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European Union regulators targeted the heart of Google’s business model on Tuesday, announcing that the Silicon Valley giant was subject to a new antitrust investigation for potentially abusing its dominance in the online advertising market to stifle competition.
The investigation is part of a broader push by European authorities to clamp down on the world’s largest technology companies. Amazon, Apple and Facebook are subject to antitrust measures by the 27-nation bloc, and the European Union is drafting new antitrust laws and digital services to tighten controls on big tech companies.
Online advertising has helped Google become one of the most valuable and powerful companies in the world, with its parent company, Alphabet, reporting a net profit of $40 billion last year. But publishers such as News Corp, as well as rival digital advertising companies, have long complained that Google’s dominance makes it difficult to attract advertising revenue from their websites and at competitors to gain ground.
The European Commission, the bloc’s executive body, said the investigation focused on the display advertising market, which is estimated to be worth about $24 billion in Europe, where Google provides a number of services to both advertisers and publishers. The company collects data to target ads, sells advertising space on online websites and provides services that act as an intermediary between advertisers and publishers.
“We are concerned that Google has made it difficult for online advertising services to compete in the so-called ad technology stack,” Margrethe Vestager, Executive Vice President of the European Commission responsible for competition policy, said in a statement.
“Equal opportunity is fundamental to everyone in the supply chain,” she said.
Announcing the start of a formal investigation is one step in a process that could drag on for years. Google could face fines of up to 10 percent of global revenue and require it to change its business practices if found guilty.
Focusing on advertising, authorities are focusing on the cornerstone of Google’s financial success. Its dominance has helped the company build a digital empire in internet search, email, entertainment, maps, cloud computing, smartphones and other consumer electronics, shopping and self-driving. With a market capitalization of over $1.6 trillion, Google is one of the largest companies in the world.
The commission’s investigation focuses on the ways Google is leveraging its power in the advertising technology market to reduce competition, including forcing advertisers to use certain Google services to purchase YouTube display ads. Investigators said they will also examine Google’s new policy for its Chrome browser that aims to replace tracking “cookies” placed on websites with a new system created by Google.
A Google spokeswoman said the company “will continue to engage constructively with the European Commission to answer their questions and demonstrate the benefits of our products.”
“Thousands of European companies use our advertising products to reach new customers and fund their websites every day,” the spokeswoman said. “They choose them because they are competitive and efficient.”
daily business briefing
updated
June 22, 2021, 3:38pm ET
Agustin Reina, a director at the European Consumer Organisation, said the investigation was an “important step” by the European Commission. “Fair competition in this market is important to consumers as it may encourage the emergence of alternative privacy-friendly advertising models,” he said.
This month, Google resolved a similar antitrust investigation by French authorities, in which the company agreed to pay nearly $270 million in fines and facilitate competitors’ use of some of its advertising services.
In Germany, antitrust regulators recently announced an investigation into Google’s data processing practices. The company has also been targeted by competition authorities in Britain, Australia, Turkey and Russia, among other jurisdictions.
In the US, Google is fighting a Department of Justice lawsuit accusing the company of illegally protecting its dominance in online search and advertising. Authorities said Google has unfairly paid for deals with companies like Apple to make Google the default search engine for the iPhone, and has stymied competition by using exclusive contracts and agreements with customers. Parallel cases have been brought by prosecutors in dozens of states.
Ms Vestager, who leads the European Commission’s digital policy, is a familiar opponent of Google. The company has been charged with violating EU antitrust laws three times in recent years, resulting in billions of dollars in fines.
In 2017, authorities fined Google €2.4 billion for unfairly using its dominance as a search engine to boost its online shopping service over its competitors. A year later, the commission fined Google 4.34 billion euros for using the Android mobile operating system to require manufacturers to install Google as the default search engine on smartphones.
And in 2019, Google was fined 1.5 billion euros for imposing unfair terms on companies using its search bar on their websites.
Google has filed appeals in all cases.
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