The European Commission has made a formal antitrust complaint against Google and its ad business. In a preliminary opinion, the regulator says Google has abused its dominant position in the digital advertising market. It says that forcing Google to sell off parts of its business may be the only remedy, if the company is found guilty of the charges.
This would be a significant move targeting the main source of the search giant’s revenue, and a rare example of the EU recommending divestiture at this stage in an investigation. The Commission has already fined Google over three prior antitrust cases, but has only previously imposed “behavioral” remedies — changes to its business practices.
“Our preliminary concern is that Google may have used its market position to favor its own intermediation services,” the Commission’s executive vice-president in charge of competition policy Margrethe Vestager said in a statement. In its preliminary findings, the Commission says Google has “abused its dominant positions” since at least 2014 to favor its own ad exchange. As the Commission’s press release explains:
The Commission is concerned that Google’s allegedly intentional conducts aimed at giving [Google’s ad exchange] AdX a competitive advantage and may have foreclosed rival ad exchanges. This would have reinforced Google’s AdX central role in the adtech supply chain and Google’s ability to charge a high fee for its service.
The statement of objections issued today is an important step in the EU’s investigation, but does not prejudge its outcome. Google will now have the opportunity to reply in writing and request a hearing, after which the Commission will decide whether Google has broken antitrust law in the bloc. If found guilty, the EU’s competition regulator can also fine Google up to 10 percent of its global sales and impose various changes to its business.
In a statement, Google’s VP of global ads, Dan Taylor, said the company disagrees with the Commission’s position, and called digital advertising a “highly competitive sector.”
“Our advertising technology tools help websites and apps fund their content, and enable businesses of all sizes to effectively reach new customers,” said Taylor in a statement. “The Commission’s investigation focuses on a narrow aspect of our advertising business and is not new. We disagree with the EC’s view and we will respond accordingly.”
When asked why the EU was recommending a divestiture — a last resort in such antitrust cases — Vestager said it was a reflection of the Google’s ubiquitous presence in the ad business.
“Google is in every part of this value chain. As we see it they hold a dominant position in both the sell side and the buy side in order to favor their own ad exchange,” Vestager told reporters in a Q&A. “We don’t see that this inherent and in-built conflict of interest can be solved in other ways … When you look at the web as such you see Google having a presence that is unrivaled by anyone else.”
Vestager stressed that the reason the Commission was considering divestiture in this case and not other antitrust proceedings targeting Google was because of the particular dynamics of the adtech business. “It is quite rare we have asked for a divesture [in previous cases],” said Vestager, noting that the Commission has not officially asked for it yet in this one, only suggested it as a possibility.
The order, if it comes, could deal a significant blow to the core source of Google’s revenue. Although the Alphabet-owned company provides everything from email to thermostats, it’s advertising that still generates the majority of its income. Bloomberg, which earlier reported on today’s complaint, noted that Google’s advertising business brought in around $225 billion for the company in 2022, or around 80 percent of its annual revenue.
The European Union’s probe into Google’s advertising technology dates back to 2021, when it said it was investigating whether Google unfairly favors its own services over competitors and limits their access to user data. At the time, Margrethe Vestager noted that “Google is present at almost all levels of the supply chain for online display advertising” and said that the EU is “concerned that Google has made it harder for rival online advertising services to compete in the so-called ad tech stack.”
If Google is found to be in violation in this case, it would be the fourth major decision taken by the EU against Google following a trio of fines between 2017 and 2019 totaling over €8 billion (around $8.6 billion). The EU has previously found Google guilty of “systematically favoring” its own shopping comparison service, abusing its Android market dominance by bundling its search engine and Chrome apps, and preventing AdSense customers from accepting advertising from rival search engines. Google is challenging these earlier fines in the courts.
Google’s advertising business is being investigated outside of the EU as well. The UK’s Competition and Markets Authority (CMA) has been investigating the company over fears its practices are unfairly freezing out competitors. Meanwhile, in the US, the Justice Department and eight states sued the company earlier this year and issued similar calls for its ad-technology business to be broken up.