Competition law and Google’s big EU fine by the numbers
The success of Google is phenomenal. 2 trillion searches are made annually through its search engine, with 187 million uniques visitors to Google sites every single month. It’s hard to imagine life without it now. How many times have you wondered about something and found the answer by “googling it”?
Google shopping is a service which allows users to search for products sold through online websites and compare prices from different vendors. This service has landed Google in hot water after a lengthy investigation by the European Union, under the lead of European Commissioner for Competition, Margrethe Vestager. Regulators have been investigating Google for 7 years, looking into its dominance in searches and smartphones and found that Google had been operating illegally under the EU’s antitrust rules.
In June 2017, Google was found to have broken competition law, by prioritizing their own shopping service, causing competitors to drop dramatically. Many of these competitors have not recovered.
The European Union said that Google “denied both its consumers real choice and rival firms the ability to compete on a level playing field”. Ariel Ezrachi, director of the University of Oxford Centre for Competition Law and Policy, says it “objects to Google leveraging its power in search to give itself an unfair advantage in price comparison.”
The result was that Google has handed down a record breaking fine. In the wake of this news, Alphabet shares fell 1.5% in pre-market trading in New York.
That must be some hefty fine, right?
The investigating commission said it took into consideration the “duration and gravity of the infringement”, and was based on Google’s revenue from its comparison shopping service in the 13 countries where the illegality occurred.
Google immediately rejected the commission’s findings, and spoke of their intention to appeal. A company spokesman said: “We respectfully disagree with the conclusions announced today. We will review the commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case.”
The fine was an astonishing 2.42 billion Euros. That’s $2.86 billion or £2.13 billion. It’s more money than most of us can even begin to imagine.
You may think that such a huge fine seems appropriate. Maybe even a little harsh? Or maybe not harsh enough? When you consider that Google’s parent company, Alphabet, made a staggering £2 billion in profit in the first six weeks of 2017 alone, this fine seems more like a drop in the ocean.
Still, it’s hard to fathom without putting it into perspective.
So credit broker Credit Angel took the salary of an average Joe in the UK and fined him the same percentage as the Google fine is to Alphabet’s revenue.
You might be surprised as to how it equates.