As has been widely reported in the national and international press, on 27 June 2017, Google was fined a record €2.42bn by the European Commission for abusing its dominant position as a search engine to the benefit of its own comparison shopping service (a separate market in which Google is not dominant). What does this mean for rivals and consumers and how far-reaching is the decision?
Under UK and European law, it is not illegal to hold a dominant position in the market. However, companies in such a position have a special responsibility not to allow their conduct to distort competition either in the market in which they are dominant or in separate markets.
Comparison shopping allows consumers to compare the products and prices of mainstream retailers, online platforms (such as eBay and Amazon) and re-sellers. Retailers pay to list their products on a comparison shopping platform, either by a flat fee or on a 'per click' basis. Comparison shopping services rely on traffic to be competitive: more traffic generates more revenue and attracts more retailers; more retailers in turn generate more traffic.
The European Commission found that when a Google search is carried out, the results appear ranked by relevance by applying generic algorithms. However, Google Shopping is not subject to those algorithms, meaning the service generally features at (or near) the top of the search results, often as consumer-friendly images. Further, Google's algorithms include criteria which demote rival comparison shopping sites generally off the first page of search results, or beyond. The result is that consumers very rarely see rival comparison shopping services in Google search results. The European Commission has ruled such practice to be anticompetitive and illegal.
Google has been ordered to end its abusive conduct within 90 days. In practice, this should mean that other shopping comparison sites will feature as high in search results as Google Shopping. Comparison shopping sites may start to lower prices or offer deals to entice retailers and generate traffic, to the benefit or retailers who may also have more bargaining power against Google and others.
So far, there is nothing to suggest that Google's abuse of dominance led to increased prices for retailers using its comparison shopping service, or that retailers have suffered any recoverable loss. However, others in the comparison shopping market are likely to have seen their traffic – therefore their revenue – drop as a result of Google's conduct and are likely to have claims against Google for losses suffered. On the back of the Commission ruling, Google's comparison shopping competitors would not need to establish liability but would be entitled to damages if (i) a demonstrable link can be established between loss of revenue and Google's conduct, and (ii) that loss can be quantified. The process of claiming follow-on damages has been made more straightforward by the EU Competition Damages Directive, implemented in the UK on 9 March 2017 (find out more about the Damages Directive in our briefing paper).
The decision relates only to the comparison shopping market, but may have further reaching effects on Google's approach to its comparison services which, by the same logic, may also be considered anti-competitive.
Google has said it will appeal the decision.
Article by Jane Wessel and Douglas Campbell.