Google Alphabet Inc. (NASDAQ: GOOGL) was fined $1.7B by the European Union on Wednesday, making it the third fine for the company in just two years. EU regulators found that Alphabet, through its Google division, engaged in illegal anticompetitive advertising practices from 2006 to 2016.
A statement from EU Competition Commissioner Margrethe Vestager said that Google used illegal methods to “cement its dominant market position.”
The $1.7B fine is equal to 1.29% of Google’s global revenue from 2018.
Google Restricted Competitor Adverts
Google breached EU antitrust law by restricting its publishing partners from showing adverts of its competitors. The most profitable spaces were reserved for Google related advertising. Publishers needed written approval from it before showing rival adverts.
The EU looked at over 200 advertising agreements with major websites and found clauses that harmed fair competition. Vestager said that “there was no reason for Google to include these restrictive clauses in its contracts except to keep rivals out of the market.”
Google has since changed its practices and the EU is “cautiously optimistic” that the company is now following a policy that allows for fair competition.
This is not the first or even the largest fine that it has received from regulators in the EU. The company was previously fined a record $4.96B for anticompetitive practices surrounding its Android operating system. It also received a $2.4B fine for anticompetitive online shopping practices.
Business Groups Want the EU to Remain Vigilant
The Initiative for a Competitive Online Marketplace, a London based lobbying group, said after the announcement that “Competitors have withered or died. It’s time for the EU and governments around the world to step in and address the underlying wrong.”
Alphabet Stock Unharmed
While the news is significant, and it highlights how American businesses need to operate carefully in the EU, it did little to impact the stock of parent company Alphabet.
Alphabet gained 1.99% on Wednesday, contributing to a stock rally of 17.37% since the start of this year. The EU fine will easily be absorbed, and the company has already changed its advertising policies.
Alphabet remains a strong BUY stock in most analyst assessments. Strong revenue growth and a robust advertising market have kept investors confident in the future of Google and its parent company.
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