When Google Trends on Google: EU Commission Slaps Search Engine Giant with Antitrust Fine

Sara Stappert

Vol. 39 Associate Editor

June 27, 2017 was a dark day for tech giant Google as European Union (EU) antitrust officials fined the company “a record $2.7 billion for unfairly favoring some of its own services over those of rivals.”[1] The antitrust decision was specifically targeted at Google’s online shopping service. It is alleged that Google promoted Google Shopping in organic search results[2] while simultaneously demoting rival services in 13 of the 31 countries in the European Economic Area.[3] The Commission specifically objected to the fact that Google leveraged its marked dominance in general Internet search into a separate market: comparison-shopping.[4] The penalty showcases just how aggressive European officials are in regulating technology companies. The fine has allowed the EU to lay claim to “being the Western world’s most active regulator of digital services, an industry dominated by Silicon Valley.”[5] While the fine announced in June is minuscule as compared with Google’s $90 billion in annual revenue, it has had drastic effects as Google’s stock declined 2.5 percent on the day the fine was announced, and Google will have to modify its search engine and algorithms in order to comply with the fine.[6] A company like Google, with global reach, plays a decisive role in determining what most of us read, use, and purchase online. The EU Commission did find that Google is the dominant search engine in all 31 countries covered in the European Economic Area (EEA).[7] Yet, should Google be prevented from and punished for capitalizing on the popularity of its services? This type of investigation and fine could also spell trouble for other Silicon Valley tech giants like Amazon and Facebook[8] and leaves open many questions about how large companies will fare outside of the U.S. under other international laws, treaties, and precedent. While Google has come under class action twice in the Northern District of California, both lawsuit were unsuccessful and dismissed for failure to state a claim. The EU’s attack on Google is novel and will force some sincere changes in how the giant conducts its international business activities. Google has elected to appeal the EU’s antitrust fine, which has set up a “legal battle that could set the tone for a series of cases and probes against the company.”[9] It appears that pending appeal, Google intends to comply with the judgment, as it has not lodged an application with the Court of Justice of the European Union (CJEU) for interim measures. Aside from the attention that the fines have garnered, scholarly focus has begun to shift to the changes that Google will have to make to comply with the antitrust decision. Under EU rules, the company and not the regulator must come up with proposals to guarantee fair treatment of competitors when people make online search queries. If they are not satisfied with the initial proposals, EU authorities can demand that Google make further changes.[10] Google must, in particular, respect the “simple principle of equal treatment in its search results for its own comparison shopping product and rival comparison shopping products.”[11] As Google faces this appeal, there are several instruments of international law at work that Google can use but also some with which the company will have to contend. Take the 2009 fine issued against Intel by the EU Commission and its ensuing appeal, for example. An EU Commission Memo from June 12, 2014, lauded a lower court judgment that upheld its decision to fine Intel 1.06 billion euros for Intel’s breach of Article 102 of the Treaty on the Functioning of the European Union (TFEU). [12] The Commission found that Intel had “engaged in two types of abuse of its dominant position” in the market for computer chips.[13] Intel had granted rebates to several PC and server manufacturers on the condition that they obtain all or most of their supplies from Intel and had granted direct payments to three computer manufacturers to halt, delay, or limit the launch of specific products incorporating chips from Intel’s only rival, AMD.[14] The Intel case was appealed to the CJEU, which handed down a decision in 2016 that remanded the case to the lower court, setting aside the lower court’s decision upholding the fine on Intel.[15] The CJEU felt that the lower court decision had failed to properly analyze economic aspects of the case and that the fine–the largest ever levied until the 2017 Google case–needed to be reviewed.[16] Google’s prospects in its current appeal are bolstered by the outcome of the prior Intel appeal as it is unusual for a European Court to rule against Commission verdicts. The verdict in the Intel case “offer[s] some hope to Google’s lawyers [that] they can successful[ly] argue against the regulator’s rationale.”[17] Article 102 of the TFEU, as applied to both the Intel investigation and the Google investigation, mandates that “any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.”[18] Such abuse may come from imposing unfair purchase or selling prices,[19] limiting production markets or technical development to the prejudice of consumers,[20] applying dissimilar conditions to equivalent transactions,[21] or making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations that have no connection with the subject of such contracts.[22] While Google will turn to the CJEU Opinion on the Intel case for support, Google will also have to contend, nonetheless, with the provisions of the TFEU–specifically Article 102–to show that it is generating Google Shopping comparison results in a rich format and any demotion of rivals comparison-shopping services in those results does not violate this provision. The EU’s efforts to rein in tech companies stem from “continuing unease that Silicon Valley has come to dominate how the continent’s 500 million citizens interact online.”[23] Yet, years of uncertainty will remain before any final ruling will dictate where Google stands.[24] The EU Commission has also launched two other ongoing investigations into Google’s business practices, one related to the encouragement to bundle other Google services when using Android mobile operating system and the other regarding Google’s AdSense ad placement service.[25] Google denies all of the accusations of unfairly dominating the market, yet the Commission is pursuing all investigations, notwithstanding Google’s appeal. While the appeal is pending (and resolution could take years judging by the timeline of the Intel case where the fine was issued in 2009 and the latest appeal was delivered in 2016) Google will remain in limbo as it fights to preserve its algorithms and its dominance in the virtual marketplace. At the same time, it will also be forced to comply with the EU’s requirements so as to avoid more, and even heftier, fines.

[1] Mark Scott, Google Fined Record $2.7 Billion in E.U. Antitrust Ruling, N.Y. Times (June 27, 2017), https://www.nytimes.com/2017/06/27/technology/eu-google-fine.html. [2] Natasha Lomas, Google Files to Appeal $2.73BN EU Antitrust Fine, TechCrunch (Sep. 11, 2017), https://techcrunch.com/2017/09/11/google-files-to-appeal-2-73bn-eu-antitrust-fin. [3] European Commission Press Release IP/17/1785, Antitrust: Commission Fines Google €2.42 Billion for Abusing Dominance as Search Engine by Giving Illegal Advantage to Own Comparison Shopping Service—Factsheet (June 27, 2017). [4] European Commission Press Release, supra note 3. [5] Scott, supra note 1. [6] Id. [7] European Commission Press Release, supra note 3. [8] Scott, supra note 1. [9] Sam Schechner & Natalia Drozdiak, Google Appeals Record $2.9 Billion EU Antitrust Fine, The Wall Street J. (Sep. 11, 2017, 12:12 PM), https://www.wsj.com/articles/google-appeals-record-eu-antitrust-fine-1505137493. [10] Id. [11] European Commission Press Release, supra note 3. [12] European Commission Memo, Antitrust: Commission Welcomes General Court Judgment Upholding Its Decision Against Intel (June 12, 2014). [13] Id.  [14] Id.  [15] Case C-413/14, Intel Corp. Inc. v. Comm’n, 2016 E.C.R. 788. [16] Id. [17] Lomas, supra note 2. [18] Consolidated Version of the Treaty on the Functioning of the European Union art. 120, May 9, 2008, 2008 O.J. (C 115) 89. [19] Id. at art. 120(a) [20] Id. at art. 120(b) [21] Id. at art. 120(c) [22] Id. at art. 120(d) [23] Scott, supra note 1. [24] Lomas, supra note 2. [25] Id.; European Commission Press Release, supra note 3.