Google was accused of abusing its dominance over advertising technology to crush competition, as the European Union fired off an antitrust charge sheet that strikes at the heart of the U.S. firm’s sales model and threatens a selloff of the lucrative business.
Margrethe Vestager, the E.U.’s competition commissioner, said the Alphabet Inc. unit had favored its own ad exchange program over its rivals and bolstered the company’s central role in the ad tech supply chain as well as Google’s ability to charge a high fee for its service. Should the commission decide that Google acted illegally it may be forced to divest part its ad sales services, she said at a press conference Wednesday.
“Google is present at almost all levels of the so-called ad tech supply chain,” Vestager said. “Our preliminary concern is that Google may have used its market position to favor its own intermediation services.”
Crucially, the European Commission said that a potential order for Google to implement behavioral remedies may not be sufficient in correcting the abusive conduct, opening the door for a potential order against Google to break up its ad tech business from its core services.
“Google remains committed to creating value for our publisher and advertiser partners in this highly competitive sector,” Dan Taylor, vice president of global ads at Google, said in a statement. “The commission’s investigation focuses on a narrow aspect of our advertising business and is not new. We disagree with the EC’s view and we will respond accordingly.”
Google shares fell as much as 0.5% in premarket trading on the news to $123.20.
The E.U. case is a direct attack on the black-box of online advertising where Google automatically calculates and offers ad space and prices to advertisers and publishers as a user clicks on a web page. Online advertising is Alphabet’s most lucrative business, generating 80% of total revenue last year, adding up to about $225 billion.
The new charge sheet follows three earlier E.U. cases against Google, in which the company has racked up more than €8 billion ($8.6 billion) since 2017 for abuses of dominance on its mobile operating system, its search business, and its display advertising operations. Google has continued to defend its innocence.
So-called statements of objections are a formal step laying out the European Commission’s concerns over a particular behavior that it deems to be harmful to the market. On Wednesday, the E.U.’s antitrust arm appealed to Google to come forward with solutions.
While antitrust charge sheets can pave the way for fines as much as 10% of a firms’ global sales, they seldom approach that level, meaning the impact on earnings of Silicon Valley firms is often muted.
Instead, regulators across Europe have pivoted toward insisting on tough remedies — including changes to the business model of companies — that can be far more onerous. They’ve also approved a slew of new rules to try to act before it’s too late to stop the most powerful companies turning markets into competition dead-zones.
Google has long held a key position in which it’s able to collect data allowing advertisers to target ads, as well as sell ad space and provide the technology that allows for advertisers to find publishers to sell their space.
The E.U. first opened a probe into Google’s ad tech practices in 2021. The commission’s investigation has been examining how the company may have obstructed rivals’ access to user-data for online advertising as well as how it may have ringfenced data for its own use.
The U.K.’s competition authority has also been investigating Google’s ad tech practices. Litigation against the firm’s behavior is also ongoing in the U.S. as part of three different suits filed by the U.S. Department of Justice and a group of states, a separate one from a different group of states and one by advertisers and publishers. Those cases could well result in an order for Google to separate its ad tech arm from its core business.
