Google under investigation for uncompetitive practices by EU

The EU announced it is investigating Google over potential violations of the Digital Markets Act (DMA).

If the tech giant is found to have violated the DMA, it could face fines of up to 10% of its annual turnover and may be required to divest certain business divisions.

Meta and Apple are also currently under investigation by the EU Commission for alleged breaches of the DMA.

What is the Digital Markets Act (DMA)? The DMA is a piece of legislation introduced in 2022 designed to ensure that large online platforms, called “gatekeepers”, behave in a fair way online to create a fair and open environment for online businesses. Only six gatekeepers have obligations under the DMA:

• Alphabet (Google’s parent company).
• Apple.
• Meta.
• Amazon.
• Microsoft.
• ByteDance.

All six companies, none of which are based in the EU, were required to ensure they fully complied with DMA obligations and submit compliance reports by March 7.

DMA violation penalties. The consequences of non-compliance with the DMA includes:

• Fines: Up to 10% of the company’s total worldwide annual turnover, or up to 20% in the event of repeated infringements.
• Periodic penalty payments: Up to 5% of a company’s average daily turnover.
• Remedies: These can include behavioural and structural remedies, such as the divestiture of (parts of) a business.

Under investigation. EU antitrust boss Margrethe Vestager and industry head Thierry Breton confirmed that investigations Google is being investigated for”

• Allegedly not allowing apps to freely communicate with users and form contracts with them.
• Reportedly giving its own goods and services preference in its SERPs.

App store concerns. The Commission is investigating whether Google has broken the DMA rules regarding its app stores. According to Article 5(4) of the DMA, gatekeepers (the six companies the DMA applies to) must let app developers guide users to offers outside their app stores without any fees. The Commission is concerned that Google might not be following this rule entirely as its existing measures seem to limit developers’ freedom to advertise and promote offers. They also impose charges, which reportedly make it harder for developers to communicate and make deals directly.

Self-preferencing concerns. The Commission is also investigating Alphabet to see if Google’s search results give preference to Alphabet’s own services like Google Shopping, Google Flights, and Google Hotels over similar rival services. They’re worried that Alphabet’s actions to comply with the DMA might not ensure fair treatment for third-party services listed on Google’s search results page compared to Alphabet’s own services, as demanded by Article 6(5) of the DMA.

Why we care. Tougher data privacy policies might affect Google’s capacity to deliver personalized ads and content. This could potentially reduce the effectiveness of advertising campaigns, as they may not effectively reach the desired target audience as accurately.

Additional concerns. The EU Commission is also conducting three additional investigations into Meta and Apple for:

• Meta allegedly unfairly asking individuals to pay to stop their data from being utilized for ads.
• Apple reportedly not allowing apps to openly communicate with users and form contracts with them.
• Apple reportedly not offering users enough choice.

All five investigations are expected to be complete in approximately 12 months.

What the EU is saying. EU antitrust boss Margrethe Vestager said in a statement:

• “We suspect that the suggested solutions put forward by the three companies do not fully comply with the DMA.”
• “We will now investigate the companies’ compliance with the DMA, to ensure open and contestable digital markets in Europe.”

Industry head Thierry Breton added:

• “We have been in discussions with gatekeepers for months to help them adapt, and we can already see changes happening on the market. But we are not convinced that the solutions by Alphabet, Apple and Meta respect their obligations for a fairer and more open digital space for European citizens and businesses.”
• “Should our investigation conclude that there is lack of full compliance with the DMA, gatekeepers could face heavy fines.”

What Google is saying. Oliver Bethell, a competition executive at Google, said in a statement:

• “To comply with the Digital Markets Act, we have made significant changes to the way our services operate in Europe.”
• “We have engaged with the European Commission, stakeholders and third parties in dozens of events over the past year to receive and respond to feedback, and to balance conflicting needs within the ecosystem. We will continue to defend our approach in the coming months.”

What Meta is saying. Meta said in a statement:

• “Meta said: “Subscriptions as an alternative to advertising are a well-established business model across many industries . . . We will continue to engage constructively with the Commission.”

Deep dive. Read the European Commission’s announcement in full for more information.