The European Union aimed for a “deterrent effect” on Google and other technology giants when it ordered the internet search provider to pay 2.4 billion euros ($2.8 billion) for breaching antitrust law over how it displays shopping ads. Regulators weighed “the need to ensure that the fine has a sufficiently deterrent effect not only on Google and Alphabet but also on undertakings of a similar size and with similar resources,” the European Commission said in a 215-page document laying out details of its seven-year investigation into the company. The “particularly large” revenue of Google’s parent, Alphabet Inc, also determined the size of the fine, the EU said.
The penalty, levied in June, was more than double an earlier 1 billion-euro fine on Intel and came with a threat of more daily fines for Google if it didn’t comply with an order to offer equal treatment to rival shopping-comparison services. Big numbers for big technology names have been a theme for EU Competition Commissioner Margrethe Vestager, who ordered Apple Inc to pay back some 13 billion euros in taxes last year.
“It is very surprising to speak of deterrence when the behavior is novel, as in the Google case,” said Dirk Auer, a research fellow at Liege University’s Competition and Innovation Institute. “Large fines can only have a deterrent effect if firms know that their behavior might infringe the law. Here, the behavior is not listed” in the EU’s enforcement priority and “Google is challenging this very point” in its court appeal.
The EU defended its move to levy a fine in a case that raised some new issues, in a young industry it hasn’t investigated thoroughly before now. “Even if the conduct may have certain features that have not been examined in past decisions, this does not prevent the imposition of a fine,” it said in the document. “Contrary to what Google claims, Google and Alphabet committed the infringement described in this decision intentionally or negligently” and the company “could not have been unaware of the fact that Google held a dominant position in the national markets for general search.”
The fine was based on revenue from Google’s comparison-shopping service in 13 European countries, including sales from the paid product results and bottom text ads displayed on the Google Shopping website. That amount was multiplied by a figure that was redacted from the EU document.
“I wonder whether it was even reasonable for the commission to impose any fine at all,” said Damien Geradin, a professor at Tilburg University’s Law & Economics Centre. Regulators’ explanations “fail to convince that there is a need for an additional” multiplier of the penalty and the size of the fine needs to reflect the gravity of the infringement “which could not be that bad since the commission was willing to settle the case” at an earlier stage of its probe.
Google said that while it disagrees with the decision and has appealed it, it has also “implemented a remedy, as ordered by the EC, to ensure equal treatment for competitors,” it said in a statement. “We have cooperated fully with the European Commission during its seven years of competition inquiry,” it said. “We maintain that our innovations in online shopping have been good for shoppers, retailers and competition in general.”
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