With its long history of fines and sanctions against large companies for violating European competition rules, any pronouncement from Brussels on the American technology giants is capable of stopping Silicon Valley and the financial markets for a moment. Yesterday was not an exception. There is hardly any precedent for the two words with which the European Commission capped off its conclusions about Google’s conduct in the lucrative business of online advertising: “Mandatory divestment.”
“There is no alternative,” said the vice president of the European Commission and head of the Competition portfolio, Margrethe Vestager, at the press conference in which she announced the results of two years of investigations motivated by complaints from third-party companies. Only if Google gets rid of “part of its services” in the online advertising business “can the problems detected be resolved” and new abuses prevented. “There are very few precedents,” Vestager admitted, but “the inherent conflict of interest” in this case, with Google being the dominant company at two key points in the business, makes “mandatory divestment” the only solution.
At the moment it is a suggestion, but if Google’s response does not satisfy the European Commission, which yesterday sent a statement of objections to the Alphabet subsidiary with its findings and proposals to remedy the situation, it can become an order. According to the preliminary findings of its investigation, Google is abusing its dominant position in the online advertising industry, which “unlawfully misrepresents” to the benefit of its own ad technology services, the tools and programs used by advertisers to amplify their audiences and measure the impact of their campaigns, known as adtech, which “cross” demand and supply.
“In the milliseconds it takes to load a website, various algorithms are produced” that decide which of all the available ads are presented to the user at that moment. Often, companies use intermediaries to get the best results; some work for advertisers, others, for those who offer space on websites and apps. And there is still a third actor involved in the operations, the platforms where they are produced. “Google offers those three services,” Vestager said. It sells services for advertisers (Google Ads and DV360), also for those who offer advertising space (DFP) and has its own exchange platform, AdX. According to Brussels, the company has a dominant position in both the supply (advertisers) and demand (publishers) sectors and has abused this situation to favor “the online display of its own advertising technology services to the detriment of rival providers ”.
“Google has strong market positions at both ends of the ad market,” representing both ad buyers and sellers, “and this creates an inherent and pervasive conflict of interest” that, as long as it remains, will allow the company to maintain these practices or create new versions that can be very difficult to detect, argued Vestager, whose team has worked in collaboration with competition services in several member states.
The investigation is not over and Google will be able to defend itself against the accusations. If their explanations or proposals for changes do not resolve the problems detected, the European Commission could not only impose a multimillion-dollar fine on the company but, as it warned yesterday, reach the extreme decision of ordering it to divest “part” of its business in the sector. Google would always have the option of challenging the punishment in European courts, as it has done, with mixed success, in the past. To date, Google has received fines totaling 8,000 million euros in Europe for its anti-competitive practices, but it has never been ordered to divest itself of part of its assets to comply with community law on free competition.
The news, which comes months after the US Department of Justice accused the company of corrupting legitimate competition in the online advertising industry with its “illegal monopoly,” was welcomed by companies dealing with to compete with the American firm. “As lead plaintiffs in the Google Shopping case, we have experienced first-hand how they bear the cost of fines as part of the cost of doing business and how Google’s proposed remedies do not lead to genuine competition,” said the sales platform. online Kelkoo Group.
