The European Union has accused Google of abusing its dominant position in the advertising technology market and has fired off an antitrust charge sheet, which threatens to break up certain parts of the tech giant's lucrative business. The accusations relate to the alleged preferential treatment of Google-owned ad exchange programs, which ultimately strengthens the company's position in the ad tech supply chain and allows it to charge a higher rate for its services.
The EU's Competition Commissioner, Margrethe Vestager, said that "only the mandatory divestment by Google of part of its services would address its competition concerns" and that market reaction was muted, as previous European investigations have taken years to conclude and have failed to create any significant impact on Google's share price. Google shares remained steady in New York, hardly moving after initially dropping as much as 1.9% in the market open.
Google has been invited to a hearing by the European Commission in which it can present its arguments against the preliminary charges. The EU has also stated that the potential behavioural remedies that could be implemented may not be sufficient in correcting the alleged abusive conduct, which could leave the door open for a potential order for Google to divest part of its ad tech business from its core services.
While Google states that it is "committed to creating value for our publisher and advertiser partners in this highly competitive sector", the EU case represents 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 - and the new charge sheet follows three earlier EU cases against Google, for which the company has thus far racked up more than €8 billion in fines since 2017.
Regulators across Europe are now pivoting towards tough remedies and changes to business models in order to create fairer competition in the marketplace. Google's ability to collect data allowing advertisers to target ads, sell ad space and provide the technology to allow advertisers to find publishers to sell their space places the company in a very important position. The EU opened a probe into Google's ad tech practices in 2021 which has led to an investigation into how the company may have obstructed rivals' access to user-data for online advertising, as well as how it may have ringfenced some data for its own use.
The UK's competition authority has also been investigating Google's ad tech practices, and litigation against the company's behaviour is also ongoing in the US, with three different suits filed by the US Department of Justice and a group of states, as well as by a separate group of states and one by advertisers and publishers. Ultimately, these cases could lead to an order for Google to separate its ad tech arm from its core business.