Google faces years of EU
oversight on top of record antitrust fine
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[June 28, 2017]
By Foo Yun Chee and Eric Auchard
FRANKFURT (Reuters) - Beyond a
headline-grabbing 2.4 billion euro ($2.7 billion) fine EU antitrust
regulators have levelled against Google, the internet giant is likely to
be shackled for years by Tuesday's precedent-setting decision defining
the company as a monopoly.
The ruling opens the door for further regulatory actions against more
crucial parts of Google's business – mobile phones, online ad buying and
specialised search categories like travel - while easing the standard of
proof for rivals to mount civil lawsuits showing Google has harmed them.
So far, investors have shrugged off the EU's threatened crackdown, with
Google's holding company Alphabet's shares down 1.8 percent in early
U.S. trade amid a continued selloff in technology stocks.
The stock has doubled in the two years since European authorities
vigorously stepped up investigations of it.
It trades just behind rival Apple as the world's most valuable stock
with a $666 billion market capitalisation.
The real sting is not from the fine for anti-competitive practices in
shopping search but the way the EU has thrown the issue back to Google
to solve, meaning the company won't be able to comply through an easy
set of technical steps.
In effect, the Commission is forcing Google to demonstrate that rivals
have made substantial inroads into its businesses before there is much
chance of it being let off the regulatory hook.
EU competition chief Margrethe Vestager promised Google was in for years
of monitoring to guard against further abuses.
"Just being put on notice can limit Google's strategic options into the
future," said Matti Littunen, a digital media and online advertising
analyst with Enders Analysis in London.
The EU's 2004 ruling that Microsoft Corp had abused its dominant market
position in Windows and other markets is now seen as having curtailed
the software giants moves over the subsequent decade to expand more
quickly into emerging markets such as online advertising, opening the
way for Google's rise.
Putting the onus on the company underlines regulators' limited knowledge
of modern technologies and their complexity, said Fordham Law School
Professor Mark Patterson.
"The decision shows the difficulty of regulating algorithm-based
internet firms," he said. "Antitrust remedies usually direct firms that
have violated antitrust laws to stop certain behaviour or, less often,
to implement particular fixes.
"This decision just tells Google to apply 'equal treatment,' not how to
[to top of second column]
European Competition Commissioner Margrethe Vestager holds a news
conference at the EU Commission's headquarters in Brussels, Belgium,
June 27, 2017. REUTERS/Francois Lenoir
The EU ruling is a warning shot for two on-going EU probes into Google's Android
mobile operating system and AdSense ad system, said Richard Windsor, an
independent financial analyst who tracks competition among the biggest U.S. and
Asian internet and mobile players, including Google.
"If the European Union turns around and says Google can no longer bundle its
Google Play app store as a default feature on many Android smartphones, this
opens up the market to other handset makers to put their own software and
services front and centre on their phones," he said.
Littunen of Enders Analysis agreed, saying while Google may be able to meet EU
objections in the AdSense case by making relatively modest changes to its
advertising systems to enable website customers to run ads from Google
advertising rivals, the Android case has many complicated factors with no easy
More importantly, Google must find ways change its business practices without
harming its very lucrative advertising business model, which accounted for
around 85 percent of the $90.3 billion in revenue of parent company Alphabet in
"The EU's identification of 'super-dominance' in internet search throughout the
European Economic Area is confirmed and will provide a cornerstone for
assessment of other ongoing cases, especially regarding Android and AdSense,"
said Jonas Koponen, competition chief at Linklaters law firm in Brussels.
"This could result in a profound change to the company's business models," he
Yet another worry for the company could be a wave of lawsuits in the future.
"We can expect to see a series of damages claims brought by the rivals that were
excluded from the market by Google's conduct," said Peter Wills, co-head of
competition law for Bird & Bird in London, setting the stage for national court
With the EU's Vestager giving no ground in her record demand last year to
collect 13 billion euros in unpaid taxes from Apple and stopping Google from
squeezing out rivals, other tech giants will probably think twice before testing
($1 = 0.8862 euros)
(Editing by David Evans)
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