Google Faces $3.4B Fine for Search Bias

Google will reportedly face a fine of more than $3 billion for a series of alleged breaches of European competition laws. The penalty would be one-sixth of the maximum that could be imposed, but would still dwarf previous records.

The penalty would come from the European Commission. Among many other roles, the commission oversees competition rules which apply to firms doing business across 28 European countries.

For the record, this is a separate case launched last month, which the European Commission formally accused Google of using unfair rules in the way it pressures Android device manufacturers to pre-install and promote Google apps on handsets.

Search Rankings And Ad Rules Both Under Fire

Instead, this case involves an investigation going back to 2010 covering Google's search engine. The claims cover both the main results list and the sponsored (advertising) results that appear to the right and top of the page.

One claim is that the main results list, which is theoretically automatically generated according to Google's algorithm, are actually manipulated. Specifically, Google is said to have penalized rival companies which run specialist search tools such as price comparison sites and instead favored links to its own sites in this field. (Source: europa.eu)

It's also said that Google lowered the quality score it assigns to the rival sites. This lower score meant the rivals faced higher fees to appear in the sponsored results section. The claims also said Google unfairly insisted on exclusivity deals when accepting online advertising and made it hard for companies to take their business elsewhere later on.

In effect, the commission's view is that such behavior becomes unfairly anticompetitive when it's carried out by a firm such as Google that dominates the European markets for Internet searches and advertising.

Deal Or No Deal

The case has taken so long because commission officials and Google had been in negotiations for a settlement that would have meant Google paid a penalty and changed its behavior but didn't necessarily admit any wrongdoing. Those negotiations appear to have been killed off by a change in the senior competition official at the commission.

Now the Daily Telegraph newspaper says the commission plans to impose a fine of €3 billion, equivalent to US$3.4 billion. That's a little under half the maximum allowable penalty of 10 percent of Google's annual revenue. (Source: telegraph.co.uk)

As well as imposing the penalty, the commission may seek to force Google to change its algorithm so that it doesn't penalize sites simply because they offer competition to Google-owned businesses. Google will be particularly hostile to such a demand so its highly likely it will seek to appeal any punishment issued by the commission.

What's Your Opinion?

Should the alleged activity be against competition rules and if so, does Google deserve the reported punishment? Is $3.4 billion an appropriate fine and is it right to take into account the company's revenues when choosing a figure? Should the commission have the power to force Google to change its search algorithm?