The European Commission’s recent €890m fine against Google is a major step up in efforts to define the limits of digital market dominance. This new sanction comes as part of the EU’s lengthy list of penalties, but in this case it’s a big trial of the success or failure of the Digital Markets Act, the EU’s ambitious bill to curb the influence of big tech companies. The fines are detailed and divide them into two distinct charges, highlighting the complexity of issues involved. Google was fined €460 million for allegedly displaying its own services like shopping, booking hotels, transport and sports results more prominently in search results than others. At the same time, a €430 million penalty was imposed for the Commission’s “restrictive practices in the Google Play app store, which hinders developers from offering users access to alternative, lower-cost offers on other platforms.
With this development, the European Commission is caught in the middle of a high-stakes struggle with implications for more than just business regulations. It is a statement of sovereignty in the Internet, a proof that the EU will implement its regulations in the face of external pressures, such as specific criticism and threats of retaliatory tariffs by the USA. The principle of fairness and level playing field for all the businesses in the Commission’s scope is at the core of the Commission’s actions. The fines underscore that the days of unchecked expansion for tech giants are coming to an end and that the days of robust regulation to encourage competition and maintain consumer choice are here. How these penalties were reached was carefully tracked and reporting of such penalties focused public attention on the current investigation into the way these huge platforms operate in Europe.
It is also important to note that this development follows a history of Google’s interaction with European regulators. These are the first penalties under the new Digital Markets Act framework but the fifth and sixth penalties for anti-competitive practices, which have now cost Google a whopping €10.38bn over almost 20 years. It is an extended and fraught saga that points to a familiar conflict between the company’s practices and the bloc’s philosophy for regulating them. But the mood of these new fines is quite different than what has occurred in the past. The European Commission has surprisingly made it clear that it won’t impose further fines on Google in the short-term. The regulators have recognised the companies “constructive dialogue” and “good progress” in adapting its activities to the demands of the Digital Markets Act.
The tone indicates that regulators may be looking to be more tolerant of the tech giant, a change in attitude. The EU antitrust chief, addressing media queries about external pushback, said the duty and the obligation is to ‘respect the rules and observe them. The assessment of on-going talks as constructive suggests that Google is making a serious attempt at negotiating and adjusting their services towards compliance. Alexandra Xanthaki, the Commission’s tech chief, also emphasized the main goal of the Digital Markets Act – to ensure competition – as part of the Commission’s action to promote fairness in the market. It is a fine balancing act to hold people to the letter of the law while at the same time creating a cooperative atmosphere to reach the intent of the law without ever having to go to court.
Google is grappling with a host of operational issues as it works its way toward compliance, and it hasn’t held back in voicing its concerns. The company has responded to the Commission’s conclusions by saying it may take the case to court. The new rules have been explained by Google’s Global Affairs President. To comply, they are taking away features that Europeans cherish, such as real-time hotel and flight prices and availability, and removing safety measures from Google Play. It’s a defense that puts the company in the role of a protector of user experience and safety, and one that has to cut back its own services to meet regulatory requirements. This argument touches on the central issue the Digital Markets Act is grappling with: competition without compromising the quality or functionality of the service that users have come to expect.
The Google Play implications are especially significant. The anti-steering restrictions fine of €430m will open up the app distribution and in-app purchases market. Google was essentially locking developers in to their payment system and fee structure with no other viable options for redirecting users to other cheaper app stores or other websites. The changes are likely to completely restructure the business of the app market, allowing the developer to provide promotions and discounts to the user, free of the usual “Google tax. This will create a more dynamic environment that will result in greater price competition and consumer choice, which may bring down the price of apps, subscriptions, and in-app purchases in the entire digital economy.
