EU is considering breaking up Google’s advertising arm

The European Commission is once again working on disrupting the tech industry. This time, Google is put on the rack. In a provisional ruling, the Commission has filed a formal complaint with one of the largest companies in Tech land. Google’s advertising branch has too dominant a position in the industry and is therefore probably in violation of competition law.

Forcing Google to divest parts of the company may be the only option

At least, if the upcoming court case proves that the complaint made is well-founded. But the commission is certain of the case. “For now, our fear is that Google has exploited its own market position to favor its own services.” Thus, executive vice-chairman of the Commission Margrethe Vestager, who is also the driving force behind competition policy. According to the Commission, the preliminary findings show that Google has been exploiting this dominant position since 2014.

With this, the Commission aims the arrows at the financial heart of Google. Perhaps the reader should not immediately think of advertising services at Google, but this business is the company’s main source of income. It’s a move that doesn’t happen very often. Google has already been fined three times for previous violations. The purpose of these fines was to convince Google to change course. That has clearly not succeeded, which is why the Commission is now coming up with a significantly more decisive measure.

Outcome is not yet certain

The statement is an important step in the EU investigation, but does not yet say anything about the outcome of the case. Google will first have to respond to the complaint in writing. This is followed by a request for a hearing. Only then will a final decision be made. Should Google violate applicable law, a fine of up to 10% of global revenues may follow. In addition, there may be requirements regarding possible changes within the company.

Google’s vice president of global advertising, Dan Taylor, says the company is diametrically opposed to the European Commission’s position. According to him, the market is extremely competitive. “Our advertising tool technologies help websites and apps fund their content and enable businesses of all sizes to effectively reach new customers. The Commission’s investigation focuses on a very limited aspect of our advertising business and is nothing new. We disagree with the EC’s view on the matter and will respond accordingly.

Google is ubiquitous in the advertising business

The Commission clearly disagrees with that. Google has a dominant position in every part of the market, according to Vestager. Both sellers and buyers cannot ignore Google and thus Google gives its own advertising branch an unfair advantage. A position that no other competitor holds. According to her, this position can only be resolved in one way. Namely by divesting part of Google.

This rare position therefore requires a rare solution. However, it remains a proposal for the time being. A hard claim is only made when the case shows that the provisional position of the Commission is correct.

But if the ruling is passed, it could result in a record fine and rob Google of its main source of income. According to Bloomberg, the advertising business accounts for 80% of the total revenue of Alphabet, Google’s parent company. In dollars, that 80% amounts to about 225 billion. In comparison, the first three cases against Google between 2017 and 2019 together amounted to a fine of about 8.6 billion.

Google also criticized for AI chatbot

Bard is the name, but we will not see the chatbot in Europe for the time being. The Irish privacy watchdog (Data Protection Commission, or DPC) believes that it is completely unclear whether, and if so how, Bard will comply with European privacy legislation. With this, the DPC deals a sensitive blow, because the privacy watchdog is the most important European supervisor for Google, since the European headquarters of the latter is located in Ireland.

The complaints were therefore reason enough for Google to postpone the introduction of the chat bot. The future of Bard in the EU therefore remains uncertain, Google has not provided information about possible actions or a later introduction. Bard is already available in the United States and the United Kingdom. There it has to compete with, for example, ChatGPT and Bing Chat from Microsoft.

ChatGPT can be used on the European market, but this does not mean that OpenAI, the developer of ChatGPT, will not be criticized by the authorities.