The European Commission has levied another record breaking fine on Google. In July this year the European Commission fined the company €4.34 billion. It follows a fine on the company of €2.42 billion in June 2017 for allegedly abusing its dominance by giving an illegal advantage to Google's comparison shopping service. An investigation into practices regarding Google Adsense is ongoing.
This article sets out the key aspects of this decision and what it means for all companies (not just tech companies near the top of the Fortune 500).
Summary of the decision
In summary the Commission alleges Google engaged in three infringements constituting abuse of dominance:
- requiring manufacturers to pre-install the Google Search app and browser app (Chrome), as a condition for licensing Google's app store (the Play Store);
- making payments to certain large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices; and
- preventing manufacturers wishing to pre-install Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google.
The full text of the decision has not yet been published but broadly these alleged infringements appear to be:
- tying. Requiring the installation of the dominant search engine when taking Google Play. A relevant question in this context: if Google search makes the money then requiring unbundling may require a change to Google’s business model?;
- fidelity building schemes and/or exclusivity. Additional payments to receive some form of ‘premium’ listing over competitors.
- A non-compete. A requirement that if a company is doing business with Google, it cannot do business with Google’s Android rivals.
The Commission considers these practices were all ultimately intended to maintain the dominance of the Google search engine, in part by exploiting consumers’ so-called ‘status quo bias’.
Lessons for businesses
It seems highly likely given both the issues involved (abuse of dominance cases in technology markets are typically controversial), and the amounts involved, that these cases will run and run in the courts. So pending their resolution what are the current lessons for all businesses?
- Competition law risks are significant. The amounts of the fines can be eye-watering, and investigations result in significant legal costs and diverted management time. Increasingly any investigation and fine brings with it the risk (in many cases near certainty) of follow-on damages litigation. Not to mention the possibility of criminal prosecution and director disqualification. Although competition law intervention is still a relatively rare occurrence for many businesses, the repercussions need to be taken seriously. With an ever-increasing regulatory burden it’s easy to take the eye off the (antitrust) ball. We would certainly not suggest ignoring other regulatory obligations, but competition compliance needs to remain near the top of a business’s compliance agenda. it’s worth contrasting the size of Google’s fine with the (admittedly pre-GDPR) £500,000 fine levied on Facebook by the ICO for the Cambridge Analytica issue. This is of course not a like for like comparison but is still a useful reminder that while regulatory ‘trends’ come and go, businesses with limited resources need to effectively prioritise risks.
- the importance of market context. The dominance of Google search is a highly relevant factor in these investigations. But for this dominance there would be no case, and these types of restrictions (tying and bundling, payments for listing and non-competes) are commonly seen in many lawful commercial arrangements. You have to look carefully at market context when assessing competition law risk.
- legal uncertainty. There is frequently room for at least two views when it comes to competition law. President Trump certainly appeared to be at odds with the European Commission when he tweeted “I told you so! The European Union just slapped a Five Billion Dollar fine on one of our great companies, Google. They truly have taken advantage of the U.S., but not for long!” It is unclear whether he took expert antitrust advice on the case before offering this view, but the fact remains that big, well-advised businesses can take different views from the regulators on the risks, and that views can differ as between regulators (and governments!) in different jurisdictions. Practitioners and businesses dealing with risks in this space need to be adept at dealing with uncertainty and risk mitigation.
Gustaf Duhs