European Commission fines Google €2.42 bn for breaching antitrust rules

The European Commission has fined Google €2.42 billion for breaching EU antitrust rules and abusing its market dominance as a search engine by giving an illegal advantage to another Google product called Froogle, a comparison shopping service.

As per the verdict, the company must now end the conduct within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, Google’s parent company.

Commissioner Margrethe Vestager, in charge of competition policy said, “Google has come up with many innovative products and services that have made a difference to our lives. That’s a good thing. But Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals. Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.”

“What Google has done is illegal under EU antitrust rules. It 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,” added Vestager.

In 2004 Google entered the separate market of comparison shopping in Europe, with a product that was initially called Froogle, re-named Google Product Search in 2008 and since 2013 has been called Google Shopping.

Google Shopping allows consumers to compare products and prices online and find deals from online retailers of all types, including online shops of manufacturers, platforms (such as Amazon and eBay), and other re-sellers.

When Google entered comparison shopping markets with Froogle, there were already a number of established players. Contemporary evidence from Google shows that the company was aware that Froogle’s market performance was relatively poor (one internal document from 2006 stated Froogle simply doesn’t work).

Comparison shopping services rely to a large extent on traffic to be competitive. More traffic leads to more clicks and generates revenue. Furthermore, more traffic also attracts more retailers that want to list their products with a comparison shopping service. Given Google’s dominance in general internet search, its search engine is an important source of traffic for comparison shopping services.

Google has systematically given prominent placement to its own comparison shopping service: when a consumer enters a query into the Google search engine in relation to which Google’s comparison shopping service wants to show results, these are displayed at or near the top of the search results.

Evidence shows that even the most highly ranked rival service appears on average only on page four of Google’s search results, and others appear even further down. Google’s own comparison shopping service is not subject to Google’s generic search algorithms, including such demotions.

As a result, Google’s comparison shopping service is much more visible to consumers in Google’s search results, whilst rival comparison shopping services are much less visible.

This means that by giving prominent placement only to its own comparison shopping service and by demoting competitors, Google has given its own comparison shopping service a significant advantage compared to rivals.

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