Google faces EU termination order over anti-competitive advertising practices

By Foo Yun Chee

BRUSSELS (Reuters) – Alphabet subsidiary Google may have to sell part of its profitable advertising technology business to address concerns about anti-competitive practices, EU regulators said on Wednesday, threatening the company with its toughest regulatory fine yet.

The European Commission made its allegations in a statement to Google two years after it opened an investigation into conduct such as favouring its own advertising services, which could also result in fines of up to 10% of Google’s annual global turnover.

The stakes for Google in this latest conflict with regulators are higher because it involves the company’s largest source of revenue, 79% of which was advertising revenue last year.

The company’s advertising revenue in 2022, including from search, Gmail, Google Play, Google Maps, YouTube ads, Google Ad Manager, AdMob and AdSense, was $224.5 billion.

Google has several months to respond to the allegation. It can also ask for a closed hearing before senior antitrust officials and their national counterparts before the EU issues a decision in a process that could take a year or more. The company could also potentially settle with stronger remedies than previously proposed.

EU antitrust chief Margrethe Vestager said Google may have to sell part of its advertising business because its behavioural solution is unlikely to be effective in stopping anti-competitive practices.

“For example, Google could get rid of its sell-side tools, DFP and AdX. That would put an end to conflicts of interest,” she said at a press conference.

“Of course, I know that’s a strong statement, but it reflects the nature of markets, how they work, and why a behavioral commitment seemed out of the question.”

Google said it disagreed with the Commission’s allegations.

“The Commission’s investigation focuses on a narrow aspect of our advertising activities and is nothing new. We disagree with the EC’s view,” Dan Taylor, Google’s vice president of global advertising, said in a statement.

Vestager said investigations into Google’s rollout of a suite of privacy tools that block third-party cookies in its Chrome browser will continue, as well as into Google’s plans to stop sharing its advertising identifier with third parties on Android smartphones.

She added that the EU was working closely with competition authorities in the United States and Britain.

The European Publishers Council, which filed a complaint with the Commission last year, responded positively to the allegations.

The Commission found that Google favours its own online advertising technology services, to the detriment of competing ad technology service providers, advertisers and online publishers.

The company said Google has been abusing its dominant position since 2014 by favoring its own ad exchange AdX in the ad selection auction run by the dominant publisher, ad server DFP, and by favoring AdX in the way its Google Ads and DV360 ad buying tools bid on the ad exchanges.

According to research firm Insider Intelligence, Google is the world’s leading digital advertising platform, with a 28% share of the global advertising market.

Google tried to settle the case three months after it was filed, but regulators were frustrated by the slow pace of the proceedings and the lack of significant concessions, a person familiar with the matter previously told Reuters.

(Reporting by Foo Yun Chee, additional reporting by Sudip Kar-Gupta; Editing by Philip Blenkinsop, Kirsten Donovan and Lisa Shumaker)