September 22, 2023

European Union regulators on Tuesday targeted the core of Google’s business model, announcing that the Silicon Valley giant is the subject of a new antitrust investigation because it may be abusing its dominance in the online advertising market to compete suffocate.

The investigation is part of a broader push by the European authorities to crack down on the world’s largest tech companies. Amazon, Apple and Facebook are also the subject of antitrust proceedings by the 27-state bloc, and the European Union is drafting new antitrust and digital services laws to further tighten oversight of big tech.

Online advertising has helped Google become one of the most valuable and powerful companies in the world, with its parent company Alphabet making net profits of $ 40 billion last year. But publishers like News Corp, as well as competing digital advertising firms, have long complained that Google’s dominance makes it harder to generate advertising revenue from their websites and to gain ground from competitors.

The European Commission, the bloc’s executive body, said the investigation focused on the display advertising market, valued at an estimated $ 24 billion in Europe, on which Google offers a range of services to both advertisers and publishers. The company gathers data for targeted advertising, sells ad space on websites across the Internet, and offers services that act as an intermediary between advertisers and publishers.

“We are concerned that Google has made it difficult for competing online advertising services to compete in what is known as the ad tech stack,” said Margrethe Vestager, the European Commission’s executive vice-president in charge of competition policy, in a statement.

“A level playing field is vital for everyone in the supply chain,” she said.

Announcing the start of the formal investigation is one step in a process that could take years. Google could face fines of up to 10 percent of global sales and require it to change its business practices if found guilty.

With a focus on advertising, the authorities are focusing on a cornerstone of Google’s financial success. Its dominance has helped the company build a digital empire in internet search, email, entertainment, maps, cloud computing, smartphones and other consumer electronics, shopping, and autonomous driving. With a market value of more than $ 1.6 trillion, Google is one of the largest companies in the world.

The Commission’s investigation focuses on ways Google is using its power in the advertising technology market to limit competition, including requiring advertisers to use certain Google services to buy display advertising on YouTube. Investigators said they were also looking into a new Google policy for its Chrome browser to replace tracking of “cookies” placed on websites with a new system created by Google.

A Google spokeswoman said the company will “continue to work constructively with the European Commission to answer their questions and demonstrate the benefits of our products.”

“Thousands of European companies use our advertising products to reach new customers every day and to fund their websites,” said the spokeswoman. “They choose them because they are competitive and effective.”

Agustín Reyna, Director of the European Consumer Organization, said the investigation was a “significant step” by the European Commission. “Fair competition in this market is important for consumers as it could encourage the emergence of alternative, privacy-friendly advertising models,” he said.

This month, Google closed a similar antitrust investigation by the French authorities, with the company agreeing to pay fines of around $ 270 million and make it easier for competitors to use some of its advertising services.

In Germany, the antitrust authorities recently announced an investigation into Google’s data processing practices. The company has been targeted by competition authorities in the UK, Australia, Turkey and Russia, among others.

In the US, Google is fighting a Justice Department lawsuit accusing the company of illegally protecting its dominance in online search and advertising. Authorities said Google wrongly paid for deals with companies like Apple to make Google the iPhone’s default search engine and hampered competition through exclusive contracts and agreements with customers. Parallel cases have been filed by attorneys general in dozens of states.

Ms. Vestager, who heads the European Commission’s digital policy, is a well-known opponent for Google. The company has been charged three times in the past few years for violating European Union antitrust law, resulting in fines running into billions.

In 2017, the authorities fined Google € 2.4 billion for unfairly using its dominance as a search engine to strengthen its online shopping service over its competitors. A year later, the commission fined Google € 4.34 billion for using its Android mobile operating system to force manufacturers to install Google as the default search engine on smartphones.

And in 2019, Google was fined € 1.5 billion for imposing unfair conditions on companies through the search bar on their websites.

Google appealed in all cases.