EU fines Google record $2.7 billion in first antitrust case

[June 27, 2017]  By Foo Yun Chee

BRUSSELS (Reuters) - EU antitrust regulators hit Alphabet <GOOGL.O> unit Google with a record 2.42-billion-euro ($2.7 billion) fine on Tuesday, taking a tough line in the first of three investigations into the company's dominance in searches and smartphones.

It is the biggest fine the EU has ever imposed on a single company in an antitrust case, exceeding a 1.06-billion-euro sanction handed down to U.S. chipmaker Intel <INTC.O> in 2009.

The European Commission said the world's most popular internet search engine has 90 days to stop favoring its own shopping service or face a further penalty per day of up to 5 percent of Alphabet's average daily global turnover.

The fine, equivalent to 3 percent of Alphabet's turnover, is the biggest regulatory setback for Google, which settled with U.S. enforcers in 2013 without a penalty after agreeing to change some of its search practices.

The EU competition enforcer has also charged Google with using its Android mobile operating system to crush rivals, a case that could potentially be the most damaging for the company, with the system used in most smartphones.

The company has also been accused of blocking rivals in online search advertising.

The Commission found that Google, with a market share in searches of over 90 percent in most European countries, had systematically given prominent placement in searches to its own comparison shopping service and demoted those of rivals in search results.

"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," European Competition Commissioner Margrethe Vestager said in a statement.

Google said its data showed people preferred links taking them directly to products they want and not to websites where they have to repeat their search.

European Competition Commissioner Margrethe Vestager holds a news conference at the EU Commission's headquarters in Brussels, Belgium, June 27, 2017. REUTERS/Francois Lenoir

"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," Kent Walker, Google's general counsel, said in a statement.

The action follows a seven-year investigation prompted by scores of complaints from rivals such as U.S. consumer review website Yelp <YELP.N>, TripAdvisor <TRIP.O>, UK price comparison site Foundem, News Corp <NWSA.O> and lobbying group FairSearch.

The penalty payment for failure to comply would amount to around $12 million a day based on Alphabet's 2016 turnover of $90.3 billion. The Commission did not specify what changes Google had to make.

"This decision is a game-changer. The Commission confirmed that consumers do not see what is most relevant for them on the world’s most used search engine but rather what is best for Google," said Monique Goyens, director general of EU consumer group BEUC.

Thomas Vinje, legal counsel to FairSearch, welcomed the Commission's findings and urged it to act on Google's Android mobile operating system following its 2013 complaint that Google restricted competition in software running on mobile devices.

(Reporting by Foo Yun Chee; editing by Philip Blenkinsop and Jason Neely)

[© 2017 Thomson Reuters. All rights reserved.]

Copyright 2017 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.