Google in trouble

EU's landmark ruling will boost consumer choice

The European Commission on Tuesday declared that Google had “abused market dominance” to provide “illegal advantage” to its own shopping services in its search engine results. The European Union’s (EU’s) anti-trust watchdog was addressing complaints by several rival shopping services. It imposed a massive fine of 2.4 billion euros (about Rs 17,700 crore at the current exchange rate) and gave the Internet giant 90 days to provide “equal treatment to competitors” in its search engine results. The fine is 2.5 per cent of the annual revenue of Google’s parent company Alphabet. The commission ruled that Google had denied choice to consumers. The landmark decision directly affects shopping comparison services but it could change the dynamics of several other markets where Google is dominant. Google practically owns the online search and advertising environment, it is also by far the largest player in map-based applications, and its Android operating system and app store, Google Play, too, are dominant in the smartphone environment. 

Alphabet will probably appeal against the decision, given the high stakes. But this is not the only case it has to bother about. The commission is also investigating other charges against the world’s second most valuable company. It is looking into complaints that Google’s maps, images and local information services embraced similar illegal practices. It is also ascertaining the possibility that Google misused its dominance in the smartphone segment by imposing restrictions on handset manufacturers and telecom operators. Then there are complaints about AdSense, the advertisement placement service, which is a core revenue generator. Tuesday’s decision makes it more likely that Google may be found wanting in some of these investigations. It also opens the door for competitors to file more complaints, making Google more vulnerable to civil suits by aggrieved competitors who could cite this ruling. It is noteworthy that in the past, anti-trust rulings by the commission against Intel and Microsoft resulted in opening up the browser and semi-conductor market segments to wider competition. In doing so, they supported innovation and increased consumer choice.

Google could argue that physical malls and supermarkets tend to provide superior placement to in-house brands without falling foul of anti-trust verdicts. The Federal Trade Commission decided to drop similar charges in 2013, so this ruling will not directly affect Google’s strategy in the US or outside the EU. But the EU is a huge market in itself, and it is very likely that similar charges will be brought in other jurisdictions by competitors, citing this judgment, thereby forcing Google to change its shopping-search algorithms and, possibly, even its strategy across segments just to retain access to the EU marketplace. In every segment, competition will surely create more choices and more robust business models. This verdict also underscores that cheating consumers does not pay, notwithstanding a company’s record of innovation — Google is one of the greatest innovators of the Internet era — or its overwhelming market dominance. Google won market share by being the smartest player but it cannot be allowed to stifle competition by unfair means. This ruling will open the door to more innovation and to more choices for consumers, and it should be welcomed.