Alphabet’s Google may need to sell a chunk of its successful adtech sector in order to allay concerns about anti-competitive behavior.
EU regulators issued a stern warning on Wednesday, indicating their intent to impose the most significant regulatory penalty the company has faced thus far.
EU Commission Charges Google
The European Commission formally presented its charges against Google, two years after launching an investigation into the company’s alleged anti-competitive practices, including favoring its own advertising services. If found guilty, Google could face a fine of up to 10% of its annual global turnover.
This particular clash between Google and regulators carries heightened importance, as it centers around the company’s primary revenue stream: advertising. In 2022, advertising accounted for a staggering 79% of Google’s total revenue, amounting to $224.5 billion from various services such as Search, Gmail, Google Maps, YouTube, and AdSense.
Google has been granted a few months to respond to the charges. It also has the option to request a closed hearing before senior Commission antitrust officials and national counterparts, before the EU issues a final decision, which could take more than a year. Alternatively, the company could potentially reach a settlement by offering more robust remedies than previously proposed.
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Regulators dissatisfied with slow progress and lack of concessions
The Commission’s Vice President suggested one potential remedy would be for Google to divest its sell-side tools, DFP and AdX, to eliminate conflicts of interest.
However, Google expressed its disagreement with the EC’s perspective, asserting that the investigation focuses on a narrow aspect of its advertising business.
According to the Commission, Google has been accused of favoring its own online display advertising technology services at the expense of competing providers, advertisers, and online publishers.
The company is alleged to have abused its dominant position by giving preferential treatment to its ad exchange AdX in the ad selection auction, through its publisher ad server DFP. Additionally, Google is accused of prioritizing AdX in the bidding process conducted by its ad-buying tools, Google’s Ads and DV360.
As the world’s leading digital advertising platform, Google currently commands a 28% market share of global ad revenue, according to Insider Intelligence, a research firm.
Sources indicate that regulators had attempted to settle the case three months after commencing the investigation. However, their frustration grew due to the slow progress and the lack of substantial concessions from Google.
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