Google (NASDAQ: GOOGL) has been hit with a $1.7 billion fine by European Union regulators, who say the search giant engaged in illegal practices aimed at cementing its dominant position in the online advertisement sector. The fine is the result of a probe into the Google AdSense advertising platform that serves up online commercials via a search function integrated into everyday websites.
EU regulators established that Google forced businesses to sign contracts if they wanted to use the platform to provide search functions on their own websites. The contracts prevented online publishers from placing rivals’ ads on their search results pages. Publishers also had to seek Google’s permission before changing how rival adverts are displayed.
“Today the Commission has fined Google €1.49 billion for illegal misuse of its dominant position in the market for the brokering of online search adverts. Google has cemented its dominance in online search adverts and shielded itself from competitive pressure by imposing anti-competitive contractual restrictions on third-party websites,” said Margrethe Vestager, the EU’s Margrethe Vestager, the EU’s competition commissioner.
“This is illegal under EU antitrust rules. The misconduct lasted over 10 years and denied other companies the possibility to compete on the merits and to innovate – and consumers the benefits of competition,” Vestager concluded.
European Competition Commission has previously punished the Alphabet-owned company over the past two years, for abusing its power in markets. Last year, the commission placed a record $5 billion penalty on the company for anti-competitive behaviors related to Android operating system. In mid-2017, the regulators also handed down a $2.7 billion penalty for Google Shopping antitrust violations.
Google has not said whether it plans to appeal the EU’s fine. Nonetheless, the company’s senior vice president of global affairs, Kent Walker, has responded to the decision. Walker says the tech giant has already made a wide range of changes to its products to address the concerns of the European Competition Commission.
Alphabet Inc Profile
Alphabet Inc is a holding company, with Google, the Internet media giant, as a wholly owned subsidiary. Google generates 99% of Alphabet revenue, of which more than 85% is from online ads. Google’s other revenue is from sales of apps and content on Google Play and YouTube, as well as cloud service fees and other licensing revenue. Sales of hardware such as Chromebooks, the Pixel smartphone, and smart homes products, which include Nest and Google Home, also contribute to other revenue.
Alphabet’s moonshot investments are in its other bets segment, where it bets on technology to enhance health (Verily), faster Internet access to homes (Google Fiber), self-driving cars (Waymo), and more. Alphabet’s operating margin has been 25%-30%, with Google at 30% and other bets operating at a loss.
