Google have been fined a whopping $2.7 billion dollars, setting a new world record for the largest penalty against any Tech company to date. The multinational technology company have been charged by European Anti-Trust officials for favouring their own services against their competitors. The cooperate giant finds itself having to defend itself after been accused of “unfairly dominating the market place” with its advertising products.
It is nothing new for a controversy involving a European ruling and Silicon Valley. In fact Europe have always been “setting the agenda” according to Nicolas Petit, a professor of competition law and economics at the University of Liège in Belgium.
The European Anti-Trust have continuously held a militant stance on regulating many of the major tech companies in our recent times, especially with American companies. In fact, some have begun to question the European Union’s creditability for unfairly targeting American companies when compared with their European counterparts! The European Union have of course denied such allegations.
The European Anti-Trust officials have been no stranger to large law suits and rulings against various companies in the technology sector. Apple were forced to pay $14.5 billion in taxes back into Ireland in 2016. Microsoft was penalised from (2004-2008) for failing to provide code to allow its competitors to use its Windows server software at a fair price costing them a total of €1.2 billion. Intel were charged €1.1 billion in 2009 for giving discounts to computer manufacturers that bought their computer processors, companies such as Acer, Dell, HP, Lenovo and NEC are the most prominent companies that received such discounts. In fact it was the European Anti-Trust that raised concerns about Facebook’s use of people’s digital data and consequently penalised them for misleading the public. For instance, the social media giant was fined €110 million for providing false information during the investigations of WhatsApp in 2014.
It appears that Google are the next company to receive big drawbacks for two different antitrust charges. The first is related to their Android operating system in April 2016, which required mobile manufactures to preinstall their services and went as far as offering exclusive deals that favour their products against their rivals, and thus dominating the market place. In response Google counteracted these allegation by stating that “smartphone makers are not required to use its digital services as part of Android”.
The other charge was made in July 2016 where they were targeted for favouring their products in their online shopping advertising search engine. Europe’s competition watchdog claims that Google were offering some of their online advertising tools as part of search services on third-party websites. Google rejects any misconduct in these cases. In fact they say that consumers can freely use alternative online search products, and that their competitors are able to offer their own digital services that can compete directly with themselves.
In spite of these rebuttals from Google, The European antitrust Chief, Margrethe Vestager says that “In Europe, companies must compete on the merits regardless if they are European or not,” and went on to say that “What Google has done is illegal under E.U. antitrust rules.”
Vestager has pointed out that Google holds a dominant position with their online search product, therefore they are obligated to take extra precautions to make sure that their services do not gain a monopoly on the technology industry. Furthermore, there have been numerous complaints from other non-European companies which include, but are not limited to Oracle, News Corporation and Yelp, who are all in favour of the fines against Google.
Google has 3 months to respond to the European Commission’s demands, or they will be subjected to further charges of up to 5 % of their average daily global revenue of Alphabet (Google’s parent company). European officials have made a statement specifying that because of this illegal activity they will now regularly monitor the company to ensure that they are complying with the ruling which could even involve exposing Google’s long protected search algorithms.
This decision could turn out to be a major set back for them as many analysts have said that Google rely on making profits on their search products, for example restaurant and business reviews now represent a growing percentage of Google’s annual revenue. If they follow EU rules then the company could find themselves losing their monopoly over this market sector as they will be forced to change their business strategy.
However, although 2.7 billion euros is a large amount of money, it is only a fraction compared to Google’s $90 billion annual revenue and thus it is unlikely to cause the company to close down its headquarters any time soon! Nonetheless, Google’s shares have fell for two days and as of yesterday the stock declined by 2.5 percent.
Google have more options than simply revealing their most guarded search algorithms, alternatively they could decide to remove their specialised search services from Europe entirely, and as a result return to how they operated before the European Union’s investigation began.
Google have responded to the charges by making a statement that its services have “helped the region’s digital economy grow”. They have denied claims of dominating the market place, saying that “significant online competition still remains high in Europe”, including rival companies like Amazon and eBay. “We respectfully disagree with the conclusions announced today,” said the speaker of Google’s general counsel. Kent walker elaborated on this and said that Google will review their commission’s decision in detail as they consider an appeal. He said they even look forward to continuing to make their case and that Google denies the EU claims that they ‘systematically favour its comparison shopping service in its search result pages’
Shivaun Raff, who is regarded as the co-founder of Foundem, which is a British comparison-shopping site, was the first company to file a complaint against Google and he said that “Google’s search engine has played a decisive role in determining what most of us read, use and purchase online,” and he warned officials that if “Left unchecked, there are few limits to this gatekeeper power.”
Only time will tell to see the outcome of these law suits, whatever the solution, many analysts expect a long legal battle that will continue for several years as both Google and its competitors fight to define how search services are provided in Europe and elsewhere across the world.
What do you think about this decision? Do the European Anti-Trust officials have the right to demand Google to help their competition, or is it solely down to the will of the people to decide what search engines they prefer as Google have suggested? Is it not Google’s right as a company to sell or favour their own products, or should they be forced to promote other companies products equally? Leave you comments in comment section below!