The European Commission has presented a formal complaint to the Antitrust against Google and its advertising activity. According to the preliminary opinion, “only Google’s compulsory divestment of part of its services could resolve its competition concerns.” An unprecedented move, which fundamentally undermines the search giant’s main source of income. The company replied in a statement: “We do not agree.”
The American company, the EU executive pointed out, “is active on both sides of the market with its ad server for publishers and with its ad buying tools and holds a dominant position on both sides. In addition, it manages the largest (online) market for ads. This leads to an intrinsic conflict of interest situation for Google”, reads the preliminary findings which do not prejudge the outcome of the ongoing investigation.
The consequences of the Brussels action
Google will now have the opportunity to respond in writing and to request a hearing, after which the Commission will decide whether Google has violated the block’s antitrust laws. If found guilty, the EU’s competition regulator could fine Google up to 10% of its global sales and (perhaps more importantly) force it to change the way it does business.
While the Alphabet-owned company is active in many businesses, from research to operating systems to thermostats, advertising provides the bulk of its revenue. Bloomberg noted that Google’s advertising business earned the company about $225 billion in 2022, representing about 80% of its annual revenue.
The origin of the EU investigation into Google
The European Union’s investigation into Google’s advertising technology dates back to 2021, when it said it wanted to investigate whether Google unlawfully favored its own services over competitors and restricted their access to user data. At the time Margrethe Vestager, noted that “Google is present at almost every level of the online advertising supply chain” and stated that the EU is “concerned that Google has made it more difficult for rival online advertising services to compete in the so-called ad tech stack”.
As for today’s decision, a dry reply from Google: “The investigation focuses on a narrow aspect of our advertising activity, and this is nothing new. We do not share the point of view of the European Commission and we will respond accordingly”.