Google’s ad business faces EU regulatory threat

According to sources familiar with the matter at hand, Alphabet’s Google is likely to face its most significant regulatory threat from EU antitrust regulators, who are set to open a formal investigation into its digital advertising business by the end of 2021.

In the last decade, the European Commission had fined Google more than $9.8 billion (8 billion euros) for “blocking rivals in online shopping, Android smartphones and online advertising”.

According to one of the sources, antitrust regulators are likely to focus on Google’s position vis-a-vis advertisers, rivals, publishers, and intermediaries indicating that the upcoming probe is likely to be deeper than the French antitrust agency’s probe which came to an end last week.

In 2020, Google made $147 billion in revenue from online ads, more than any other company in the world. Ads on its properties, including search, YouTube and Gmail, accounted for the bulk of sales and profits.

Nearly 16% of its revenues came from its display or network business, in which other media companies use Google technology to sell ads on their website and apps.

Last year, the US Justice Department, joined by other state attorneys sued Google for abusing its dominance in search ads. Subsequently, a group of states, led by Texas, also filed lawsuits focused on anti-competitive behaviour on the network side of its business.

According to market researcher eMarketer, Google controls around 27% of the global online ad market, including 57% for search ads and 10% for displays. While the numbers may not reveal its monopolistic hold immediately, advertisers and rivals contend that through its various software, the role played by Google becomes obvious since it is impossible to avoid them.

According to them, Google takes advantage of such dependences, sellers and intermediaries have on it to extract high fees from all sides and block rivals from fairly competing with it.

In a questionnaire sent to Google rivals and third parties earlier this year and seen by Reuters, the EU watchdog asked if advertisers receive rebates when they use Google intermediaries which allow advertisers or media agencies to buy advertising inventory from many sources.

The Commission should conclude ongoing cases before starting new ones, said Thomas Hoppner, a partner at law firm Hausfeld, and who advises several complainants against Google.

“From the practitioner’s point of view and from the industry’s point of view, it appears equally important to bring investigations into local search and Google’s job search to an end when other authorities have opened investigations into Google’s adtech,” said Hoppner.

($1 = 0.8399 euros)

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