Google loses in the Google Shopping case – €2.42 billion fine upheld
Another stage in the long-running dispute about the price comparison service Google Shopping has recently come to a close, with Google Inc. (“Google
”) suffering a defeat before the European General Court (“General Court
”). The General Court ultimately upheld a fine of €2.42 billion imposed by the European Commission (“Commission
”) on Google and its parent company Alphabet Inc. (“Alphabet
”) in June 2017. The General Court also largely agreed with the Commission’s legal analysis that Google had abused its dominant position on the market for general search services by unlawfully favouring its price comparison service over competing services (Case: T-612/17; an English summary of the judgment can be found here
Abusive adjustment of search algorithms to promote Google Shopping
To recap, the Commission had imposed the fine of €2.42 billion on 27 June 2017. Google had been accused of using its dominance on the market for online general search services (with market shares of over 90% in many EEA states and, at the same time, high barriers to market entry for potential competitors) at least from the beginning of 2008 to display the results from Google Shopping in a more favourable position on the results page for product-related searches. These appeared either high up in the results list or in special boxes to the right of the search results. At the same time, it was said that Google had adjusted its algorithms in such a way that the most relevant results referring to other price comparison services were at best displayed on page 4 of the results. Traffic to the Google Shopping site was reported to have increased by a factor of 45 in some countries as a result of this practice, while traffic to competitors’ sites had plummeted by up to 92%.
The Commission regarded this practice by Google, often referred to as “self-preferencing”, as an abuse of a dominant position according to Article 102 of the Treaty on the Functioning of the European Union (“TFEU”). Although this provision does not prohibit attaining a dominant position, companies enjoying a dominant position are subject to special obligations not to exploit their position on the relevant markets to the detriment of competitors and competition. In addition to the imposition of the fine, there was also an order to cease the abusive conduct and to refrain from any conduct with the same or similar objectives.
Fine upheld by the European General Court
In its judgment of 10 November 2021, the General Court largely agreed with the Commission’s legal analysis and also confirmed the full amount of the penalty. It came to the finding that mainly due to the significance of the Google search for other price comparison services and the behaviour of consumers, who usually click on one of the first results, Google’s conduct was capable of weakening competitors and competition. From the General Court’s point of view, the decisive factor here was not only the decrease in traffic on the sites of the other price comparison services, but also the fact that these losses could not be compensated for in any other way.
The General Court therefore believed that the Commission had a sufficient basis to assume that Google’s conduct led to a disappearance of comparison shopping services overall and could therefore lead to less innovation and less choice for customers. Finally, the General Court also rejected arguments by Google that its conduct was justified due to allegedly pro-competitive effects – particularly by improving its own search service. It held that the penalty imposed by the Commission was also justified as a result.
Outlook: stronger regulation and pursuit of big tech business models by the (competition) authorities
Google can still bring an appeal (limited to points of law only) against the General Court’s judgment before the Court of Justice of the European Union (“CJEU”). This means that it is quite possible, and also likely, that this is not the last word on the subject of the Google Shopping dispute. The judgment nevertheless marks an important victory for the Commission and should also be viewed as a confirmation of the efforts by numerous competition authorities and legislators to tighten the regulations governing the business practices of large digital companies. This includes, first and foremost, the Digital Markets Act (DMA), which is still in the legislative process in the EU and is intended to prohibit anti-competitive business practices by large online platforms (referred to as “gatekeepers”) before the fact. According to the current drafts this also covers the practice of self-preferencing.
A key factor for the competition authorities when monitoring the business models and practices of big tech companies will however still be the input provided by the market players affected by their practices. (Competition) Authorities still rely heavily on market players’ input, especially in digital markets. They are familiar with the market conditions and competitive relationships and are able to provide the authorities with insights into the effects of the dominant tech companies’ business practices. The investigations against Google in the Google Shopping case were also mainly triggered by complaints made to the Commission and national competition authorities (including the German Federal Cartel Office) by competitors. Most of the evidence put forward by the Commission came from Google’s competitors. As a result, companies affected by potentially abusive business practices engaged in by the large digital companies should look at each case individually to establish whether approaching the competition authorities could provide a remedy or at least lead to investigations. In addition and building on efforts by the authorities, affected companies can also consider whether they should claim damages for possible losses at a later stage.
Any questions? Please contact: Sarah Blazek and Jochen C. Hegener
Practice group: Antitrust & Competition