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Google Face Record Fine Over Unfair Shopping Advantage

The EU has slapped Google with an eye-watering $2.7bn fine for unfairly favoring some of its own services over rivals –  a violation of EU antitrust laws. As they weigh up whether to appeal, Croud considers some of the changes Google might have to make as a result of the ruling.

What?

Google has been fined a record €2.4bn ($2.7bn / £2.1bn) by the European Commission. The Commission ruled that Google had abused its power by promoting its own shopping comparison service at the top of the search results:google shopping results :

 

The ruling is centered around the fact that only Google’s Shopping comparison tool appears and not other competing services like Kelkoo, Nextag and Shopzilla to name a few. Google has been told they have 90 days to end the anti-competitive practices or face further penalties – which could be as punitive as 5% of Alphabet’s average daily earnings.

Google have put out a brief statement disagreeing with the conclusion of the report and have said in the past that services like eBay and Amazon have more influence over the public’s spending habits.

So What?

With the European Commission determining that Google granting this type of preferential treatment to its own product is not only anti-competitive but illegal, this could be big. It could mean that advertisers will need to manage multiple feeds; not just Google Shopping but also other price comparison sites. This means the same resource doing more work across different reporting systems – an unappetising result for advertisers even if the accusation against user choice is understandable.

What next?

Until now, Google have enjoyed a largely unchallenged monopoly in the search space – this is unlikely to remain the case. Google have already released a statement, somewhat compunctiously titled “The European Commission decision on online shopping: The other side of the story”, in which they basically say that because their product provides the best experience for users, it’s not actually unfair.  They also claim they’re helping ” thousands of European merchants use these ads to compete with larger companies like Amazon and eBay” (whilst of course netting themselves a tidy profit in the process).

“When you use Google to search for products, we try to give you what you’re looking for. Our ability to do that well isn’t favoring ourselves, or any particular site or seller–it’s the result of hard work and constant innovation, based on user feedback.”

This is unlikely to end here. Google are likely to appeal and the case will continue, but they’ll still need to adapt their business practices to the ruling; and the onus is on them, not the European Commission to figure out a solution that won’t unfairly advantage their own product.  The case took 7 years to reach this conclusion today, so a speedy end to this saga is unlikely at this point in time. However, given the increasing importance of feeds, automation and AI within Google’s advertising plan, this isn’t a bitter pill they will swallow easily.

From Croud’s  Co-Founder and CEO, Luke Smith:

“For e-commerce retailers we find Shopping activity (both Google and Bing) to work exceptionally well and proves to be a valuable experience for consumers in general. Traffic and investment in this form of advertising has grown significantly over the years as the mechanisms with which to control Shopping have significantly improved. Should Google Shopping cease to exist then it would have a profound impact on the industry and so we’ll be keen to see how the case unfolds. Plus, given the extra pressure on Google with Amazon now representing 45% of product searches in the US’, this maybe another reason to double down on those Amazon shares…”