Google Fined an Enormous €2.42bn For Abusing Its Power

It’s no secret that Google is a highly popular search engine with billions of visitors every single day. With such a large influence on our decisions, shopping habits and lives, what happens when Google abuses their powers and trust? You might think Google are too nice to do that, but think again.

On 27th June 2017, Google was fined €2.42bn by the European Commission after it had ruled the search engine had abused its power and trust. The fine was the largest ever by the regulating authority and warned if Google didn’t stop its current practice they would be fined even more. So what exactly did Google do to warrant such a hefty fine and what else is Google doing secretly under the radar? Here’s what you need to know.

What Google Did Wrong

google shopping service

If you’ve used Google regularly over the past few years, then you’ve probably noticed Google have increasingly started to promote its own services. Whether it’s their own YouTube videos, Google maps or adverts, Google wants you to use as many of its services as possible. Since they basically control what gets displayed on their search engine, there is often a fine line between self-promotion and taking advantage of their power.

In 2004 Google entered the market comparison industry with “Froogle” the now renamed price comparison service. Since 2013 the same service has been called “Google Shopping” and helps users find the lowest price on certain products across various online retailers including eBay and Amazon. When Googled entered the market they were the only price comparison service out there. There were already a number of well-established websites that had established themselves as the market leaders.

These comparison services rely on large amounts of traffic and engagement in order to be successful. Every click generates the businesses revenue and drives eager buyers to their client’s website. Since Google was already the largest search engine in the world which also happened to attract the most visitors in the world, they were in a great position.

In 2008 Google actively started to promote its own price comparison service by displaying their service at the top of every search result. Competitors websites would be shown lower down the page while Google’s own results would always be at the top. This naturally gave Google a distinct advantage over their competitors.

In addition to this, a statement released by the European Commission also concluded that Google purposely demoted competitors sites on their search engine. In fact, the closest rival comparison service on average appeared on page 4. As a result, Google’s service was clearly visible to users while competitors were purposely not.

How They Have Broken EU Antitrust Rules

Although market dominance is not illegal under EU antitrust rules, dominant companies abusing their market power is. The decision by the European Commission is that Google is clearly a dominant business in the search engine industry as they hold over 90% market share in most EU countries. In addition to this, considering the length of time Google has been a dominant player in the industry, it only further proves how influential Google are.

The report also went on to say that Google abused their market dominance by giving its own service an unfair advantage. This was done by placing their price comparison service at the top of all search results while demoting rival services. The start of this illegal practice first took place in January 2008 when the comparison service was rolled out in Germany and the UK. In 2010 the same service and practice was extended to France and in 2011 Italy, Spain and the Netherlands all had the same service. By 2013 all 13 of the European Economic Area (EEA) countries had the price comparison feature.

The Effect of Google’s Abusegoogle

Google’s blatant attempt to promote its own comparison service has had a significant impact on competitors in the industry. Since these price comparison services rely on traffic and visitors in order to earn revenue, a lot of rival services have had to stop operating altogether.

To give you an idea how much of an impact Google’s illegal practices had on their comparison service; since the beginning of the abuse in the UK, Google saw a 45 fold increase in traffic. Similarly, Google also saw a 35 fold increase in Germany, 19 fold increase in France, 29 fold in the Netherlands, 17 fold in Spain and 14 fold in Italy.

The demotion of rivals services and websites also had an enormous impact on their traffic. The report found that rival websites in the UK saw a 85% drop in traffic while rivals in Germany experienced a 92% drop in traffic. These sudden drops in traffic could not be explained by any other factors and were consistent only with price comparison websites.

Could Google Be Up To Something Else?

android chrome

Since Google has been caught abusing their power once, what’s to stop them from doing it again? Currently, the European Commission is already investigating 2 other cases which involve Google’s Android operating system and AdSense network.

The ongoing Android case involves Google restricting Android device manufacturers and mobile network operators the use to their software unless they do certain things. Currently, Google requires Android manufacturers to pre-install Google Chrome on their devices and set Google as the default search engine. The European Commission believes this breaks their antitrust laws.

The ongoing AdSense case involves Google’s restriction of certain third party adverts on Google’s network. This means if a website chooses to use Google’s AdSense network to display ads on their website, they are not allowed to us any other ad network. The European Commission also believes this breaks their antitrust laws.

Google might be a dominant search engine across the world, but with great power comes great responsibility. Will this fine cause Google to rethink their strategies or do the profits greatly outweigh the potential fines? Hate them or love them, Google is here to stay and there are no signs they are going to disappear overnight.

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