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EU Commission fines Google €1.49 billion for abusive practices in online advertising

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The European Commission has fined Google €1.49 billion for breaching EU antitrust rules. Google has abused its market dominance by imposing a number of restrictive clauses in contracts with third-party websites which prevented Google’s rivals from placing their search adverts on these websites.

Commissioner Margrethe Vestager, in charge of competition policy, said: “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. 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.”

Google’s strategy for online search advertising intermediation

Websites such as newspaper websites, blogs or travel sites aggregators often have a search function embedded. When a user searches using this search function, the website delivers both search results and search adverts, which appear alongside the search result.

Through AdSense for Search, Google provides these search adverts to owners of “publisher” websites. Google is an intermediary, like an advertising broker, between advertisers and website owners that want to profit from the space around their search results pages. Therefore, AdSense for Search works as an online search advertising intermediation platform.

Google was by far the strongest player in online search advertising intermediation in the European Economic Area (EEA), with a market share above 70% from 2006 to 2016. In 2016 Google also held market shares generally above 90% in the national markets for general search and above 75% in most of the national markets for online search advertising, where it is present with its flagship product, the Google search engine, which provides search results to consumers.

It is not possible for competitors in online search advertising such as Microsoft and Yahoo to sell advertising space in Google’s own search engine results pages. Therefore, third-party websites represent an important entry point for these other suppliers of online search advertising intermediation services to grow their business and try to compete with Google.

Google’s provision of online search advertising intermediation services to the most commercially important publishers took place via agreements that were individually negotiated. The Commission has reviewed hundreds of such agreements in the course of its investigation and found that:

Starting in 2006, Google included exclusivity clauses in its contracts. This meant that publishers were prohibited from placing any search adverts from competitors on their search results pages. The decision concerns publishers whose agreements with Google required such exclusivity for all their websites.

As of March 2009, Google gradually began replacing the exclusivity clauses with so-called “Premium Placement” clauses. These required publishers to reserve the most profitable space on their search results pages for Google’s adverts and request a minimum number of Google adverts. As a result, Google’s competitorswere prevented from placing their search adverts in the most visible and clicked on parts of the websites’ search results pages.

As of March 2009, Google also included clauses requiring publishers to seek written approval from Google before making changes to the way in which any rival adverts were displayed. This meant that Google could control how attractive, and therefore clicked on, competing search adverts could be.

Therefore, Google first imposed an exclusive supply obligation, which prevented competitors from placing any search adverts on the commercially most significant websites. Then, Google introduced what it called its “relaxed exclusivity” strategy aimed at reserving for its own search adverts the most valuable positions and at controlling competing adverts’ performance.

Google’s practices covered over half the market by turnover throughout most of the period. Google’s rivals were not able to compete on the merits, either because there was an outright prohibition for them to appear on publisher websites or because Google reserved for itself by far the most valuable commercial space on those websites, while at the same time controlling how rival search adverts could appear.

Breach of EU antitrust rules

Google’s practices amount to an abuse of Google’s dominant position in the online search advertising intermediation market by preventing competition on the merits.

Market dominance is, as such, not illegal under EU antitrust rules. However, dominant companies have a special responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in separate markets.

Today’s decision concludes that Google is dominant in the market for online search advertising intermediation in the EEA since at least 2006. This is based in particular on Google’s very high market shares, exceeding 85% for most of the period. The market is also characterised by high barriers to entry. These include very significant initial and ongoing investments required to develop and maintain general search technology, a search advertising platform, and a sufficiently large portfolio of both publishers and advertisers.

Google has abused this market dominance by preventing rivals from competing in the online search advertising intermediation market.

Based on a broad range of evidence, the Commission found that Google’s conduct harmed competition and consumers, and stifled innovation. Google’s rivals were unable to grow and offer alternative online search advertising intermediation services to those of Google. As a result, owners of websites had limited options for monetizing space on these websites and were forced to rely almost solely on Google.

Google did not demonstrate that the clauses created any efficiencies capable of justifying its practices.

Consequences of the Decision

The Commission’s fine of €1 494 459 000 (1.29% of Google’s turnover in 2018) takes account of the duration and gravity of the infringement. In accordance with the Commission’s 2006 Guidelines on fines (see press release and MEMO), the fine has been calculated on the basis of the value of Google’s revenue from online search advertising intermediation in the EEA.

Google ceased the illegal practices a few months after the Commission issued in July 2016a Statement of Objections concerning this case. The decision requires Google to, at a minimum, stop its illegal conduct, to the extent it has not already done so, and to refrain from any measure that has the same or equivalent object or effect.

Finally, Google is also liable to face civil actions for damages that can be brought before the courts of the Member States by any person or business affected by its anti-competitive behaviour. The new EU Antitrust Damages Directive makes it easier for victims of anti-competitive practices to obtain damages.

