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21 March 2019

Antitrust: Commission Fines Google €1.49bn For Abusive Practices In Online Advertising

The European Commission has fined Google €1.49 billion for breaching EU antitrust rules after finding that the tech giant's conduct had "harmed competition and consumers, and stifled innovation."

The Commission found that Google has abused its market dominance by imposing a number of restrictive clauses in contracts with third-party websites which prevented Google's rivals from placing their search adverts on these websites.

In a press release, Commissioner Margrethe Vestager, in charge of competition policy, said: "Today the Commission has fined Google €1.49 billion for illegal misuse of its dominant position in the market for the brokering of online search adverts.

"Google has cemented its dominance in online search adverts and shielded itself from competitive pressure by imposing anti-competitive contractual restrictions on third-party websites. This is illegal under EU antitrust rules. The misconduct lasted over 10 years and denied other companies the possibility to compete on the merits and to innovate - and consumers the benefits of competition.”

Based on a broad range of evidence, the Commission found that Google's conduct harmed competition and consumers, and stifled innovation.

Google's rivals were unable to grow and offer alternative online search advertising intermediation services to those of Google. As a result, owners of websites had limited options for monetizing space on these websites and were forced to rely almost solely on Google.

Google was by far the strongest player in online search advertising intermediation in the European Economic Area, with a market share above 70 per cent from 2006 to 2016. In 2016 Google also held market shares generally above 90 per cent in the national markets for general search and above 75 per cent in most of the national markets for online search advertising, where it is present with its flagship product, the Google search engine, which provides search results to consumers.

Google's provision of online search advertising intermediation services to the most commercially important publishers took place via agreements that were individually negotiated. The Commission has reviewed hundreds of such agreements in the course of its investigation and found that:

  • Starting in 2006, Google included exclusivity clauses in its contracts. This meant that publishers were prohibited fromplacing any search adverts from competitors on their search results pages. The decision concerns publishers whose agreements with Google required such exclusivity for all their websites.
  • As of March 2009, Google gradually began replacing the exclusivity clauses with so-called 'Premium Placement' clauses. These required publishers to reserve the most profitable space on their search results pages for Google's adverts and request a minimum number of Google adverts. As a result, Google's competitorswere prevented from placing their search adverts in the most visible and clicked on parts of the websites' search results pages.
  • As of March 2009, Google also included clauses requiring publishers to seek written approval from Google before making changes to the way in which any rival adverts were displayed. This meant that Google could control how attractive, and therefore clicked on, competing search adverts could be.

Google's practices covered over half the market by turnover throughout most of the period. Google's rivals were not able to compete on the merits, either because there was an outright prohibition for them to appear on publisher websites or because Google reserved for itself by far the most valuable commercial space on those websites, while at the same time controlling how rival search adverts could appear, the Commission said.

Google's practices amount to an abuse of Google's dominant position in the online search advertising intermediation market by preventing competition on the merits, the Commission found.

The decision concludes that Google is dominant in the market for online search advertising intermediation in the EEA since at least 2006. This is based in particular on Google's very high market shares, exceeding 85 per cent for most of the period.

The market is also characterised by high barriers to entry. These include very significant initial and ongoing investments required to develop and maintain general search technology, a search advertising platform, and a sufficiently large portfolio of both publishers and advertisers.

Google has abused this market dominance by preventing rivals from competing in the online search advertising intermediation market.

Google did not demonstrate that the clauses created any efficiencies capable of justifying its practices, the Commission said.