Google fined record $2.72B by EU for breaching competition rules

EU antitrust regulators hit Alphabet unit Google with a record 2.42-billion-euro ($2.7 billion) fine on Tuesday, taking a tough line in the first of three investigations into the company's dominance in searches and smartphones.

It is the biggest fine the EU has ever imposed on a single company in an antitrust case, exceeding a 1.06-billion-euro sanction handed down to U.S. chipmaker Intel in 2009.

The European Commission said the world's most popular internet search engine based in Mountain View, California has 90 days to stop favoring its own shopping service or face a further penalty per day of up to 5 percent of Alphabet's average daily global turnover. Google says it is considering an appeal.

The fine, equivalent to 3 percent of Alphabet's turnover, is the biggest regulatory setback for Google, which settled with U.S. enforcers in 2013 without a penalty after agreeing to change some of its search practices.

The EU competition enforcer has also charged Google with using its Android mobile operating system to crush rivals, a case that could potentially be the most damaging for the company, with the system used in most smartphones.

The company has also been accused of blocking rivals in online search advertising.

The Commission found that Google, with a market share in searches of over 90 percent in most European countries, had systematically given prominent placement in searches to its own comparison shopping service and demoted those of rivals in search results.

"What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation," European Competition Commissioner Margrethe Vestager said in a statement.

Google maintains it's just trying to package its search results in a way that makes it easier for consumers to find what they want.

"When you shop online, you want to find the products you're looking for quickly and easily. And advertisers want to promote those same products. That's why Google shows shopping ads, connecting our users with thousands of advertisers, large and small, in ways that are useful for both," Kent Walker, senior vice president at Google, said in a statement.

"We respectfully disagree with the conclusions announced today. We will review the Commission's decision in detail as we consider an appeal, and we look forward to continuing to make our case," Walker said.

The action follows a seven-year investigation prompted by scores of complaints from rivals such as U.S. consumer review website Yelp, TripAdvisor, UK price comparison site Foundem, News Corp and lobbying group FairSearch.

The penalty payment for failure to comply would amount to around $12 million a day based on Alphabet's 2016 turnover of $90.3 billion. The Commission did not specify what changes Google had to make.

"This decision is a game-changer. The Commission confirmed that consumers do not see what is most relevant for them on the world's most used search engine but rather what is best for Google," said Monique Goyens, director general of EU consumer group BEUC.

Thomas Vinje, legal counsel to FairSearch, welcomed the Commission's findings and urged it to act on Google's Android mobile operating system following its 2013 complaint that Google restricted competition in software running on mobile devices.

But the penalty is likely to leave a bigger dent in Google's pride and reputation than its finances. Alphabet has more than $92 billion (82 billion euros) in cash, including nearly $56 billion (50 billion euros) in accounts outside of Europe.

Vestager said the Commission's probe, which started in 2008, looked at some 1.7 billion search queries. Investigators found that on average even Google Shopping's most highly-ranked rivals only appeared on page 4 of Google search results. Vestager said that 90 percent of user-clicks are on page one.

"As a result, competitors were much less likely to be clicked on," she said.

More broadly, Vestager said, the probe has established that Google is dominant in general internet search in all 31 countries of the European economic area. This will affect other cases the Commission might build against the internet giant's various businesses, like Google Images.

She also noted that regulators are making "good progress" in its other Google probes into Android and search advertising, and that the "preliminary conclusion" is that they breach EU anti-trust rules.

The decision comes a year after Vestager shocked the world and angered Washington with an order that Apple repay 13 billion euros in back taxes in Ireland.

The case is one of three against Google and of several against blockbuster U.S. companies including Starbucks, Apple, Amazon and McDonald's.

The cases have stoked tensions with Washington and Brussels could now face the wrath of U.S. President Donald Trump, who won office on his "America First" slogan.