Other Google cases

In June 2017, the Commission fined Google €2.42 billion for abusing its dominance as a search engine by giving an illegal advantage to Google’s own comparison shopping service.

In July 2018, the Commission fined Google €4.34 billion for illegal practices regarding Android mobile devices to strengthen the dominance of Google’s search engine.

Background

Today’s decision is addressed to Google LLC (previously Google Inc.) and Alphabet Inc., Google’s parent company.

The Commission’s investigation into the conduct covered by the present decision began as part of the broader Google Search investigation (case 39740).

On 14 July 2016, the Commission sent a Statement of Objections to Google setting out its preliminary views that the company had abused its dominant position by artificially restricting the possibility of third party websites to display search advertisements from Google’s competitors.

Article 102 of the Treaty on the Functioning of the European Union (TFEU) and Article 54 of the EEA Agreement prohibit the abuse of a dominant position.

Fines imposed on companies found in breach of EU antitrust rules are paid into the general EU budget. This money is not earmarked for particular expenses, but Member States’ contributions to the EU budget for the following year are reduced accordingly. The fines therefore help to finance the EU and reduce the burden for taxpayers.

More information on today’s decision is available on the Commission’s competition website in the public case register under the case number 40411.

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EU Politics

EU and Armenia Comprehensive and Enhanced Partnership Agreement enters into force

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On 1 March 2021, the European Union-Armenia Comprehensive and Enhanced Partnership Agreement (CEPA) will enter into force. It has now been ratified by the Republic of Armenia, all EU Member States and the European Parliament. This represents an important milestone for EU-Armenia relations.

This Agreement provides a framework for the EU and Armenia to work together in a wide range of areas: strengthening democracy, the rule of law and human rights; creating more jobs and business opportunities, improving legislation, public safety, a cleaner environment, as well as better education and opportunities for research. This bilateral agenda also contributes to overall aim of the EU to deepen and strengthen its relations with the countries of its Eastern neighbourhood through the Eastern Partnership framework.

High Representative of the European Union for Foreign Affairs and Security Policy/Vice-President of the European Commission, Josep Borrell, said: “The entry into force of our Comprehensive and Enhanced Partnership Agreement comes at a moment when Armenia faces significant challenges. It sends a strong signal that the EU and Armenia are committed to democratic principles and the rule of law, as well as to a wider reform agenda. Across political, economic, trade, and other sectoral areas, our Agreement aims to bring positive change to people’s lives, to overcome challenges to Armenia’s reforms agenda.”

Commissioner for Neighbourhood and Enlargement, Olivér Várhelyi, underlined that: “While these are trying times for Armenia, the European Union continues to stand by the Armenian people. The entry into force of the bilateral EU-Armenia agreement on 1 March will allow us to strengthen our work on the economy, connectivity, digitalisation and the green transformation as priority areas. These will have concrete benefits for the people and are key for socio-economic recovery and the longer-term resilience of the country. In the current turbulent days, maintaining calm and respect for democracy and constitutional order are key.”

The Agreement was signed in November 2017 and substantial parts of have been provisionally applied since 1 June 2018. Since then, the breadth and depth of the bilateral cooperation between Armenia and the European Union have advanced steadily. At the 3rd EU-Armenia Partnership Council held on 17 December 2020, the European Union and Armenia reiterated their full commitment to implementing the CEPA.

The Agreement plays an important role for the modernisation of Armenia, in particular through legislative approximation to EU norms in many sectors. This includes reforms in the rule of law and respect of human rights, particularly an independent, efficient and accountable justice system, as well as reforms aimed at enhancing the responsiveness and effectiveness of public institutions and at favouring the conditions for sustainable and inclusive development.

From the entry into force of the Agreement on 1 March, cooperation will be strengthened in those areas which to date were not subject to the provisional application of the Agreement. The European Union stands ready and looks forward to working even more closely with Armenia on the full and effective implementation of the Agreement, in our mutual interest and to the benefit of our societies and citizens.

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EU Politics

Explainer: New EU strategy on adaptation to climate change

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1. What is the objective of the new EU Adaptation Strategy?

The Strategy outlines a long-term vision for the EU to become a climate-resilient society, fully adapted to the unavoidable impacts of climate change by 2050. Complementing the EU’s ambitious goal to become climate neutral by mid-century, this strategy aims to reinforce the adaptive capacity of the EU and the world and minimise vulnerability to the impacts of climate change, in line with the Paris Agreement and the proposal for the European Climate Law. The new Strategy seeks to step up action across the economy and society in synergy with other Green Deal policies such as biodiversity protection and sustainable agriculture. This will be done by making adaptation smarter, swifter and more systemic, as well as stepping up international action on adaptation. This means improving our knowledge of climate impacts and adaptation solutions; stepping up adaptation planning and climate risk assessments; accelerating adaptation action; and helping to strengthen climate resilience globally. This strategy sets out a whole-economy approach, with particular consideration for those among us who are most vulnerable to guarantee that resilience is achieved in a just and fair way.

