The word “Google” has become a verb meaning “to search the internet,” indicating its importance in our digital world. Nevertheless, on June 27, 2017, the European Commission (EC) handed down a record fine for antitrust violations when the EC fined Google and its parent company, Alphabet, 2.42 billion euros. The EC’s antitrust decision against Google marks the first time a public antitrust regulator has sanctioned the way a digital corporation operates.
After receiving complaints worldwide against Google, the EC opened an antitrust investigation against Google, in 2010. Comparison shopping services were experiencing drops of traffic on their websites of up to 85 percent in the UK; 92 percent in Germany; and 80 percent in France that could not be explained by factors other than Google’s algorithm changes in 2008.
Comparison shopping services, such as American NexTag and British Foundem, are a growing online industry that allows consumers to search for and compare prices for available products, while also providing e-commerce merchants opportunities to attract new sales. As a result, comparison shopping services rely on more consumer traffic to be successful because more traffic leads to more revenue from consumer use, advertisements, and retailers who pay to list and promote their products on successful comparison pricing websites. Since Google dominates Europe’s general search engine market, with 92 percent of Europeans using Google as their main search engine in 2016, a comparative shopping service’s position in Google’s search engines results page is a pivotal source of European consumer traffic.
Google entered the comparison shopping market in Europe in 2004, with their first unsuccessful product “Froogle.” By 2008, Google had relaunched “Google Product Search” (renamed “Google Shopping” in 2013) pinning its own comparison shopping service to the top-centre of the first page of a search engine results page. There is substantial data that consumers click the most visible results. The first page of search results query generates 95 percent of all clicks, of which, 35 percent of users are likely to choose the top result. In sharp contrast, the second page of search engine results only receives one percent of all clicks.
In the EC’s seven year investigation against Google, the intergovernmental body used 5.2 terabytes of search result “click data” (or data from around 1.7 billion search queries) in its finding that Google’s biased algorithms relegated comparison shopping service rivals to, on average, the fourth page of search results. Google Shopping’s position as the first result attracted more consumer attention to the detriment of Google’s competitors, which the EC claims stifles innovations in European markets. By pinning its own product as the top result, Google creates an illusion of fair competition when, in reality, Google drives up prices for consumers by only displaying advertisements for products that merchants pay to display.
By April 2015, the EC sent Google a Statement of Objections alleging Google’s systematic favouring of its own comparison shopping services since 2008 led it to grow at faster rates than its competitors, irrespective of its merits. In its final June 2017 decision, the EC said Google’s conduct fostered anti-competitive agreements and abused its dominant position in Europe, violating Articles 101 and 102 Treaty on the Functioning of the European Union. Ultimately, Google had to pay the EC’s record-breaking 2.42 billion euro antitrust fine, a calculation the EC estimated was Google Shopping’s revenues in the 13 European Economic Area (EEA) countries. Google also had to outline plans to the EC of how it will end its illegal conduct in the EEA within 90 days or face penalty payments of up to 5 percent of the average daily revenue of Alphabet. At the end of September 2017, Google made changes to treat other shopping services equally by allowing competitors to bid on Google Shopping boxes at the top-centre of the first search results page.
Prior to the decision, and still in many jurisdictions such as Canada since the Competition Bureau closed its investigation in 2016, Google has unchecked power to alter its algorithms to effect its search engine results. However, the EC’s decision carves out a new role for itself as a regulator of Google and Internet content in Europe. Using antitrust laws to regulating what and how search results are displayed on Google’s search engine, the EC has given itself more power to effect content and control portions of the Internet in 13 European states. The EC’s decision against Google Shopping may be seen as the opening of a floodgates, with governmental authorities scrutinizing the economic power behind unregulated digital giants. Perhaps regulation is necessary so that Google remains a service we trust.
Jadeney Wong is a second year candidate for a joint JD/MA program, studying law at the University of Ottawa and focusing on International Organizations and Global Policy at the Norman Paterson School of International Affairs. She holds a Bachelor of Honours in Global Development Studies and World Languages at Queen’s University in Kingston, Ontario. Her areas of interest include the intersections between law and human security, international migration, labour, and technology.
Images credit: Jadeney Wong
Featured image courtesy of Robert Scoble on Flickr Creative Commons