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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

70% of the EU adult population fully vaccinated

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Today, the EU has reached a crucial milestone with 70% of the adult population now fully vaccinated. In total, over 256 million adults in the EU have now received a full vaccine course. Seven weeks ago already, the Commission’s delivery target was met, ahead of time: to provide Member States, by the end of July, with enough vaccine doses to fully vaccinate 70% of the adult EU population.

The President of the European Commission, Ursula von der Leyen, said:  “The full vaccination of 70% of adults in the EU already in August is a great achievement. The EU’s strategy of moving forward together is paying off and putting Europe at the vanguard of the global fight against COVID-19.  But the pandemic is not over. We need more. I call on everyone who can to get vaccinated. And we need to help the rest of the world vaccinate, too. Europe will continue to support its partners in this effort, in particular the low and middle income countries.”

Stella Kyriakides, Commissioner for Health and Food Safety, said:  “I am very pleased that as of today we have reached our goal to vaccinate 70% of EU adults before the end of the summer. This is a collective achievement of the EU and its Member States that shows what is possible when we work together with solidarity and in coordination. Our efforts to further increase vaccinations across the EU will continue unabated. We will continue to support in particular those Member States that are continuing to face challenges. We need to close the immunity gap and the door for new variants and to do so, vaccinations must win the race over variants.”

Global cooperation and solidarity

The rapid, full vaccination of all targeted populations – in Europe and globally – is key to controlling the impact of the pandemic. The EU has been leading the multilateral response. The EU has exported about half of the vaccines produced in Europe to other countries in the world, as much as it has delivered for its citizens.  Team Europe has contributed close to €3 billion for the COVAX Facility to help secure at least 1.8 billion doses for 92 low and lower middle-income countries. Currently, over 200 million doses have been delivered by COVAX to 138 countries.

In addition, Team Europe aims to share at least 200 million more doses of vaccines secured under the EU’s advance purchase agreements to low and middle-income countries until the end of 2021, in particular through COVAX, as part of the EU sharing efforts

Preparing for new variants

Given the threat of new variants, it is important to continue ensuring the availability of sufficient vaccines, including adapted vaccines, also in the coming years. That is why the Commission signed a new contract with BioNTech-Pfizer on 20 May, which foresees the delivery of 1.8 billion doses of vaccines between the end of the year and 2023. For the same purpose, the Commission has also exercised the option of 150 million doses of the second Moderna contract. Member States have the possibility to resell or donate doses to countries in need outside the EU or through the COVAX Facility, contributing to a global and fair access to vaccines across the world. Other contracts may follow. This is the EU’s common insurance policy against any future waves of COVID-19.

Background

A safe and effective vaccine is our best chance to beat coronavirus and return to our normal lives. The European Commission has been working tirelessly to secure doses of potential vaccines that can be shared with all.

The European Commission has secured up to 4.6 billion doses of COVID-19 vaccines so far and negotiations are underway for additional doses. The Commission is also working with industry to step up vaccine manufacturing capacity.

At the same time, the Commission has started work to tackle new variants, aiming to rapidly develop and produce effective vaccines against these variants on a large scale. The HERA Incubator helps in responding to this threat.

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EU’s defence measures against unfair trade practices remained effective in 2020

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The system for protecting EU businesses from dumped and subsidised imports continued to function well in 2020 thanks to the EU’s robust and innovative ways of using trade defence instruments (TDI), despite the practical challenges presented by the COVID-19 pandemic. This is part of the European Commission’s new trade strategy, whereby the EU takes a more assertive stance in defending its interests against unfair trade practices.

Executive Vice-President and Commissioner for Trade Valdis Dombrovskis said: “The EU needs effective tools to defend ourselves when we face unfair trade practices. This is a key pillar of our new strategy for an open, sustainable and assertive trade policy. We have continued to use our trade defence instruments effectively during the COVID-19 pandemic, improved their monitoring and enforcement, and tackled new ways of giving subsidies by third countries.  We will not tolerate the misuse of trade defence instruments by our trading partners and we will continue to support our exporters caught up in such cases. It is crucial that our companies and their workers can continue to rely on robust trade defence instruments that protect them against unfair trade practices.”

At the end of 2020, the EU had 150 trade defence measures in force, in line with previous years’ activity levels with an increase in the number of cases lodged towards the end of 2020. In addition, for the first time, the Commission addressed a new type of subsidy given by third countries in the form of cross-border financial support that was a serious challenge for EU companies.

The following are the main trade-defence highlights of 2020:

Continued high level of EU trade defence activity

Due to the COVID-19 pandemic, the Commission had to swiftly introduce temporary changes to its work practices, especially concerning on-the-spot verification visits. This allowed the Commission to continue applying the instruments at the highest standards without a drop in the levels of activity. At the end of 2020, the 150 trade defence measures that the EU had in place – 10 more than at the end of 2019 – included 128 anti-dumping, 19 anti-subsidy and 3 safeguard measures.

In 2020, the Commission launched:

  • 15 investigations, compared to 16 in 2019, and imposed 17 provisional and definitive measures, compared to 15 in 2019;
  • 28 reviews, compared to 23 the previous year.

The highest number of EU trade defence measures concerns imports from:

  • China (99 measures);
  • Russia (9 measures);
  • India (7 measures);
  • The United States (6 measures).

Tackling new types of subsidies

In 2020, the Commission strengthened its action against subsidies granted by third countries. In particular, the Commission imposed countervailing duties on cross-border financial support given by China to Chinese-owned companies manufacturing glass fibre fabrics and continuous filament glass fibre products based in Egypt for export to the EU.

This means that, for the first time, the Commission addressed cross-border subsidies given by a country to enterprises located in another country for exports to the EU.