2. Why do we need a new EU Adaptation Strategy now?

Halting all greenhouse gas emissions today would still not prevent the climate change impacts that are already occurring. The severe effects of the COVID-19 pandemic on our health and socio-economic wellbeing are a stark warning of the dangers of insufficient preparation. The frequency and severity of climate and weather extremes is increasing. They range from unprecedented forest fires and heatwaves to devastating droughts; and from hurricanes ravaging EU outermost regions to forests decimated by unprecedented bark beetle outbreaks in Central and Eastern Europe. Water shortages in the EU have affected economic activities as diverse as agriculture, aquaculture, tourism, power plant cooling, and cargo shipping on rivers. In the EU, economic losses from extreme weather already average over €12 billion per year.

While the 2013 EU Adaptation Strategy was positively evaluated in 2018, there is a need to deepen and to expand adaptation actions, e.g. to make data more uniform and accessible, to bridge the climate protection gap – the share of non-insured economic losses – and to scale up finance for climate adaptation in the EU and globally. The EU’s adaptive capacity needs to be reinforced in line with the Paris Agreement and the proposed European Climate Law. The strategy comes at an important moment, ahead of the COP26 in Glasgow, where adaptation to climate change will play a key role.

3. What actions are planned in the EU as part of the strategy?

The Strategy pursues three objectives and proposes a range of actions in order to meet them:

  • To make adaptation smarter – improving knowledge and availability of data, while managing the inherent uncertainty brought upon us by climate change; securing more and better data on climate-related risk and losses, and making Climate-ADAPT the authoritative European platform for adaptation knowledge.
  • To make adaptation more systemic – supporting policy development at all levels of governance, society and the economy and in all sectors by improving adaptation strategies and plans; integrating climate resilience in macro-fiscal policy, and promoting nature-based solutions for adaptation.
  • To speed up adaptation across the board – by accelerating the development and rollout of adaptation solutions; reducing climate-related risk; closing the climate protection gap , and ensuring the availability and sustainability of fresh water.

At the same time, the Commission will continue to provide guidelines, technical capacity and funding opportunities to help Member States, regions, and local administrations to develop and implement comprehensive adaptation strategies and actions. The Commission will also continue to mainstream adaptation by integrating climate change considerations into EU policies and programmes to make them climate resilient.

4. How does the Strategy integrate international action into its framework?

Our climate change adaptation ambition must match our global leadership in climate change mitigation. The Paris Agreement established the global goal on adaptation and highlighted adaptation as a key contributor to sustainable development. Adaptation is a crosscutting element in the EU and Member States’ external action, spanning development cooperation, migration, trade, agriculture and security. The EU already has a history of cooperating with other countries on climate adaptation at all levels, but the strategy brings this into a coherent framework around three actions:

  • increasing support for international climate resilience and preparedness, for example in support of the development and implementation of Nationally Determined Contributions (under the Paris Agreement) in partner countries;
  • scaling up international finance to build climate resilience, for example through the EU instruments for external action and leveraging private sector investments;
  • strengthening global engagement and exchanges, learning from our international partners who have long been on the frontlines of climate change and have valuable experience that can help Europe become more climate resilient and sharing information for example from the COPERNICUS programme.

The EU and its Member States increased their overall climate finance support to third countries by 7.4% in 2019, amounting to €21.9 billion, 52% of which was spent on helping our partners adapt to climate change. In order to close the climate change adaptation financing gap, the Commission will aim to increase resources and mobilise larger scale adaptation finance, including through innovative mechanisms such as the European Fund for Sustainable Development Plus, as well as making resources available through bilateral channels and through the Member States.

5. Where can I find more information on adaptation in Europe?

The adaptation strategy aims to make Climate-ADAPT the authoritative European platform for adaptation knowledge, linking it up with other relevant knowledge portals and sources and making it more accessible for citizens, local governments and other stakeholders. Already today, Climate-ADAPT provides access to reliable data on the likely impacts of climate change, their socio-economic aspects, and the costs and benefits of adaptation options. Its continued development will give decision-makers vital support, and will help policy-makers at EU, national, regional and local levels to develop informed climate change adaptation measures and policies.

Climate-ADAPT will also host the new European Climate and Health Observatory. This Observatory will boost our awareness and understanding of the growing health risks, which climate change will entail, such as heat stress, food and water safety and security threats, or the emergence and spread of infectious diseases. It will help us to better anticipate and minimise these risks, and to improve our individual and collective preparedness.

