The EU court has confirmed the EUR 2.42 billion fine imposed on Google for self-preferencing practices

(Google Shopping) case)

EU General Court Case T-612/17, 10 November 2021, Google, Alphabet v Commission

From 2017 to 2019, several Google cases have played out one after the other with, at their root, GAFAM’s ability to take advantage of its strong position to impose its tools and/or lock users into its ecosystem. In three separate proceedings under Article 102 TFEU (Google Shopping, Google Search and Google AdSense), the Commission handed down fines against Google amounting to a total of EUR 8.25 billion and one of the highest ever amounts to have been inflicted on an undertaking .

In this case, the General Court was called upon to rule in the Google Shopping case. In a decision dated 27 June 2017, the Commission had imposed a EUR 2.42 billion fine on Google for having abused its dominant position on the general online search market in thirteen EEA countries, by favoring its own product comparison search engine, Google Shopping, to the detriment of those of rival services. Not only were the results of a query launched from Google’s general search engine more attractively positioned and presented (including richer graphical features, including images and dynamic information) when they were from Google Shopping, but also the results of competing comparison sites, which necessarily took the form of generic results, were therefore likely to be downgraded by Google’s generic results adjustment algorithms, including the Panda algorithm, because of their lack of original content.

  1. Self-preferencing is anticompetitive

Pointing out that the purpose of Article 102 TFEU is not to prevent an undertaking from gaining, on its own merits, a dominant position on a market, and that the mere extension of an undertaking’s dominant position on a neighboring market cannot, in itself, be evidence of conduct departing from normal competition – even if such an extension leads to the disappearance or marginalization of competitors – the Court stated that the material scope of the particular liability of a dominant undertaking must be assessed in the light of the specific circumstances of each case which demonstrate a weakening of competition.

In this case, Google used its dominant position in the general search market to leverage its own product comparison service in the specialized product comparison search market, while downgrading the results of competing comparison services through algorithms. Due to three specific circumstances, namely (i) the extent of the traffic generated by Google’s general search engine for product comparison services, (ii) its non-effectively replaceable nature, and (iii) the behavior of users who, when searching on the internet, assume that the most visible results are the most relevant, this self-preferential practice led to a weakening of competition.

In the Court’s view, Google’s conduct is all the more anomalous in that favoring its own specialized results over third-party results seems to run counter to the business model underlying the initial success of its general search engine, which is an “open infrastructure”.

The deviation from competition on the merits of its behavior is all the more obvious, according to the Court, that GAFAM, in a “super dominant” position on the general search market, initially displayed all the results of specialized search services in the same way and according to the same criteria, before amending its practices.

Moreover, the practice at issue concerns a difference in treatment in access to the facility, and not an express and unilateral refusal of access, so the Commission was not required to establish that the conditions laid down in the Bronner judgment were met.

Finally, while Google claims that the differentiated treatment of its search results is based on the nature of the results produced by its general search engine, i.e. whether they are specialized or generic results, this differentiated treatment is in fact based on the origin of the results, i.e. whether they come from competing comparison shopping services or from its own service, so that in practice Google favored the latter over the former, and not one type of results over another.

  1. Favoring produces harmful effects on competition

The Court first stresses that the characterization of abuse of a dominant position requires the demonstration of an anticompetitive effect, not necessarily an actual one, but at least a potential one. In this case, after finding that on the various national markets for product comparison services concerned, the self-preferencing practices had led to a decrease in traffic for almost all competing product comparison services and to a correlative increase in traffic to Google Shopping, the Commission demonstrated to the requisite legal standard that the traffic in question which represented a large part of the total traffic of the competing comparison services, could not be effectively replaced by other sources of traffic (such as AdWords advertisements or mobile applications) and that the contested practices could therefore potentially lead to some competing product comparison services going out of business, to a decrease in innovation and, ultimately, to less choice for consumers. The existence of at least potential anticompetitive effects on the national markets for product comparison services is thus established.

On the other hand, according to the Court, by merely stating that by treating its comparison shopping service more favorably on its general results pages, Google would be protecting the revenues that this specialized search service brings it from these pages, which would themselves finance the general search service, without presenting any analysis of the importance of the revenues in question and the impact they may have on the position of Google and its competitors, the Commission fails to establish potential anticompetitive effects on the national markets for general search, so that the finding of infringement on this market alone must be annulled.

While Google criticized the Commission for not having taken into account the competitive pressure exerted by the merchant platforms, the Court considers that the Commission has sufficiently demonstrated that the services offered by comparison shopping service providers had particular characteristics that so differentiate them from the comparison shopping services offered by merchant platforms, or vice versa, that they are only to a small degree interchangeable with each other and competition between them is insignificant. Emphasizing the two-sided nature of the market in question, in which suppliers respond simultaneously to two demands, on the one hand, that of internet users wishing to compare the features and prices of products before ultimately making a purchase, and, on the other, the demand of those wishing to sell their products online, that of persons wishing to sell their products, who supply the databases of the providers with information for the purpose of comparison with a view to their subsequent purchase by internet users, it being specified that any transaction between buyers and sellers will take place, where appropriate, on the other market, the Court considers that the Commission properly examined the two sides of the relevant market.

The Court added that Google’s conduct was not objectively justified. Even if Google’s algorithms for ranking generic results or its criteria for positioning and presenting specialized results for products may as such represent improvements to its service with a pro-competitive content, they do not justify unequal treatment between the results of Google’s product comparator and those of competing product comparators: Google fails to demonstrate any efficiencies associated with this practice that would outweigh its negative effects on competition.

Finally, given that, in order to determine the basic amount of the fine, the Commission only took into account as the value of sales advertising revenues related to the markets for specialized product search results but no advertising revenues linked to the markets for  general search services, the Court finds that the annulment of the Commission’s decision limited to the national markets for general search services has  no impact on the amount of the fine imposed. The fine must therefore be upheld.