Costs of Competition: Google receives a £1.3 billion fine

March 21, 2019

2 min read

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What's going on here?

Google has been fined £1.28 billion by the EU for anti-competitive behaviour.

What does this mean?

The fine comes after Google was found to have blocked rival online search advertisers between 2006 and 2016. This has been seen as an abuse of market dominance, restricting third-party rivals from displaying search advertisements. In response to the fine, Google has changed its AdSense contracts with other companies, giving more freedom to display competing search advertisements.

What's the big picture effect?

Margrethe Vestager (the European Commissioner for Competition, who deals with competition issues in the EU) said that “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. Google’s actions are illegal under EU antitrust rules. The misconduct lasted over 10 years and denied other companies the possibility to compete while denying consumers the benefits of competition.”

This is the third fine handed down by Brussels to Google in the last two years. Last year, the EU competition authority gave the search engine giant a £3.7 billion fine for using its Android operating system for mobiles to block rivals. Another fine of £2 billion was given to the company in 2017 for hindering rival shopping comparison websites.

We are seeing the EU award repeated, whopping fines to Google for anti-competitive behaviour, and yet the recurrence of these offences shows that the fines are not sufficient to deter Google from behaving in this way. Alphabet Inc (Google’s parent company) makes huge amounts of profit from advertising, with pre-tax profits reaching £23 billion in 2018. Google may, therefore, see a £1.28 billion hit on its profits as a small price to pay when considering the costs against the benefits. Even when factoring in the costs, companies are able to make such huge profits from their advertising strategy.

Receiving three fines within two years indicates that the EU fines are arguably an insufficient deterrent. Is the EU unable to effectively prevent anti-competitive behaviour from a powerful, dominant company such as Google?

Report written by Elizabeth C

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