Google faces an antitrust investigation into its online advertising business from the EU’s regulation enforcer European Commission. This is the fourth time the EU has gone after Google since it paid $2.7 billion in penalties in 2017. Except for Microsoft, all Big Tech companies are currently dealing with active antitrust investigations in Europe.
A couple of weeks after the European Union (EU) initiated an investigation into possible anticompetitive business practices by Facebook, the 27-member nation bloc will now probe Google over suspected antitrust violations. With the announcement, Google is now the fourth of the five Big Tech companies the EU has gone after in the last two years.
Much like the investigations against Amazon and Facebook, the EU’s executive arm European Commission will be carrying out the investigation against Google to see if it engaged in anticompetitive conduct in the ad tech space, the Mountain View-based company’s bread and butter.
Specifically, the EC will assess whether Google has violated EU competition rules under Article 101Opens a new window and Article 102Opens a new window of the Treaty on the Functioning of the European Union (TFEU), by favoring its own online display advertisements.
EVP of the EC and Commissioner for Competition Margrethe Vestager,Opens a new window said, “Google is present at almost all levels of the supply chain for online display advertising. We are concerned that Google has made it harder for rival online advertising services to compete in the so-called ad tech stack. A level playing field is of the essence for everyone in the supply chain.â€
.@GoogleOpens a new window collects data, sells ad space & intermediates at almost all levels of the online display advertising supply chain. We are concerned that @GoogleOpens a new window has made it harder for rivals to compete in the #AdTechOpens a new window market. Today, we open an investigation More:
— Margrethe Vestager (@vestager) June 22, 2021Opens a new window
“Fair competition is important, both for advertisers to reach consumers on publishers’ sites and for publishers to sell their space to advertisers, to generate revenues and funding for content. We will also be looking at Google’s policies on user tracking to make sure they are in line with fair competition,†she addedOpens a new window .
See Also: Can the Justice Department’s Antitrust Lawsuit Blunt Google’s Ad Tech Dominance?
Antitrust Probe Against Google
Google is no stranger to antitrust accusations and this is not the first time the search behemoth is directly at loggerheads with the EU. The company was fined €1.49 billionOpens a new window ($1.74 billion) for breaching EU antitrust rules for AdSense in March 2019.
More recently, the company was fined €220 millionOpens a new window ($268 million) earlier this month by France’s antitrust watchdog, the French Competition Authority, for abusing its dominance in the market.
On the domestic front, Google is dealing with three antitrust lawsuits, one each by the Department of Justice (DoJ), a group of 38 statesOpens a new window led by Colorado and Nebraska Attorney Generals, and another group of 10 statesOpens a new window led by Texas. These lawsuits are filed for:Â
(a) Maintaining monopoly over search by signing exclusive contracts to set Google as the default search engine for browsers
(b)Maintaining search monopoly over on other products such as voice assistants besides browsers, andÂ
(c) Speculation over Google and Facebook being in cahoots over rigging ad auctions in their areas.
EC’s fresh new investigation against Google will encompass a broad-scale of its services, some of which the Texas-led coalition of states already accused the company of. As such EC will look into the following:Â
- See if Google favored ads made on its own ad exchange (AdX) and/or Google Ads
- Why Google mandates the use of its services Display & Video 360 (DV360) and/or Google Ads to purchase online display advertisements on Google-owned YouTube.
- Why it is obligatory to use Google Ad Manager to broker online display advertisements on YouTube, and why other tools are barred
- Why Google leverages user identity and behavioral data for targeted ads while restricting online display ad competitors, third-party advertisers, and publishersÂ
The importance of the investigation is evident from some of the astounding statistics the company has managed to achieve since its ad tech service was launched in 2000. Google’s advertising business is largely based on personalization, the data for which is collected by user search patterns, personal data, and behavior/browsing history.
Presently, Google dominates both in web searches with just over 92% search engine market share globallyOpens a new window (93.15% in Europe), and a 28.6% shareOpens a new window of the worldwide net ad revenue from display advertising in 2021. Online ads contributed 80.78% of Alphabet’s $55.314 billionOpens a new window revenue in Q1 2021.
It is unclear how much Google raked in from Europe’s €20 billion online ads spend in 2019.
Online ads or digital advertising refers to the text search results (based on keywords), display banner ads on websites (browsing history), and video ads on YouTube. EU’s investigation will primarily revolve around Google’s apparent abuse of its dominance to promote ads delivered using its own tools.
