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Google faces competition fine of €2,700,000,000

28 Jun 2017

The decision

Yesterday, after a seven year investigation, the EU Directorate General (DG) decided that Google should pay a record-breaking €2.4 billion ($2.7 billion) EU fine. The Directorate General is charged with maintaining the integrity of the internal EU market.

In effect, Google was found to have promoted its own sponsored sites on searches. So if you searched, “I want a little black dress”, the accusation was that Google would show search results that tended to list sites and organisations sponsored by Google. No comment is made whether this allegation was well founded or not. It is important to stress that this fine is a decision of the Commissioner (an administrative body) and not a finding or judgment by any court of competent jurisdiction.

Briefly

Under EU Law (article 102 of the Treaty for the Functioning of the European Union) it is not lawful for any undertaking with a dominant position in a relevant market to act in such a way so as to adversely affect the functioning of the market.

In other words, if you are a big company, firm, or other undertaking big enough to have real market power, you cannot abuse that position. The rationale is that competition in the marketplace promotes the interests of the consumer and efficiency in the market. This type of jurisdiction is nothing new. Big monopolies overcharging consumers and driving competitors out of the market have been broken up by national governments for many decades.

The powers of the Commission and the UK Authorities

If a company is found to have “abused a dominant position” then the DG for Competition has a powerful armoury. Commission “fines” can amount to 10% of worldwide turnover (note “turnover” not “profit” – so this is calculated on your revenue and not the bottom line profits). So you can be fined even if you making a loss.

The Commission can also publish “Interim Measures” (an injunction would be the nearest analogy) to force infringing organisations from continuing the suspect behaviour(s) while investigations are ongoing.

The Competition and Markets Authority (CMA) in this country has an equivalent jurisdiction and powers for companies and undertakings which are only dominant within the UK. UK law is modelled almost exactly on its bigger brother.

It does not stop there: if you as a company have engaged in market abusive behaviour and you have harmed the commercial interests of a competitor, you can be sued by that competitor (or any number of such competitors).

Furthermore, if you have, as a large company, contractual relationships (or even just practices) with third companies that are found to contravene EU or UK competition law, then those contracts or business practices are unenforceable. It is not unusual for third companies that have grown tired of their links to the larger company to complain to the UK or EU authorities and then, under the whistle blower provisions of the EU and UK legislation, be let off very lightly.

It can get very expensive very quickly.

That said, all is by no means lost for Google and Google has meritorious arguments to deploy.

Google can now appeal to the General Court (what used to be called the “Court of First Instance”) to annul the decision of the Competition Commissioner. Appeals from the General Court lie to the European Court of Justice. Interestingly, judgments of the General Court can be appealed as of right. Appeals from higher courts in this country tend to be limited to points of law. Before we rush to judge Google, let us hear what the courts have to say; “innocent until proven guilty…” and all that.

For further information on national or EU competition questions, please contact me via the details below.

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