Support to, and defence of, EU exporters facing trade defence investigations in export markets

The importance of monitoring trade defence action taken by third countries was again evident in 2020. The number of trade defence measures in force by third countries affecting EU exporters reached its highest level since the Commission started this monitoring activity, with 178 measures in place. In addition, the number of cases initiated also increased in 2020, with 43 compared to 37 the previous year.

The report outlines the Commission’s activities to ensure that WTO rules are correctly applied and procedural errors and legal inconsistencies are addressed in order to avoid any misuse of trade defence instruments by third countries. The Commission’s interventions yielded success in some cases where measures were not ultimately imposed, affecting important EU export products such as ceramic tiles and fertilisers.  

Strong focus on monitoring and enforcement

There was a renewed focus on the monitoring of measures in place in 2020, including changes to surveillance practices to ensure the ongoing effectiveness of the trade defence instruments. This also involved customs authorities, EU industry, and in certain instances, the European Anti-Fraud Office (OLAF). Continuing its efforts to address instances where exporters tried to avoid measures, the Commission initiated three anti-circumvention investigations in 2020 and completed five such investigations during the year, where measures were extended in four cases to also address imports from third countries where transhipment was found to have taken place.

The report also recalls the findings of the European Court of Auditors from July 2020, which confirmed the successful enforcement of the EU’s trade defence instruments by the Commission. The report made a number of recommendations to further strengthen the Commission’s response to the challenges posed by unfairly traded imports that the Commission has started to implement in 2020, such as improving monitoring to ensure the effectiveness of measures. 

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Fishing opportunities in the Baltic Sea for 2022: improving long-term sustainability of stocks

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The Commission today adopted its proposal for fishing opportunities for 2022 for the Baltic Sea. Based on this proposal, EU countries will determine how much fish can be caught in the sea basin, for what concerns the most important commercial species.

The Commission proposes to increase fishing opportunities for herring in the Gulf of Riga, whilst maintaining the current levels for sprat, plaice and by-catches of eastern cod. The Commission proposes to decrease fishing opportunities for the remaining stocks covered by the proposal, in order to improve the sustainability of those stocks and to help other stocks such as cod and herring recovering.

Virginijus Sinkevičius, Commissioner for Environment, Oceans and Fisheries, said: “The poor environmental status of the Baltic Sea is heavily affecting our local fishermen and women, who rely on healthy fish stocks for their livelihoods. This is why the Commission is doing its utmost to restore those stocks, and today’s proposal is a reflection of that ambition. However, the state of the Baltic Sea is not only related to fishing, so everyone must do their part to build the long-term sustainability of this precious sea basin.”

Over the past decade, EU’s fishermen and women, industry and public authorities have made major efforts to rebuild fish stocks in the Baltic Sea. Where complete scientific advice was available, fishing opportunities had already been set in line with the principle of maximum sustainable yield (MSY) for seven out of eight stocks, covering 95% of fish landings in volume. However, in 2019 scientists discovered that the situation was worse than previously estimated. Decisive action is still necessary to restore all stocks and ensure that they grow to or remain at sustainable levels.

The proposed total allowable catches (TACs) are based on the best available peer-reviewed scientific advice from the International Council on the Exploration of the Seas (ICES) and follow the Baltic multiannual management plan adopted in 2016 by the European Parliament and the Council. As regards western Baltic cod, western Baltic herring and salmon, the Commission will update its proposal once the relevant scientific advice will be available (expected by mid-September).

Cod

For eastern Baltic cod, the Commission proposes to maintain the TAC level and all the accompanying measures from the 2021 fishing opportunities. Despite the measures taken since 2019, when scientists first alarmed about the very poor status of the stock, the situation has not yet improved.

For western Baltic cod the scientific advice from the International Council on the Exploration of the Seas (ICES) is postponed to mid-September, and the Commission will update its proposal accordingly. However, since it seems unlikely that the stock has developed favourably, the Commission proposes already now to maintain the spawning closure. It also proposes to maintain all accompanying measures in the eastern part of the catch area, given the predominance of eastern Baltic cod in that area.

Herring

The stock size of western Baltic herring remains below safe biological limits and scientists advise for the fourth year in a row to stop catching western herring. The Commission, therefore, proposes to close the directed fishery and set a TAC limited to unavoidable by-catches, whose level the Commission will propose at a later stage, as ICES is currently not in a position to provide sufficient scientific data.

For central Baltic herring, the Commission proposes a reduction of 54% in line with the ICES advice, because the stock size has dropped very close to the limit below which the stock is not sustainable. In line with the ICES advice, the Commission proposes to decrease the TAC level for herring in the Gulf of Bothnia by 5%, while the situation for Riga herring allows for an increase of the TAC by 21%.

Plaice

While the ICES advice would allow for an increase, the Commission remains cautious, mainly to protect cod – which is an unavoidable by-catch in plaice fisheries as currently conducted. It therefore proposes to maintain the TAC level unchanged.

Sprat

Similarly to plaice, the ICES advice for sprat would allow for an increase. The Commission however advises prudence and proposes to maintain the TAC level unchanged. This is because sprat and herring are caught in mixed fisheries and the TAC for central Baltic herring has to be reduced again significantly. Moreover, sprat is a prey species for cod, which is not in a good condition.

Salmon

ICES has postponed its scientific advice for salmon to mid-September. The Commission will update its proposal accordingly. A special advice from ICES of April 2020 already provides information about the issues affecting these stocks, pointing to the fact  that the MSY objective cannot be achieved for all salmon river stocks if the commercial and recreational mixed-stock sea fisheries are continued at current levels.

Next steps

The Council will examine the Commission’s proposal in view of adopting it during a Ministerial meeting on 11-12 October.

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