Google in Race to Deflect EU Fines as Shopping Foes Cry Foul

Google faces a Monday deadline to defend changes to its shopping service that left old foes clamoring for a new wave of European Union antitrust fines. Still smarting from last year's record 2.4 billion euro ($3 billion) penalty, Google must submit the first report to the EU on how it has met a strict demand from regulators to give smaller competitors a fairer deal. Rivals say the search giant's offer to auction advertising space doesn't work because Google wins most of the spots. The U.S. company has so far insisted it's giving competitors the same opportunity to show shopping ads from retailers that its own Google Shopping service gets. Failing to comply with an EU antitrust order can cost as much as 5 percent of global daily revenue. Long-time opponent Foundem reckons Google is "actively inviting" fines of about $12 million a day. In a similar fight more than a decade ago, Microsoft Corp. was fined 280.5 million euros for disobeying EU demands. "It risks being a second Microsoft," said Ioannis Kokkoris, a law and economics professor at Queen Mary University in London. It's looking like a case "of that scale with remedies and a decision of non-compliance and a fine for that non-compliance," Ad slots Kelkoo Group, one of the companies buying ad slots, and Foundem, which filed the first complaint about Google's shopping business, have both called for fines. Penalties aren't automatic. The EU could negotiate changes with Alphabet Inc.'s Google or require it to do more. It would need to open a new investigation and set formal objections before it could decide on further punishment. "I think the commissioner will decide after seeing all the evidence" on how the shopping ad offer rarely shows rival results "that they need to fine Google again," said Richard Stables, chief executive officer of Kelkoo, referring to Margrethe Vestager, the EU's antitrust chief. "You need to put a remedy in that effectively fixes the abuse and they have not done that." Google, which is appealing last year's fines, declined to comment. It said in September that it is running the Google Shopping unit as a separate business so it must compete on equal terms when it bids for shopping ads it sells to retailers to show their products. What precisely Google has to do is not clear. The European Commission, the EU's antitrust arm, says Google has to give equal treatment to rival comparison shopping services and its own service, "not more, not less." How that happens is "up to Google to achieve and implement." The EU "is collecting a lot of data from all sides to get the full picture," Vestager told reporters in Berlin on Monday. There's no fixed threshold that would trigger an investigation into Google's compliance and it depends on whether the model works, she said. 'By Google' The EU will have to examine why Google's shopping ads aren't showing more than a handful of rival ads. When users search for a product, picture ads pop up above or beside search results with links to retailers. The vast majority of these are labeled "By Google" showing that Google is being paid by retailers for the ad. It is unclear why rivals aren't providing the same ads in the auction system that Google set up to allay EU concerns. "That is in my view the million dollar question, whether competitors have a fair chance to be there," said Kokkoris. "We need to see whether the outcome we are seeing is because competitors are not winning or not bidding at all or whether there is something else happening" to prevent their ads coming up. In the meantime, regulators have already started their work checking up on Google. The company must submit its first report by Jan. 29, the EU said, and is required to keep handing in such filings every four months for five years. Officials get expert advice to assess Google's actions. KPMG provides economics and accounting help and Mavens helps the EU on search engine optimization and marketing. "We have already requested information on the operation of Google's measures from Google and other market participants," the EU's press office said. "Of course, as part of our monitoring we also listen to what those most directly affected by the practices in question have to say. Commissioner Vestager and her team are meeting with a variety of stakeholders and take their views seriously." (An earlier version of this story was corrected after the European Commission gave an incorrect date for the deadline.) —Bloomberg News

Google in Race to Deflect EU Fines as Shopping Foes Cry Foul

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