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EU 2.4 billion euro fine was designed to surprise Google

by on19 December 2017

Watchdog wanted a deterrent effect

The European Union aimed for a “deterrent effect” on Google and other technology giants when it ordered the internet search outfit to pay 2.4 billion euro ($2.8 billion) for breaching antitrust law over how it displays shopping ads.

Regulators said that “the need to ensure that the fine has a sufficiently deterrent effect not only on Google and Alphabet but also on undertakings of a similar size and with similar resources".

The European Commission said in a 215-page document laying out details of its seven year investigation into the company. The “particularly large” revenue of Google’s parent, Alphabet also determined the size of the fine, the EU said.

The penalty, levied in June, was more than double an earlier one billion euro fine on Intel and came with a threat of more daily fines for Google if it did not comply with an order to offer equal treatment to rival shopping-comparison services. Big numbers in cases of mega-companies have been a theme for EU Competition Commissioner Margrethe Vestager, who dared to order Apple to pay back some 13 billion euro in taxes last year.

Dirk Auer, a research fellow at Liege University’s Competition and Innovation Institute warned that it is a little risky to speak of deterrence when the behaviour is novel.

“Large fines can only have a deterrent effect if firms know that their behaviour might infringe the law. Here, the behaviour was not listed” in the EU’s enforcement priority and "Google is challenging this very point" in its court appeal.

The EU defended its move to levy a fine in a case that raised some new issues, in a young industry it hasn’t investigated thoroughly before now.

“Even if the conduct may have certain features that have not been examined in past decisions, this does not prevent the imposition of a fine", it said in the document.

“Contrary to what Google claims, Google and Alphabet committed the infringement described in this decision intentionally or negligently” and the company “could not have been unaware of the fact that Google held a dominant position in the national markets for general search”.

The fine was based on revenue from Google’s comparison shopping service in 13 European countries, including sales from the paid product results and bottom text ads displayed on the Google Shopping website. That amount was multiplied by a figure that was redacted from the EU document.

Another legal expert warned that the courts might see it unreasonable of the Commission to impose any fine.

Damien Geradin, a professor at Tilburg University’s Law & Economics Centre. Regulators’ explanations “fail to convince that there is a need for an additional” multiplier of the penalty and the size of the fine needs to reflect the gravity of the infringement "which could not be that bad since the commission was willing to settle the case" at an earlier stage of its probe.

Google said it had implemented a remedy, as ordered by the EC, to ensure equal treatment for competitors.

“We have cooperated fully with the European Commission during its seven years of competition inquiry. We maintain that our innovations in online shopping have been good for shoppers, retailers and competition in general.”


Last modified on 19 December 2017
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