In a significant move targeting Google’s main revenue source, the European Commission has lodged a formal antitrust complaint against the tech giant and its ad business. The regulator’s preliminary opinion asserts that Google has abused its dominant position in the digital advertising market, potentially necessitating the divestiture of certain business segments if the charges are proven.
The European Commission has previously fined Google in three antitrust cases; however, this complaint represents a rare instance of recommending divestiture during the investigative stage. Margrethe Vestager, the Commission’s executive vice president responsible for competition policy, expressed concerns about Google’s potential exploitation of its market position to favor its own intermediation services.
The Commission’s preliminary findings indicate that Google has been leveraging its dominant positions since at least 2014 to favor its own ad exchange, potentially stifling competition from rival ad exchanges. This has solidified Google’s central role in the ad tech supply chain and enabled the company to charge higher fees for its services.
Although today’s statement of objections marks a significant step in the EU’s investigation, it does not preclude the final outcome. Google will have the opportunity to respond in writing and request a hearing, following which the Commission will determine whether the company has violated antitrust laws within the bloc. If found guilty, the EU’s competition regulator could impose fines of up to 10 percent of Google’s global sales and introduce various changes to its business practices.
Dan Taylor, Google’s VP of global ads, voiced the company’s disagreement with the Commission’s position, emphasizing the highly competitive nature of the digital advertising sector. Taylor stressed that Google’s advertising technology tools play a crucial role in helping websites, apps, and businesses of all sizes reach new customers and fund their content.
When asked about the EU’s recommendation for divestiture, Vestager highlighted Google’s pervasive presence in the ad business as a justification. She explained that Google’s dominant position in both the sell side and the buy side, favoring its own ad exchange, presents an inherent conflict of interest that cannot be resolved through alternative means. Vestager noted that while the Commission has rarely pursued divestiture in previous cases, the particular dynamics of the ad tech industry warrant considering it as a potential remedy.
If implemented, the divestiture order could deal a significant blow to Google’s primary revenue stream. Despite offering a wide range of services, advertising continues to generate the majority of the company’s income. In 2022 alone, Google’s advertising business raked in approximately $225 billion, accounting for roughly 80 percent of its annual revenue.
The European Union’s investigation into Google’s advertising technology dates back to 2021 when it began examining whether the company unfairly favors its own services over competitors and restricts its access to user data. The EU expressed concerns about Google’s pervasive presence throughout the supply chain for online display advertising and its potential adverse effects on rival online advertising services within the ad tech stack.
Should Google be found in violation in this case, it would mark the fourth major decision by the EU against the company. Previous fines totaling over €8 billion were imposed between 2017 and 2019 for systematically favoring its own shopping comparison service, abusing its market dominance with Android, and preventing AdSense customers from accepting advertising from competing search engines. Google is presently challenging these earlier fines in court.
Furthermore, Google’s advertising business is under scrutiny beyond the European Union. The UK’s Competition and Markets Authority (CMA) is investigating the company over concerns about unfair practices that impede competition. Similarly, the US Justice Department and eight states filed a lawsuit earlier this year, calling for the dismantling of Google’s ad-technology business.
Via: TheVerge