Google charged by EU with abusing its ad tech dominance
- Samuel Stolton and Stephanie Bodoni, Bloomberg News
- Jun 14, 2023 Updated 58 min ago
Google was accused of abusing its dominance over advertising technology to crush competition as the European Union fired off an antitrust charge sheet that threatens a breakup of parts of the lucrative business, kicking off a process that could take years to resolve.
The Alphabet Inc. unit had favored its own ad exchange program over its rivals' and bolstered the company’s central role in the ad tech supply chain as well as Google’s ability to charge a high fee for its service, Margrethe Vestager, the EU’s competition commissioner, said Wednesday at a press conference.
“The commission’s preliminary view is therefore that only the mandatory divestment by Google of part of its services would address its competition concerns,” Vestager said.
While she said Google may be forced to divest part its ad sales services should the commission decide that the company acted illegally, market reaction to the announcement was muted. European investigations take years to conclude and the previously eye-catching fines that ran into the billions have had little impact on the company’s share price. The U.S. previously sued Google over the same issue, and the UK has an open investigation.
Google shares were little changed in New York after falling as much as 1.9% in market open. The commission will now invite Google to a hearing where it can present its arguments against the bloc’s preliminary view.
Crucially, the European Commission said that a potential order for Google to implement behavioral remedies may not be sufficient in correcting the abusive conduct, opening the door for a potential order against Google to break off its ad tech business from its core services.
“Google remains committed to creating value for our publisher and advertiser partners in this highly competitive sector,” Dan Taylor, vice president of global ads at Google, said in a statement. “The commission’s investigation focuses on a narrow aspect of our advertising business and is not new. We disagree with the EC’s view and we will respond accordingly.”
The EU case is a direct attack on the black-box of online advertising where Google automatically calculates and offers ad space and prices to advertisers and publishers as a user clicks on a web page. Online advertising is Alphabet’s most lucrative business, generating 80% of total revenue last year, adding up to about $225 billion.
The new charge sheet follows three earlier EU cases against Google, in which the company has racked up more than €8 billion ($8.6 billion) since 2017 for abuses of dominance on its mobile operating system, its search business, and its display advertising operations. Google has continued to defend its innocence.
So-called statements of objections are a formal step laying out the European Commission’s concerns over a particular behavior that it deems to be harmful to the market. On Wednesday, the EU’s antitrust arm appealed to Google to come forward with solutions.
While antitrust charge sheets can pave the way for fines as much as 10% of a firm's global sales, they seldom approach that level, meaning the impact on earnings of Silicon Valley firms is often muted.
Instead, regulators across Europe have pivoted toward insisting on tough remedies — including changes to the business model of companies — that can be far more onerous. They’ve also approved a slew of new rules to try to act before it’s too late to stop the most powerful companies turning markets into competition dead-zones.
Google has long held a key position in which it’s able to collect data allowing advertisers to target ads, as well as sell ad space and provide the technology that allows for advertisers to find publishers to sell their space.
The EU first opened a probe into Google’s ad tech practices in 2021. The commission’s investigation has been examining how the company may have obstructed rivals’ access to user-data for online advertising as well as how it may have ringfenced data for its own use.
The UK’s competition authority has also been investigating Google’s ad tech practices. Litigation against the firm’s behavior is also ongoing in the U.S as part of three different suits filed by the US Department of Justice and a group of states, a separate one from a different group of states and one by advertisers and publishers. Those cases could well result in an order for Google to separate its ad tech arm from its core business.
