Google loses appeal against €2.4 billion EU fine over its shopping service

Google has lost its appeal against a €2.42 billion antitrust fine imposed by the European Commission in relation to its shopping service.

The ruling was delivered by the European General Court (EGC), the lower tribunal of the Court of Justice of the European Union, which decided to uphold the fine.

An appeal before the higher European Court of Justice (ECJ) is still possible though.

The Commission argued that Google had unfairly used its dominant search engine to redirect traffic to Google Shopping, a service that allows users to compare products and prices from online retailers.

Brussels says that when the company launched the service back in 2004 (under the name of Froogle), it was not successful and failed to live up to the expectations.

But from 2008, the executive claims Google began to systematically favour its shopping service in the results of its popular search engine, whose market dominance exceeds 90% in most EU countries. Google Shopping now routinely appears at the very top of search results, Brussels noted.

This practice squeezed out rival comparison shopping services, which were demoted in search results and made virtually impossible to find. As a result, people were exclusively exposed to Google Shopping, turning the platform into the de facto default option for online shoppers.

“Evidence shows that even the most highly ranked rival service appears on average only on page four of Google’s search results, and others appear even further down,” the Commission said in 2017, when it announced the huge fine.

Brussels estimates that 95% of clicks go to the ten highest-ranking results on the first page, with those on the second page receiving just 1% of attention.

Condemning rival services to near-absolute obscurity breaches EU competition rules and distorts the internal market, the executive argued.

“What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation,” said Margrethe Vestager, European Commissioner for competition, in 2017.

The €2.42 billion fine was calculated according to the revenue obtained by Google from 2008 to 2017 across 13 countries of the single market that the Commission considered affected by the unfair practice: Germany, the United Kingdom (still an EU member when the probe was launched), France, Italy, the Netherlands, Spain, the Czech Republic, Austria, Belgium, Denmark, Norway (non-EU member but part of the single market), Poland and Sweden.

Google fought back against the accusations, saying the European Commission’s thinking was “wrong on the law, the facts and the economics” and its service had actually increased choice for consumers.

“Shopping ads have always helped people find the products they are looking for quickly and easily, and helped merchants to reach potential customers,” the company said back in February 2020, when hearings for the appeal took place before the General Court.

On Wednesday, the EGC largely agreed with the Commission’s reasoning, dismissed any “objective justifications for Google’s conduct” and upheld the original €2.42 billion penalty.

The judges concluded the company has promoted its own Google Shopping “through more favourable display and positioning” while simultaneously relegating rivals “by means of ranking algorithms”.

The court, however, specified the anti-competitive behaviour only reached the market for shopping services, not the overall market for search engines, as Brussels had claimed.

Besides the current probe, the tech giant is battling two additional antitrust investigations: a record-breaking €4.34 billion fine for allegedly imposing illegal restrictions on devices ran by its own Android system and a €1.49 billion fine for alleged abusive practices in online advertising.

In total, the company is facing more than €8.2 billion in EU antitrust fines.

Google has long been accused of exploiting its preeminent position in the online world to its benefit. Market dominance as such is not illegal under EU law, but dominant companies are compelled to respect free competition, which is considered an essential pillar of a liberalised economy.

While the fines appear huge, they are symbolic in comparison to the company’s enormous profits. Alphabet Inc., the conglomerate that hosts Google, is one of the most valuable companies in the world, having recently passed the $2 trillion threshold. Last year, its net income exceeded $40 billion.

The Luxembourg ruling marks an important victory to Margrethe Vestager, who has pioneered the strategy of using antitrust rules to rein in the power excesses of Big Tech.

“Today’s judgement delivers the clear message that Google’s conduct was unlawful and it provides the necessary legal clarity for the market,” the Commission said in a statement, hoping the ruling will serve as a precedent for private damages action.

“The Commission will continue to use all tools at its disposal to address the role of big digital platforms on which businesses and users depend to, respectively, access end users and access digital services.”

Vestager is spearheading a twin set of regulations – the Digital Services Act and the Digital Markets Act – to create a safer, fairer and more competitive digital environment. The legislation is expected to increase the Commission’s powers to crack down on abusive practices from multinationals.

Among its provisions, the Digital Markets Act (DMA) proposes to ban self-preferencing by forcing big platforms to adjust their algorithms and ensure rivals are treated according to market merits.

The European Consumer Organisation (BEUC) also welcomed the verdict, saying Google’s “misleading and unfair practices” have harmed millions of European consumers.

“Today’s General Court ruling makes clear that Google must give equal opportunities to all market players to compete on the basis of their own merit and gain consumers’ trust on an equal footing,” said Monique Goyens, the organisation’s director general, in a statement.

For Thomas Vinje, a partner from Clifford Chance specialised in European antitrust law, the ruling should encourage the Commission to launch new antitrust probes in other digital areas, such as travel search, and the European Parliament to “forcefully adopt” the Digital Markets Act.

“This is definitely a victory for Commissioner Vestager herself,” Vinje told Euronews.

“It’s also very much a victory for consumers that Commissioner Vestager put herself on the line with this. And so this was very important to her, and she now gains credibility and, had she lost, and it would certainly have dented her credibility.”

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