6. What will Member States need to do under the new Strategy and how will progress be measured?

Adapting to climate change is a process. Discussions on standardised indicators that accurately capture progress are ongoing at EU and international level. The strategy aims to enlarge and make more accessible a toolbox that adaptation actors can use in their work and adapt to their individual needs, be they national, regional or local administrations, SMEs or individual citizens. To help informed decisions, the strategy promotes knowledge sharing and data availability. Adaptation reporting requirements for Member States are already set out in dedicated legislative instruments, such as the Energy Union Governance Regulations. The European Climate Law will, once adopted, also set out obligations for the EU and its Member States in this respect.

7. What EU-level resources are available for adaptation?

Financial support for adaptation is made available through the European Structural and Investment Funds, the Common Agricultural Policy, the LIFE Programme, and the Recovery and Resilience Facility. The proposed Horizon Europe Mission on Adaptation to Climate Change will also leverage significant resources in the effort to make Europe climate resilient. The Commission will support the local uptake of data, digital and smart solutions related to climate adaptation. To help local authorities move from planning to action, the EU will pilot a policy support facility to assist local and regional authorities under the EU Covenant of Mayors.

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EU Politics

Strong EU trade enforcement rules enter into force

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Robust new trade enforcement rules have entered into force that will further strengthen the EU’s toolbox in defending its interests. With the update of the EU’s Trade Enforcement Regulation, the EU is able to act in a broader range of circumstances.

The new rules upgrade the EU’s enforcement by introducing the following changes:

  • empowering the EU to act to protect its trade interests in the World Trade Organization (WTO) and under bilateral agreements when a trade dispute is blocked despite the EU’s good faith effort to follow dispute settlement procedures (the regulation previously only allowed action after the completion of dispute settlement procedures); and
  • expanding the scope of the regulation and of possible trade policy countermeasures to services and certain trade-related aspects of intellectual property rights (IPR) (the regulation previously only permitted countermeasures in goods).

Executive Vice-President and Commissioner for Trade, Valdis Dombrovskis, said: “The European Union must be able to defend itself against unfair trading practices. These new rules will help protect us from those trying to take advantage of our openness. We continue to work towards our first preference, which is a reformed and well-functioning multilateral rulebook with an effective Dispute Settlement System at its core. But we cannot afford to stand defenseless in the meantime. These measures allow us to respond resolutely and assertively.”

In line with the Political Guidelines of Commission President Ursula von der Leyen, the Commission is further reinforcing the Union’s tools to focus on compliance and enforcement of the EU’s trade agreements.

Ensuring the respect of the commitments agreed with other trade partners is a key priority of this Commission. The EU is therefore increasing the focus on enforcing its partners’ commitments in multilateral, regional and bilateral trade agreements. In so doing the Union will rely on a suite of instruments.

Background

The proposal to amend the existing Enforcement Regulation came as a reaction to the blockage of the operations of the WTO Appellate Body. The current regulation – a basis under EU law for adopting trade countermeasures – requires that a dispute goes all the way through the WTO procedures, including the appeal stage, before the Union can react. The lack of a functioning WTO Appellate Body allows WTO Members to avoid their obligations and escape a binding ruling by simply appealing a panel report.

The revised Regulation enables the EU to react even if the WTO has not delivered a final ruling because the other WTO member blocks the dispute procedure by appealing to the non-functioning Appellate Body and by not agreeing to an alternative arbitration under WTO Dispute Settlement Agreement.

This new mechanism also applies to the dispute settlement in relation to regional or bilateral trade agreements to which the EU is party if a similar blockage arises. The EU must be able to respond resolutely in case trade partners hinder effective dispute settlement resolution, for instance, by blocking the composition of panels.

Anti-coercion mechanism

As part of the agreement, the Commission committed to developing the EU’s anti-coercion mechanism swiftly. As announced in the Letter of Intent of the President of the European Commission to the President of the European Parliament and President in office of the Council of 16 September 2020 the Commission shall adopt the proposal on the anti-coercion mechanism no later than the end of 2021. The anti-coercion mechanism is also included in the European Commission’s 2021 Work Programme.

Additional efforts on implementation and enforcement

In addition to upgrading the Enforcement Regulation and to proposing an anti-coercion mechanism, several other steps have been taken since the start of this Commission to strengthen and target EU implementation and enforcement efforts. This includes:

  • the appointment of a Chief Trade Enforcement Officer;
  • the creation of a new Directorate in DG Trade for enforcement, market access and SMEs; and
  • the establishment under Access2Markets of a single entry point for complaints from EU stakeholders and businesses on trade barriers on foreign markets and violations of sustainable trade commitments in EU trade agreements.

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