EU Regulators Hit Google Inc With $2.72bn Fine Over Abuse Of Power

Industry experts believe that the strong punitive measure issued by the European Commission earlier this week could indicate the beginning of Europe’s campaign to curb the company's clout in the region according to experts. Google has been accused unfairly favouring its own shopping business over competitors in its search results.

The ruling has given Google a period of 90 days to make the necessary changes in its operations or face additional penalties that can reach up to 5 percent of its parent Alphabet's average daily turnover.

This would roughly work out to $14 million (12 million euros), using Alphabet's revenue in the first quarter of this year as a benchmark. The crackdown will not have any impact on the company's operation in other countries including the United States.

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Margrethe Vestager, European Commissioner for Competition has said that the results of the agency’s seven-year probe had established that action needed to be taken against Google’s practices. European regulators are carrying out additional probes into the company's operations in Europe.

In a statement Vestager said

What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.

Google is alleged to have highlighted its own shopping services in the small shopping links provided at the top of relevant search results. Results pertaining to competitors are displayed only at page 4 and thereafter based on the data compiled by European regulators. This greatly limits their competitors’ access to customers since 90 percent of user clicks are confined to the first page.

This is the largest penalty that has ever been imposed by European authorities for anti-competitive activities. The highest penalty so far was 1.06 billion euros which was levied on Intel in 2009.

The nature of the penalty has raised concerns of Europe’s regulators overstepping their powers and hampering operations. Another major criticism faced by the regulators is that they are unfairly targeting American companies. The EU has denied these accusations.

Although the penalty is heft, it is not very likely to have a big impact on Google's finances Alphabet Inc holds cash of over $92 billion (82 billion euros) currently, of which nearly $56 billion (50 billion euros) is being held in accounts outside the U.S. Alphabet is considering appealing the ruling but will still need to make the changes within the stipulated time limit.