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From Antitrust Law Daily, March 20, 2019

Google fined €1.49B by EC for restricting rivals in online search advertising intermediation market

By Jeffrey May, J.D.

EC says Google abused its dominance by imposing restrictive clauses in contracts with third-party websites thereby preventing Google’s rivals from placing their search advertisements on these websites. This latest EC fine is the third within two years.

Just eight months after being hit with a €4.34 billion (approximately U.S. $5 billion) fine from the European Commission (EC) for illegal practices regarding Android mobile devices to strengthen the dominance of Google's search engine, today the tech giant was fined another €1.49 billion (almost U.S. $1.7 billion) for abusive practices in online advertising. This is the third fine in recent years. In 2017, the EC fined Google €2.42 billion (approximately U.S. $2.73 billion) for abusing its dominance as a search engine by giving an illegal advantage to Google's own comparison shopping service. The EC says that the latest targeted misconduct in the market for the brokering of online search advertisements has lasted for more than a decade.

Statement of Objections. In 2016, the EC announced that it had issued a Statement of Objections (SO), alleging that Google placed restrictions on the ability of certain third-party websites to display search advertisements from its competitors. This effort to restrict competitors was intended to maximize traffic to Google’s own websites, according to the EC.

Google has said that it stopped the challenged practices in response to the SO. In addition to today’s fine, the EC is requiring Google to "stop its illegal conduct, to the extent it has not already done so, and to refrain from any measure that has the same or equivalent object or effect."

Exclusivity clauses. The EC took issue with exclusivity clauses in Google’s contracts with publishers that prohibited the publishers from placing any search advertisements from competitors on their search results pages. These restrictions blocked opportunities for Google's competitors in online search advertising, such as Microsoft and Yahoo. Third-party websites represent an important entry point for these other suppliers of online search advertising intermediation services to grow their business and try to compete with Google because it is not possible for these firms to sell advertising space in Google's own search engine results pages, the EC noted.

According to the EC, "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 EC also noted that "owners of websites had limited options for monetizing space on these websites and were forced to rely almost solely on Google."

Competition Commissioner's statement. "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," said EC Competition Commissioner Margrethe Vestager in a prepared statement. "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."

Vestager explained that Google is by far the biggest advertising broker for other websites, with its platform "AdSense for Search." It has had market shares in Europe of above 70% since 2006. She maintained that Google abused its dominance to stop websites using brokers other than the AdSense platform.

Google’s changing practices. In a statement released yesterday, Google said that the company has been responding to the competition concerns raised by the EC and others. The company pointed to changes to AdSense for Search "in direct response to formal concerns raised by the European Commission." In addition, the company said that it has made changes to Google Shopping to comply with the EC’s 2017 order, as well as changes to the licensing model for the Google apps for use on Android phones in light of the July 2018 decision.

Companies: Google LLC; Alphabet Inc.

MainStory: TopStory Antitrust

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