Alphabet unit Google could face EU antitrust charges next year over its digital advertising business, putting the company at risk of its fourth fine in the EU of more than a billion euros, people familiar with the matter said on Thursday.
Google’s ad business, which generated over $100 billion in
sales last year, is Alphabet’s biggest moneymaker. It accounted for about 80%
of annual revenue, despite efforts over the past decade to push into selling
hardware, subscription services and cloud computing technology. The European
Commission launched an investigation into Google’s adtech business in June last
year, concerned that the U.S. tech giant may be getting an unfair advantage
over rivals and advertisers.
The company, which risks its fourth billion-euro fine,
subsequently sought to settle the case but concessions were minor and very
preliminary, one of the people said. Google has racked up more than 8 billion
euros ($7.7 billion) in EU antitrust fines in the last decade. The EU
competition enforcer is likely to issue the charges early next year although
the timing may still change, one of the people said.
The Commission has asked third parties to delete
confidential details in their submissions, usually a precursor to allowing
Google to access documents following the receipt of a statement of objections,
one of the people said.
Google could avert the charges by offering more concessions
to settle the investigation. Some companies prefer to see the precise
regulatory concerns before proposing remedies tailored to these.
The Commission declined to comment. Google, the world’s
leading seller of online advertising, well ahead of Facebook and Instagram
owner Meta Platforms Inc, had no immediate comment.
HEART OF GOOGLE‘S BUSINESSMODEL
The case goes to the heart of Google’s advertising-driven
business model, affecting advertisers, publishers, ad tech providers and users
alike, said Dieter Paemen, a partner at law firm Clifford Chance who has
previously advised Google rivals in other cases.
“It’s been a long time coming – advertisers and publishers
have been up in arms about Google’s ad-tech conduct for many years. Google is
operating on multiple sides of the advertising transaction and giving both
publishers and advertisers a raw deal,” he said.
Google’s dominance in online advertising has been
increasingly questioned over the past few years. Complaints from rivals about
its allegedly anti-competitive practices have led to antitrust investigations
on five continents concerning its practices.
Google’s ad business generated almost $111 billion in sales
through the first half of the year. Analysts expect Google to generate $233
billion in ad sales this year, up about 11% from a year ago, according to
Refinitiv estimates.
Google’s ad business includes many parts, but search ads
lead the way in terms of revenue. Other facets include selling ads on websites
and apps of outside partners and selling ads on YouTube, Gmail and other
in-house services.
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