Already fined a record-breaking $7.7 billion in two years by the European Commission, the Financial Times is now citing sources who say a third fine might be in the works over Google AdSense—and investors will be happy to know in advance that the fine is expected to be announced next week.
Still, following the FT report early on Friday, Alphabet stock showed no sign of wavering, despite the Big Tech firm falling under fire from European regulators.
That makes one wonder what could possibly rile Google? Not even the $7.7 billion in fines so far has put a dent in the giant.
The first fine came in September 2017, when Europe’s competition watchdog slapped the tech giant with a $2.7-billion fine in anti-trust ruling over its shopping service. The Commission found Google to be favoring its own services to the detriment of its rivals. But a $2.7 billion fine was rather aggressive—probably because they know that if it’s not big, it’s not going to punish Google. In the end, the 2017 fine was more than two times bigger than a similar anti-trust fine in history.
Then, in July last year, the European Commission went even further, levying a $5-billion fine on Google for anti-trust abuse related to its Android platform.
In this case, Google was accused of “illegally tying” Chrome and search apps to Android.
Commissioner Margrethe Vestager said at that time: "Today, mobile internet makes up more than half of global internet traffic. It has changed the lives of millions of Europeans. Our case is about three types of restrictions that Google has imposed on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine. In this way, Google has used Android as a vehicle to cement the dominance of its search engine. These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules." Related: Venezuela Has Yet Another Crisis Developing
Specifically, the Commission said that Google was requiring manufacturers “to pre-install the Google Search app and browser app (Chrome), as a condition for licensing Google's app store (the Play Store)”. It was also making “payments to certain large manufacturers and mobile network operations on condition that they exclusively pre-installed the Google Search app on their devices”, and it was preventing manufacturers from selling any smart mobile devices running alternative versions of Android”.
So, that’s shopping and Android covered. What comes next? AdSense, according to FT.
In 2006, Google started mandating that if third-party websites want to use the Google search box on their sites then they will have to buy into its ad service, too. Google was prohibiting third parties from sourcing search ads from its competitors and giving Google search ads premium placement, among other things.
Presumably seeing the anti-trust furor that was going to arise out of this, Google softened that a bit in 2009 and then got rid of it altogether in 2016. But it still may have to pay for those 10 years of bullying.
FT isn’t breaking this story, really. While they are scooping anonymously source news that the fines will be announced next week, the AdSense issue first arose in January this year, and the case was actually opened in 2016—when Google phased the restrictions out.
We’ll have to wait until next week to find out how much the fine could end up being, but chances are that it will be lower than the $5 billion slapped over the Android issues because Google cooperated in 2016 with regulators to change AdSense.
But if that’s not the case, FT estimates that in the worst case scenario, a fine for this could be in the neighborhood of $13 billion—basically 10 percent of Google’s most recent global turnover.
By Michael Kern for Safehaven.com