Google fights ‘quasi-criminal’ EU antitrust ad fine

LUXEMBOURG — Google claimed the EU Commission levied a “quasi-criminal” €1.49B fine riddled with “material errors” when it penalized the company for an abuse of dominance over online advertising contracts, the company’s lawyers told the EU’s General Court on Monday.

The U.S. tech giant is trying to overturn the last of three multibillion euro antitrust fines at a three-day hearing at the Luxembourg tribunal. It lost an initial challenge to the Commission’s €2.42B penalty against Google’s Shopping service last year and will later this year get the result of an appeal against a €4.3B fine for the Android operating system.

EU antitrust enforcers found in 2019 that the search giant had imposed a series of clauses in contracts with website publishers in AdSense for Search service, to the detriment of rivals in the market.

AdSense for Search operates as an online search advertising intermediation platform, giving websites access to Google’s repository of ads. The Commission ruled illegal several contractual obligations that it said harmed competition.

Commission accused of mischaracterizations

Google’s lawyer Josh Holmes QC told judges that the Commission’s decision “does not fairly or correctly characterize the clauses” contained in the AdSense contracts.

The Commission targeted three clauses, covering a decade-long period between 2006 and 2016. These include exclusivity clauses that stopped website publishers from including search ads from Google rivals on their results pages, as well as their successor — so-called ‘premium placement’ obligations, which the Commission says forced websites to reserve “the most profitable space on their search results pages for Google’s adverts.”

A third clause that Google inserted into its contracts in March 2009 — the so-called “modification clause” — required website publishers to “seek written approval” from Google before modifying how rival adverts were displayed.

Holmes said that the finding of an exclusive supply obligation “runs counter to the reading” of the agreements made with publishers and that the EU executive’s interpretation of Google’s modification clause does consider its “benign purpose” which was, Holmes argued, to protect customers of the publisher’s website.

He said the Commission was guilty of “material errors of analysis” and that the evidence does not point to the clauses producing anticompetitive effects.

Google’s ‘ultra-dominance’ in search

Nicholas Khan QC of the EU Commission’s legal service drew from wording in the EU General Court’s judgment on the Google Shopping case — which backed the Commission — describing Google’s position in the search market as “ultra-dominant.”

“Google’s dominance in general search conferred on it an enormous advantage,” Khan said, adding that the company’s exclusivity clauses were “all-encompassing.”

Khan also probed the reasoning behind Google’s decision to modify its exclusivity clauses in 2009. “If the exclusivity clause was not an infringement… it’s difficult to understand why Google retreated from it,” Khan said, adding, that the phase-out did not result in abandoning the anticompetitive effects, because they also appeared in subsequent contractual additions.

Google “didn’t want to rely on the intrinsic merit of its services,” Khan said, arguing that the company rather opted to rely on anticompetitive clauses to leverage advantage in an ecosystem where “advertising revenue is the lifeblood.”

The hearing runs until Wednesday. Monday’s arguments will also cover the Commission’s market definition analysis, as well as a deeper dive into Google’s exclusivity clauses.