Alphabet's Google has been charged by European Union's antitrust regulators for anti-competitive practices in its digital advertising business on Wednesday. According to the 'Statement of Objections' sent to Google by the Commission over "abusive practices in online advertising technology" (adtech) the company may have to sell part of its advertising business to address antitrust regulators' concerns. "The Commission takes issue with Google favouring its own online display advertising technology services to the detriment of competing providers of advertising technology services, advertisers and online publishers," said the Statement of Objections.
It further said that the Commission's view is that "only the mandatory divestment by Google of part of its services would address its competition concerns."
Google is facing significant consequences in its latest confrontation with regulators due to its adtech business, which stands as the company's primary source of revenue, contributing 79 per cent to the total earnings in the previous year, as per a report by Reuters. The advertising revenue for 2022, encompassing various services such as search, Gmail, Google Play, Google Maps, YouTube adverts, Google Ad Manager, AdMob, and AdSense, reached a substantial $224.5 billion.
After conducting a two-year investigation, the European Commission has presented its charges against Google in a formal statement of objections. A Statement of Objection is a formal step in Commission investigations into suspected violations of EU antitrust rules. The Commission informs the parties concerned in writing of the objections raised against them.
According to the Commission, Google has been accused of engaging in anti-competitive practices by giving preferential treatment to its own online display advertising technology services. This has had negative consequences for competing providers of advertising technology services, advertisers, and online publishers.
The Commission further alleges that Google has exploited its dominant position since 2014 by favouring its ad exchange AdX in the ad selection auction conducted by its dominant publisher ad server DFP. Additionally, Google is accused of favoring AdX in the bidding process on ad exchanges through its ad-buying tools, namely Google Ads and DV360.
"Google has a very strong market position in the online advertising technology sector. It collects users’ data, sells advertising space, and acts as an online advertising intermediary. So Google is present at almost all levels of the so-called adtech supply chain. Our preliminary concern is that Google may have used its market position to favour its own intermediation services. Not only did this possibly harm Google’s competitors but also publishers’ interests, while also increasing advertisers’ costs. If confirmed, Google’s practices would be illegal under our competition rules," said EU antitrust chief Margrethe Vestager.
According to Reuters, Vestager is a press conference said that Google may have to sell part of its adtech business because a behavioural remedy is unlikely to be effective at stopping the anti-competitive practices.
"Of course I know this is a strong statement but it is a reflection of the nature of the markets, how they function and also why a behavioural commitment seemed to be out of the question," she said, as per the news agency. She said the EU had closely cooperated with competition authorities in the United States and the UK.
As per research firm Insider Intelligence, Google holds a significant position as the leading digital advertising platform globally, capturing 28 percent of the market share in terms of ad revenue, the news agency reported. Adding that following the opening of the investigation, Google had initially attempted to reach a settlement within three months. However, regulators expressed their dissatisfaction with the sluggish progress and the absence of significant concessions.
If Google is found to have violated regulations in this particular case, it would mark the fourth significant ruling against the company by the European Union (EU). Prior to this, the EU had already imposed three fines totalling over €8 billion (approximately $8.6 billion) on Google.
Furthermore, Google's advertising business is under investigation beyond the EU as well. The Competition and Markets Authority (CMA) in the United Kingdom has been conducting its own investigation, expressing concerns about the company's practices potentially stifling competition. Similarly, in the United States, the Justice Department and eight states filed a lawsuit against Google earlier this year, advocating for the division of its ad-technology business.