Google Faces Forced Break-Up as EU Regulators Allege Anti-Competitive Violations

A Google sign is shown at the company's office in San Francisco, on April 12, 2023. (AP Photo/Jeff Chiu)

Google has been accused of breaching antitrust rules in the European Union (EU), and the bloc’s regulators have issued a preliminary assessment that the only solution to addressing their competition concerns is to force Google to break up.

The European Commission (EC), which serves as the executive branch and primary antitrust regulator of the bloc, stated in its initial assessment on June 14 following an investigation that Google has distorted competition in the advertising technology  industry.

“Our preliminary concern is that Google may have used its market position to favour its own intermediation services,” Margrethe Vestager, EC executive vice president in charge of competition policy, said in a statement.

“Not only did this possibly harm Google’s competitors but also publishers’ interests, while also increasing advertisers’ costs,” she continued. “If confirmed, Google’s practices would be illegal under our competition rules.”

European Commission Vice President Margrethe Vestager speaks during an interview with Reuters in Brussels, on March 28, 2022. (Johanna Geron/Reuters)

The EC said it takes issue with Google’s preference for its own online display advertising technology services, which negatively impacts competitors providing advertising technology services, as well as to the the detriment of advertisers and online publishers.

The commission’s preliminary view is that the only thing that would address its competitive concerns is for the “mandatory divestment by Google of part of its services.”

Past antitrust cases against Google ended with fines and requirements for the company to stop anti-competitive practices, but these have been ineffective as the company has continued its anti-competitive practices “just under a different disguise,” Vestager said at a press conference in Brussels.

“Google is representing the interests of both buyers and sellers. And at the same time, Google is setting the rules on how demand and supply should meet,” she said at a news conference. “This gives rise to inherent and pervasive conflicts of interest.”

She said that a possible solution to Google’s conflict of interest in the EU could be a forced sale of such business lines as its real-time marketplace for buying and selling ads or a tool for publishers to manage their ads.

This marks the first instance in which the 27-member bloc has called for a tech giant to divest key business segments for allegedly violating strict EU antitrust laws.

However, specific details of what a Google break-up in the EU would look like remain unclear.

Google Responds

Google pushed back on the EC’s claims in a statement, vowing to “respond accordingly,” accusing the EC of not considering the broader impact of Google’s business operations.

“Today’s Statement of Objections from the European Commission sets out claims that are not new and relate to a narrow part of our advertising busines,” Dan Taylor, Google vice president of global ads, said in a statement.

“It fails to recognize how advanced advertising technology helps merchants reach customers and grow their businesses—while lowering costs and expanding choices for consumers,” he added.

Taylor also reaffirmed Google’s commitment to delivering value for their publisher and advertiser partners in the fiercely competitive sector.

“We look forward to showing how we have enabled higher-quality, more effective digital ads that have helped fund broader access to content and information online for everyone,” Taylor said.

Google can defend itself by pleading its case before the EC ahead of a final decision.

Investigation

The EC’s preliminary ruling comes as a result of an official investigation initiated in June 2021 that set out to determine whether Google violated the bloc’s competition rules by favoring its own online display adtech at the expense of rivals.

“The formal investigation will notably examine whether Google is distorting competition by restricting access by third parties to user data for advertising purposes on websites and apps, while reserving such data for its own use,” the EC said in a statement at the time.

As part of its in-depth investigation, the EC focused on Google’s display advertising services and sought to gauge the extent to which the company forced its partners to favor Google’s services.

In particular, the EC examined the obligation to use Google’s services for purchasing and serving online display ads on YouTube; potential favoritism toward Google’s ad exchange; restrictions on competitors accessing user data; the impact of Google’s plans to replace third-party cookies with the Privacy Sandbox; and the effects of stopping the availability of advertising identifiers on Android devices.

Following the investigation, the EC said in its June 14 statement that Google had abused its dominant positions since at least 2014 and engaged in abusive practices.

These practices include favoring its own ad exchange, AdX, in the ad selection auction conducted by its dominant publisher ad server, DFP. Google did this by providing AdX with advanced knowledge of competitors’ best bid values that needed to be surpassed to win the auction.

Furthermore, Google’s ad-buying tools, such as Google Ads and DV360, were biased toward AdX, as they predominantly placed bids on AdX while avoiding competing ad exchanges, making AdX the most appealing option.

Previously, the EC hit Google with over $8.6 billion in fines in three separate antitrust cases. Those involved Google’s Android operating system, as well as shopping and search advertising services.

Google is appealing all three penalties.

The Associated Press contributed to this report.