EU regulators have stated that Alphabet's Google may be required to sell a portion of its adtech business to address concerns over anti-competitive practices. The European Commission presented its charges in a statement of objections, marking the culmination of a two-year investigation into Google's behaviors, including favoring its own advertising services. If found guilty, Google could face a fine of up to 10% of its annual global turnover, as well as potential divestment requirements.
This regulatory clash holds significant consequences for Google, as the adtech business represents its primary source of revenue, accounting for 79% of its total earnings in the previous year. In 2022, Google generated $224.5 billion in advertising revenue from various services such as search, Gmail, Google Play, Google Maps, YouTube, Google Ad Manager, AdMob, and AdSense.
Google has been given a few months to respond to the charges. It also has the option to request a closed hearing in front of senior Commission antitrust officials and national counterparts before the EU reaches a decision, a process that could extend over a year. The company may consider settling by offering stronger remedies than those previously proposed.
Margrethe Vestager, the EU's antitrust chief, expressed the possibility of Google divesting its sell-side tools, DFP and AdX, as a potential solution to address the conflicts of interest and anti-competitive practices. Vestager emphasized that a behavioral commitment would likely be ineffective in rectifying the situation, highlighting the necessity for more drastic measures given the nature and functioning of the markets involved.
In response to the Commission's charge, Google has stated its disagreement with the investigation's focus on a limited aspect of its advertising business. Dan Taylor, Google's Vice President of Global Ads, expressed this disagreement in a statement, highlighting that the company does not share the same view as the European Commission (EC).
Meanwhile, Margrethe Vestager confirmed that investigations into Google's privacy sandbox tools, aimed at blocking third-party cookies on the Chrome browser, and the company's plan to restrict access to the advertising identifier on Android smartphones will continue. The EU has collaborated closely with competition authorities in the United States and the United Kingdom throughout the process.
The European Publishers Council, which lodged a complaint with the Commission last year, welcomed the charge against Google. The Commission alleges that Google has favored its own online display advertising technology services to the detriment of competing providers, advertisers, and online publishers.
According to the Commission, Google has engaged in anticompetitive behavior since 2014, favoring its ad exchange AdX over competing platforms in ad selection auctions conducted by its dominant publisher ad server DFP. Additionally, Google Ads and DV360, its ad buying tools, have been accused of prioritizing AdX in bid placements on ad exchanges.
With a 28% market share of global ad revenue, Google is the leading digital advertising platform worldwide, as reported by research firm Insider Intelligence.
During the investigation's early stages, Google attempted to settle the case three months after its initiation. However, regulators grew frustrated with the slow progress and the lack of significant concessions from the company, according to a person familiar with the matter as previously reported by Reuters.
