The European Union Demands Google And Threatens With Heavy Sanctions On Anti-competitive Practices In The Adtech Business

JAKARTA - Google may have to sell some of its lucrative adtech businesses to address concerns about anti-competitive practices, EU regulators said on Wednesday, June 14 threatening the company with the harshest regulatory sanctions ever.

The European Commission put its allegations in a statement about the issues raised to Google two years after opening an investigation into behaviors such as preferentializing self-advertising services, which could also result in a fine of as much as 10% of Google's annual global turnover.

A higher stake for Google in these latest clashes with regulators as it relates to the company's biggest money producer, with the adtech business accounting for 79% of last year's total revenue.

Google's ad revenue in 2022, including from search services, Gmail, Google Play, Google Maps, YouTube ads, Google Ad Manager, AdMob, and AdSense, reached US$224.5 billion (Rp3,339 trillion).

The head of EU antitrust, Margrethe Vestager, said Google may have to sell part of its adtech business as behavioral solutions are unlikely to be effective in stopping anti-competitive practices.

"For example, Google can release its side selling tools, DFP and AdX. By doing so, we will end the conflict of interest," he told a news conference.

"Of course I know this is a firm statement, but it's a picture of the nature of the market, how it works, and also why behavioral commitments seem unlikely," Vestager said.

Google said it disagreed with the Commission's allegations. "The public is investigating the focus on the limited aspects of our advertising business and not the new one. We disagree with EC's views," said Dan Taylor, Google's vice president of global advertising, in a statement.

Vestager said investigations would continue to be carried out regarding Google's introduction to a set of privacy tools to block third-party cookies in the Chrome browser and plans to stop the availability of ad identifiers to third parties on Android smartphones.

He said the European Union had collaborated with competition authorities in the United States and Britain.

The Council of European Publishers, which filed a complaint with the Commission last year, welcomed the action.

The Commission said Google is preferential to its own online advertising technology services by harming competing ad technology service providers, advertisers, and online publishers.

The Commission said Google had abused its dominance since 2014 by preferentializing its own ad exchange, AdX, in an ad-election auction by its dominant publisher ad server, DFP, and also by preferenceing AdX in Google Ads and DV360 ad purchase tools placing bids on the ad exchange.

Google is the world's leading digital advertising platform with a market share of 28% of global advertising revenue, according to research firm Insider Intelligence.

Google has been trying to resolve the case three months after the investigation opened, but regulators are frustrated with the slow pace and the lack of substantial concessions, sources familiar with the matter previously told Reuters.

The European Union's decision to sue Google for its anti-competitive practices in the adtech business demonstrates their commitment to protecting healthy competition in the digital market. If Google is found guilty, they can face severe sanctions and may be required to sell part of their adtech business. This will have a significant impact on Google's business model, given that adtech is the company's main source of revenue.

This development also shows that the European Union continues to strengthen regulation and oversight of major tech companies to prevent monopolistic practices and protect small competitors. This decision could affect the way Google operates in the European Union market and trigger major changes in the digital advertising industry globally.

Google will now have time to provide an official response to allegations by the European Commission. This legal process is likely to continue in the next few months, and the results will provide a clear direction on the settlement of this case and its impact on Google and the digital advertising market as a whole.