Europe Is Changing Google for the Better

(Bloomberg Opinion) -- The European Union’s top antitrust official, Margrethe Vestager, is closing out her term — possibly her last — with a 1.49 billion-euro ($1.7 billion) fine on Alphabet Inc.’s Google. She’d accused the search giant of abusing its market dominance to thwart advertising rivals.

It rounds out a hat trick of fines against Google that have resulted in clear changes to its business model, and which have gone some way to opening it up slightly to more competition (as limited as this might be). The Brussels approach, despite the protectionist howls from the U.S., shows Big Tech can be regulated without a breakup.

The latest fine concerns the online advertising market — specifically the ads placed alongside search results on all kinds of websites, from news to travel bookings. Google’s grip as a go-between for the sale of these ads in Europe is impressive: It accounted for 70 percent of them between 2006 and 2016, according to the European Commission, leaving just a sliver for rivals like Microsoft and Yahoo. During that time Google abused its dominant position, according to the EU, through “exclusivity clauses” in its contracts with publishers. These were designed to block or limit the presence of ads from competitors, an illegal advantage.

Google has dismissed these concerns in the past, arguing that the EU regulators were drawing conclusions from “just a few complaints” and that its products were popular because they were the best. But the timeline of the EU’s case shows a very clear change in Google’s behavior in 2016 after the Commission sent the search engine detailed objections from its search-advertising probe. The U.S. firm simply dropped the “illegal practices” that had triggered the case in the first place. It’s hard to believe it would have done so without the EU’s investigation.

The same holds for the EU’s other Google penalties: a 2.4 billion-euro fine over Google’s preferential treatment of its own shopping comparison service in 2017, and a 4.3 billion-euro fine related to Android and the preferential treatment of its own search engine within the mobile operating system. Google has appealed against both rulings. But on Monday — in a move no doubt designed to steal some of Vestager’s thunder — the company ran through the changes it has made after both decisions, including more links to other shopping sites and options for handset-makers to install rival apps. More changes will come.

It’s true that there’s still a lot to complain about regarding the search engine’s remedies. They haven’t exactly been financially painful, given that Alphabet generated almost $137 billion of revenue last year. Google remains free to charge its rivals to give their links extra prominence, and handset makers to include its apps. Yelp claimed this week that Google still only delivered a “marginal percentage of clicks” to rivals. My colleague Alex Webb says Google’s changes are too little and come too late to make a big difference, and he has a point.

But little by little the EU is improving Google, and Big Tech as a whole. The larger aim is to give more space to startups or competitors to offer the same kinds of services on a more level playing field. Eric Leandri, co-founder of the French search engine Qwant, tells me that there are now genuine opportunities to grab more market share in businesses dominated by Google. Online advertising is one example.

It might not even be entirely crazy to try to create a rival from scratch, stapling together data and advertising analytics startups with a pure-play search engine, Leandri says. Nobody seriously expects to topple Google from the top spot; it obviously has the advantage of many years, and many tens of billions of dollars, spent building its dominance. But the fence guarding its turf isn’t as high as it used to be. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Opinion columnist covering Brussels. He previously worked at Reuters and Forbes.

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