European Union regulators took aim at the heart of Google’s business model on Tuesday, announcing that the Silicon Valley giant is the subject of a new antitrust investigation for potentially abusing its dominance in the online advertising market to stifle competition.
The investigation is part of a broader push by the European authorities to clamp down on the world’s largest technology companies. Amazon, Apple and Facebook are also the subject of antitrust actions by the 27-nation bloc, and the European Union is drafting new antitrust and digital services laws to further tighten oversight of Big Tech.
Online advertising has helped Google become one of the world’s most valuable and powerful companies, with its parent company, Alphabet, earning a net profit of $40 billion last year. But publishers such as News Corp, as well as rival digital advertising firms, have long complained that Google’s dominance makes it harder to attract advertising revenue from their websites and for competitors to gain ground.
The European Commission, the bloc’s executive body, said the investigation was focused on the display advertising market, which is worth an estimated $24 billion in Europe and where Google offers a number of services to both advertisers and publishers. The company collects data to target advertising, sells ad space on websites across the internet and offers services that work as an intermediary between advertisers and publishers.
“We are concerned that Google has made it harder for rival online advertising services to compete in the so-called ad tech stack,” Margrethe Vestager, the European Commission’s executive vice president in charge of competition policy, said in a statement.
“A level playing field is of the essence for everyone in the supply chain,” she said.
Announcing the start of the formal investigation is one step in a process that could drag on for years. Google could face fines of up to 10 percent of global revenue and demands that it change its business practices if found guilty.
In focusing on advertising, the authorities are focusing on a cornerstone of Google’s financial success. Its dominance has helped the company build a digital empire in internet search, email, entertainment, maps, cloud computing, smartphones and other consumer electronics, shopping, and autonomous driving. With a market value of more than $1.6 trillion, Google is one of the world’s largest companies.
The commission’s investigation focuses on ways that Google leverages its power in the advertising technology market to limit competition, including forcing advertisers to use certain Google services to buy display advertising on YouTube. Investigators said they would also examine a new Google policy for its Chrome browser intended to replace tracking “cookies” placed on websites with a new system created by Google.
A Google spokeswoman said the company would “continue to engage constructively with the European Commission to answer their questions and demonstrate the benefits of our products.”
“Thousands of European businesses use our advertising products to reach new customers and fund their websites every single day,” the spokeswoman said. “They choose them because they are competitive and effective.”
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Agustín Reyna, a director at the European Consumer Organization, said the investigation was a “significant move” by the European Commission. “Fair competition in this market is important for consumers because it could encourage alternative, privacy-friendly advertising models to emerge,” he said.
This month, Google settled a similar antitrust investigation by the French authorities, with the company agreeing to pay roughly $270 million in fines and make it easier for rivals to use some of its advertising services.
In Germany, antitrust regulators recently announced an investigation of Google’s data-processing practices. The company has also been targeted by competition authorities in Britain, Australia, Turkey and Russia, among other jurisdictions.
In the United States, Google is battling a Justice Department lawsuit accusing the company of illegally protecting its dominance in online search and advertising. Authorities said Google unfairly paid for deals with companies like Apple to make Google the iPhone’s default search engine, and impeded competition by using exclusive contracts and agreements with customers. Parallel cases have been brought by attorneys general in dozens of states.
Ms. Vestager, who leads digital policy for the European Commission, is a familiar adversary for Google. The company has been charged with violating European Union antitrust laws three times in recent years, resulting in billions of dollars worth of fines.
In 2017, authorities fined Google 2.4 billion euros for unfairly using its dominance as a search engine to strengthen its online shopping service over rivals. A year later, the commission fined Google €4.34 billion for using its Android mobile operating system to require manufactures to install Google as the default search engine on smartphones.
And in 2019, Google was fined €1.5 billion for imposing unfair terms on companies using its search bar on their websites.
Google has filed appeals in all of the cases.