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European Union Commissioner for Competition Margrethe Vestager speaks during a media conference at EU headquarters in Brussels on Tuesday, June 27, 2017. The European Union’s competition watchdog has fined internet giant Google over its online shopping service. (AP Photo/Virginia Mayo)

 

SAN FRANCISCO — The decision by the European Commission on Tuesday to hit Google Inc. with a record antitrust fine of 2.42 billion euros ($2.7 billion) was hardly a surprise. EU officials had been telegraphing that the move was coming for weeks ahead of time.

But it’s also not the last word in Google’s testy relationship with EU competition regulators. Kent Walker, the company’s top lawyer, indicated in a blog post Tuesday that Google intends to appeal the decision. Here’s an overview of what will likely come next in the saga and how Google found itself in the crosshairs of the commission in the first place.

Can Google Fight the Decision?

Yes. Google can—and likely will—challenge the decision of the European Commission, according to Damien Geradin, an antitrust attorney at Euclid Law in Brussels. It will first have to appeal to the General Court in Luxembourg; if it loses there, it can appeal to the highest court, the European Court of Justice. But that is likely to be a long and winding road.

Take the example of Intel Corp., the subject of the next-largest EU antitrust fine ever, after Google. Intel was hit in 2009 with a 1.06 billion euro fine for antitrust behavior in the chips market. The company sued, and after initially losing at the General Court, the ECJ’s advocate general last October reversed that ruling in an interim decision. A final order is still pending.

If Google goes down that path, it will still have to pay the fine—or some form of bank guarantee—while the appeal is pending. And regardless, it still has to change the way it displays shopping search results in line with the European Commission’s decision within 90 days, meaning that any eventual legal win would essentially be symbolic. A victory is also unlikely: The commission hasn’t lost an abuse of dominance case in more than 20 years, Geradin said.

What Will Google Have to Change?

The decision by the European Commission makes two key findings: that Google holds a dominant position in the EU market for online search, and that it abuses that dominance to favor its comparison shopping service. For example, if you type “law school briefcase” into Google, you will find sponsored shopping results from Google right at the top. Results from other comparison shopping services appear lower down, and the commission found that in many instances they don’t appear until several pages back—severely impacting those sites’ traffic and ad revenue.

The commission on Tuesday handed down a decision that Google abused its market dominance by manipulating shopping results.
The commission on Tuesday handed down a decision that Google abused its market dominance by manipulating shopping results.

Source: European Commission press release.

“What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate,” Margrethe Vestager, the EU competition commissioner, said in a statement Tuesday. The commission didn’t spell out how Google should fix that and instead ordered it to comply with the “simple principle of giving equal treatment to revival comparison shopping services and its own service.” It’s conceivable—but perhaps not likely—that Google may make broader changes to its vertical search services to comply.

“The law applies to their conduct in general, and they are going to need to draw conclusions about how they can be compliant across everything that they do,” said Alec Burnside, who is head of Dechert’s antitrust practice in Brussels and represents Getty Images in a related complaint against Google over image search results. “Are they going to come out with their hands up after this decision? I think that’s a triumph of hope over experience.”

Will There be Follow-on Litigation?

The decision definitely makes it easier for any civil antitrust suits brought in domestic EU Member State courts to proceed, mainly because they won’t have to prove that Google is dominant or that it is abusing its dominance with regard to online shopping; the commission’s decision establishes that under law. But plaintiffs still have to prove causation and damages.

Two UK online shopping services, Foundem and Kelkoo, have already sued Google. To the extent that companies in other vertical search sectors like travel arrangements seek to use the decision, they will have to do more to argue that Google has abused its dominant position in that particular area, but are still given a leg-up by the move.

It bears mentioning that the commission itself might very well have more up its sleeve against Google. It is also investigating Google over its bundling of software with the Android mobile operating system, and over restrictions Google sets on how online advertisements are displayed.

Why is Google Facing Such a Crackdown in the EU?

Critics of the European Commission have painted Vestager and EU regulators in general as protectionist and hostile to Silicon Valley. But that might not be quite the right frame. Geradin and Burnside both noted that many of the antitrust proceedings against U.S. companies have received the support of other U.S. companies.

The Intel case, for instance, started with a complaint by Sunnyvale, California-based Advanced Micro Devices Inc. And among the complainants in the Google search investigation were U.S. companies like Yelp Inc., Getty Images and Trip.com. Those companies joined several others in signing a letter of support for the commission’s antitrust action on Tuesday.

Geradin suggests one might see all the activity in the EU as a result of forum shopping by U.S. companies frustrated with a lack of aggressive monopoly enforcement at home. “The reality is that large American corporations select Brussels like they would select the Eastern District of Texas if they had a patent case,” he said.

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