with Google becoming one of Alphabet's subsidiaries.[17]

A year after, on 20 April 2016, the European Commission announced the issue of the second Statement of Objections, now addressing both Google and Alphabet within its charges.[18] The new set of complaints, amending those of the first Statement of Objections, asserted Google violated EU's antitrust laws by:[19]

  • by requiring mobile manufacturers to pre-install Google Search and Google Chrome browser and requiring them to set Google Search as default search service on their devices, as a condition to license certain Google proprietary apps;
  • by preventing manufacturers from selling smart mobile devices running on competing operating systems based on the Android open source code;
  • by giving financial incentives to manufacturers and mobile network operators on condition that they exclusively pre-install Google Search on their devices.

The potential fines for the case, if Google were to be found violating antitrust laws, has a maximum amount of 10% of the company's annual revenue, about US$7.4 billion at the time of the issuing of the Second Statement of Objection.[20]

Decision and impact[edit]

On 19 July 2018, EU has fined Google €4.3 billion (about US$5 billion). Google responded it would appeal, according to company spokesperson Al Verney "Android has created more choice for everyone, not less". To date, this fine is the biggest ever imposed by European Union on a company for anti-competitive behaviour.[21] European Union Competition Commissioner Margrethe Vestager, who was part of the decision against Google, stated that only after the EU found against Google in the search anti-trust case in 2017 did Google attempt to settle on the issues of the Android anti-trust issues, which was far too late after the EU filed the initial charges against Google.[22] Google has announced that it will give European users of Android phones an option of which browser and search engine they want on their phone at the time of purchase to further comply with the EU's decision.[23]

See also[edit]

References[edit]

  1. ^ Kanter, James; Pfanner, Eric (30 November 2010). "Europe Opens Antitrust Inquiry Into Google". The New York Times. Retrieved 18 October 2018.
  2. ^ "EU accuses Google Shopping of search 'abuse'". BBC. 15 April 2015. Retrieved 18 October 2018.
  3. ^ [1]
  4. ^ Olsen, Stefanie (8 October 2007). "Google buys Android". CNET. Retrieved 10 November 2017.
  5. ^ Scott, Mark (27 June 2017). "Google Fined Record $2.7 Billion in E.U. Antitrust Ruling". The New York Times. ISSN 0362-4331. Retrieved 10 November 2017.
  6. ^ Kottasová, Ivana. "EU slaps Google with record $2.7 billion fine".
  7. ^ Guynn, Jessica (26 September 2017). "Google rolls out shopping ad changes to appease European Union antitrust regulators". USA TODAY. Retrieved 10 November 2017.
  8. ^ Drozdiak, Natalia (30 October 2017). "Alphabet's Google Responds to EU Antitrust Fine". Wall Street Journal. ISSN 0099-9660. Retrieved 10 November 2017.
  9. ^ [2]
  10. ^ Wasserman, Elizabeth (24 February 2011). "DOJ threatens to nix Google merger". Politico. Retrieved 30 December 2014.
  11. ^ Savov, Vlad (12 April 2013). "What is FairSearch and why does it hate Google so much?". The Verge. Retrieved 18 October 2018.
  12. ^ a b Blagdon, Jeff (8 April 2013). "Microsoft and others file EU antitrust complaint over Android app bundling". The Verge. Retrieved 18 October 2018.
  13. ^ Westaway, Luke (17 June 2014). "Google is abusing its Play power, says third-party Android app store CEO". CNet. Retrieved 18 October 2018.
  14. ^ Kanter, James; Scott, Mark (16 April 2015). "Europe Challenges Google, Seeing Violations of Its Antitrust Law". The New York Times. Retrieved 18 October 2018.
  15. ^ Antitrust: Commission opens formal investigation against Google in relation to Android mobile operating system, europa.eu (15 April 2015).
  16. ^ Lumb, David (16 April 2015). "Read Google's Defensive Response To European Antitrust Charges". Fast Company. Retrieved 18 October 2018.
  17. ^ Chen, Angela (10 August 2015). "Google Creates Parent Company Called Alphabet in Restructuring". Wall Street Journal. Retrieved 10 August 2015.
  18. ^ Scott, Mark (20 April 2016). "E.U. Charges Dispute Google's Claims That Android Is Open to All". The New York Times. Retrieved 18 October 2018.
  19. ^ Antitrust: Commission sends Statement of Objections to Google on Android operating system and applications, europa.eu (20 April 2016).
  20. ^ Rankin, Jennifer (20 April 2016). "AEU accuses Google of using Android to skew market against rivals". The Guardian. Retrieved 20 April 2016.
  21. ^ "Google fined €4.3 billion by EU regulator". Deutsche Welle. 18 July 2018. Retrieved 28 July 2018.
  22. ^ White, Aoife; Bodoni, Stephanie (22 July 2018). "The Story Behind Google's Secret Offer to Settle EU's Android Probe". Bloomberg LP. Retrieved 22 July 2018.
  23. ^ Byford, Sam (March 20, 2019). "Google will give Android users a choice of browser and search engine in Europe". The Verge. Retrieved March 20, 2019.