Google faces big fine in first EU case against search practices

Search giant is braced for a fine that could top €1bn with decision expected shortly

Google is braced for a fine of potentially more than €1bn as Brussels prepares to announce the first of its trio of antitrust decisions on the search giant’s practices, in what would represent the first sanction by a leading competition regulator on the way it operates.

EU officials are expected to announce in the coming weeks that the company abused its search market dominance to build its Google Shopping service, and the bill could top the record abuse penalty of €1bn ($1.45bn) handed out to chipmaker Intel in 2009, according to two people familiar with the case. The European Commission and Google both declined to comment.

Big European technology rivals and senior politicians in Paris and Berlin have long encouraged Margrethe Vestager, Europe’s competition commissioner, to take a hard line in the case. But a decision against the Silicon Valley company threatens to reignite transatlantic tensions that erupted last summer, with her record €13bn tax bill for Apple. They have been strained most recently by President Donald Trump’s withdrawal from the Paris climate accord.

Mrs Vestager is unlikely to be deterred by potential furore. She broke the records for fines last summer in two types of antitrust cases — with a €3bn cartel fine against five European truckmakers and the largest state-aid decision, on the Apple tax bill. Google’s fine is expected to break the record for a monopoly abuse case — it is capped at a maximum of 10 per cent of Alphabet’s total revenues of $90bn last year, and calculated as up to 30 per cent of Google’s shopping revenues times the number of years of the abuse.

Alphabet has the cash to pay the fine — it held over $90bn at the end of March — but more important are the potential implications for how Google can operate online and build its services beyond general search. The company will have a set time to propose a solution (Microsoft was given 90 days in a similar case) and, if it fails to agree a fix with the commission in that period, it could be fined up to 5 per cent of average daily turnover for each day of delay. In 2006, Microsoft was fined €280m for delays in finding an appropriate solution to European concerns with its servers and media player.

Brussels has rejected suggestions is it mounting a campaign against US tech companies. However, since 2000, European regulators have investigated Microsoft, Intel, Apple, Google, Facebook and Amazon over a range of antitrust issues.

Europe’s seven-year Google investigation is a landmark case — focusing on whether the technology group has exploited its dominance in general search to give preference to its other services — such as shopping, travel and local search — to the detriment of its competitors. The case has been drawn out, highly political and sent the commission in different directions.

Mrs Vestager inherited the case from her predecessor, Joaquín Almunia, who considered three settlement offers between 2013 and 2014 — each was rejected. Soon after taking office, Mrs Vestager issued a list of charges — known as a statement of objections — that alleged Google “systematically favoured” its own comparison shopping product in its search results and, after hearing the company’s response, narrowed the charge list a little over a year later.

Kent Walker, Google general counsel, wrote in a blog post in November that the commission’s case “lacks evidence” and made claims that “are wrong as a matter of fact, law, and economics”. It will probably appeal against a negative decision in the European courts, delaying a final resolution for years.

The regulator’s decision that an abuse of monopoly power took place would open the way for shopping comparison competitors or customers to file damages claims against Google.

The commission case focused only on its shopping service, but a decision telling the search company not to favour its own products could have wider implications. Companies offering travel or local search would probably need to bring cases for their specific areas.

Google has said it is confident it can win an appeal in the European courts and has taken comfort in the commission’s decision in 2014 to focus its case on shopping, and not include other search services, such as travel or maps.

Complainants in the shopping case fear the decision could be delayed until the autumn and scupper hopes that Mrs Vestager could conclude her other two Google cases this year. The second investigation considers if Google unfairly banned competitors from websites that used its search bar and ads. The third case examines how Google pays and limits mobile phone providers who use its Android software and play app store. This case is important to Google’s future business model as 79 per cent of Europeans access the net on their smartphones, which primarily run on Android.

The Financial Times Limited 2017

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