The European Commission has given Google a record-breaking fine of 2.4 billion euros for abusing its market-dominating search engine. Google was able to use its search engine to its advantage in the fiercely competitive and rapidly expanding market of online shopping.
Google have been given 90 days by the European Commission to end the misconduct. If Google fails to comply with the allotted time period, Google’s parent company Alphabet will face penalty payments of up to 5 percent of its average daily worldwide turnover.
Google’s comparison shopping service was not just attracting customers by making its products better than those of its rivals, which would exemplify the competitive nature of a capitalist market. Instead, Google was utilizing its search engine as a tool to promote its own comparison shopping service in its search results while simultaneously demoting those of competitors. This provided Google with an unfair advantage that would display their own products and positive reviews of their products first to consumers, while failing to display or showing negative reviews of their competitor’s products.
This rigging of the search engine results is considered illegal under E.U. antitrust rules. By denying competitors a chance to compete on the quality of their products and innovation, Google also denied European consumers a genuine choice of services, products, and innovations. It would not be illegal if Google products proved to be more popular, and were able to dominate the markets on its own merits. This would be a challenge that competitors could respond to by further innovating their products and services in order to cater to their shared consumer base. The illegal actions were therefore not the dominance of Google products, but the unfair consumer dominance that arose from consumer use of Google’s search engine that provided Google with benefits that competitors are unable to respond through their products alone.
While the abuse of its search engine has been beneficial to Google, its impact is also important regarding the detriment it has on other companies. The loss of revenue due to consumers clicking more visible search results reduces competitor’s capacity to innovate. This further widens the gap between Google and its competitors, as Google gains a substantially increased revenue stream as to what it would have otherwise been, providing an income supply that can be used to further innovate their products. Google can also monitor its own webpages to reduce advertisements from its competitors, further increasing its advantage in the online shopping market.
EU authorities have been investigating Google claiming the search engine favors its own search results over those of other websites. In response, Google has repeatedly denied wrongdoing, meaning that Tuesday’s ruling will deal a sharp blow not only because of the large fine, but also the decrease of trust in Google’s practices. This ruling also has a considerable impact on Google’s source of sales growth as a revenue stream. It also indicates that the E.U.’s fine of around double the amount of the previous fine reinforces the seriousness of its antitrust policy seriously. The E.U. Commission is sending a zero tolerance message against any future misconduct.
While Google is likely to appeal the fine, its practices will be closely monitored by the European Commission. This should result in a change in how Google’s algorithm works, changing its business model while opening up space for competitors to attract consumers. Given enough time, we will be able to evaluate how attractive Google’s products actually are, and how important the manipulation of search engine results have been for Google’s comparison shopping services.