YouTube, like the Google search engine, also maintains a dominant position in the online video market with a 74.15% shareOpens a new window . Complaints of conflict of interest have been raised by smaller companies for stifling the competition. While the EC’s investigation won’t cover the conflict of interest part, Google will still need to deal with the Ending Platform Monopolies Act, one of the five new antitrust bills proposed by the United States House of Representatives last week. If passed, Google may need to let go of YouTube.
Privacy-Related Investigation Against Google
EU’s move against Google is significant, not only for antitrust concerns but also for privacy-related matters. For instance, Google’s proposals to phase out third-party cookie tracking from Chrome, collectively known as Privacy SandboxOpens a new window , were widely lauded as a great move toward instilling user trust in companies.
However, with Privacy Sandbox, Google aims not to do away with third-party cookies, but to replace them with new tools such as Federated Learning of Cohorts. Naturally, this raised additional concernsOpens a new window about whether the proposals could result in ad expenditure becoming concentrated, more so than it is now, on Google’s ecosystem at the expense of its competitors.
This is why the antitrust discourse and proceedings need to go hand in hand. As such, the EC will also keep an eye on:
- How Google plans to phase out third-party cookies on Chrome
- How Google plans to implement the opt-out function for personalized advertising on Android devices by discontinuing the availability of advertising identifiers
But Google’s ad-tech stack also has a Type II monopoly abuse: the ad-targeting systems Google sells are extraordinarily, harmfully invasive. They get away with this privacy abuse because they convert the money they get from rigging the market to lobby against privacy laws.
3/
— Cory Doctorow (@doctorow) June 8, 2021Opens a new window
Apple also rolled out App Tracking Transparency with the new iOS 14.5 in April, for which it received flak mainly from advertisers. The feature imparts users the ability to exert control over which app can (and cannot) track users when using online services or browsing websites. The hallmark of the feature is that app providers will have to request permission from users before they can begin to track them on any third-party websites or apps.
Needless to say, the feature can prove to be highly disruptive to advertisers, and beneficial to the company itself. But data collated by Verizon-owned Flurry, since iOS 14.5 was released, indicates that users are actively opting out of app tracking. Only 14% of the iOS usersOpens a new window globally opted-in for app tracking.
It remains to be seen how Google brings the no tracking feature for Android.
See Also: 5 New Antitrust Bills Seek to Rein In US Big Tech’s Anticompetitive Conduct
Other Antitrust Cases in the EU
Besides Google, the EU has moved against Amazon for preferential treatment of its own AWS MarketplaceOpens a new window , Facebook for its classified advertising service Marketplace, acquisition of instant messaging platform WhatsAppOpens a new window , and Apple for App Store practicesOpens a new window , mobile paymentsOpens a new window .
Apple was also charged by the regulatory body in the Apple-Spotify case over its music streaming business. Microsoft, also a part of the Big Tech, was slapped with an antitrust suit by workplace communications platform Slack and was scrutinized for its acquisitions of professional networking site LinkedInOpens a new window , code repository GitHubOpens a new window , and Nokia.
Articles 101, and 102 of the TFEU grant the EU powers to bury its teeth into violations. And while the EU is taking measures to bring to justice illicit conduct, it is still lagging behind when it comes to actual resolution. Hopefully, the Digital Services Act (DSA) and the Digital Markets Act (DMA), proposed in December 2020Opens a new window , will close the gap between laws and real-time enforcement.
Wrapping Up
“Thousands of European businesses use our advertising products to reach new customers and fund their websites every single day. They choose them because they’re competitive and effective. We will continue to engage constructively with the European Commission to answer their questions and demonstrate the benefits of our products to European businesses and consumers,†stated Google in response to EC’s initiation of formal investigations.
Besides this, and the $1.74 billion fine for AdSense in 2019, Google also dealt with the governing body in 2017 over search result manipulation for which it was penalized €2.42 billionOpens a new window ($2.7 billion), and then again in 2018 for taking advantage of Android’s dominance in mobile and ended up paying €4.34 billionOpens a new window ($5 billion) in fines.
If found guilty, Google may end up paying as much as 10% of its total revenueOpens a new window , a standard for violators of EU’s competition laws. Google’s annual revenue for 2020 stood at $182.52 billionOpens a new window .
However, this means little if the company happily pays the fine without relinquishing the stranglehold on the market, and ends up in violation of yet another antitrust or privacy law.
Let us know if you enjoyed reading this news on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We would love to hear from you!