Google's record fine could be a game changer

NEW YORK • Google's whopping €2.42 billion (S$3.8 billion) fine may have far-reaching impact not just on the world's biggest search engine but other tech "super monopolies" like Amazon, Apple and Facebook, say analysts.

In slapping the record penalty on Google on Tuesday, the European Union's antitrust regulator ruled its search engine stacks the deck in favour of its own comparison-shopping service.

EU competition chief Margrethe Vestager also warned that the clampdown on Google's shopping search service sets a "precedent" that could be used to scrutinise the search-engine giant's behaviour in other areas.

"The shopping reasoning applied to other services would totally impact Google's business model," Ms Ombline Ancelin, a lawyer at Simmons & Simmons in Paris, told Bloomberg News.

The decision means other specialised "vertical" Google search services such as maps, travel and restaurant reviews are effectively "on parole", she added. But Ms Ancelin also said the overall message sent Tuesday does not bode well for other technology giants.

Agreeing, Fortune magazine said the ruling was a game changer for companies like Amazon, Apple and Facebook, which have taken to leveraging new products off a dominant core business such as e-commerce, smartphones or social media. The magazine highlighted the EU regulator's sensitivity towards "network effects", the phenomenon by which services, such as Google's search engine and ad business or Facebook's social media platform, become ever more effective the more people use them.

Network effects are a core part of the business strategy of Internet companies but to an antitrust regulator like Ms Vestager, they create "high barriers to entry" for competitors, and ultimately reduce consumer choice, Fortune said.

Elevation Partners co-founder Roger McNamee said Google's business model is not structured in a way that allows for competition, just as Facebook's "monopoly" has boosted Instagram and WhatsApp.

As for Google, Tuesday's decision may influence ongoing probes into Google's Android mobile-phone software, bundled for free with Search and other Google services on handsets, and its AdSense online advertising platform.

Brussels lawyer Jonas Koponen believes the shopping decision will give the EU extra impetus for both cases.


SEE OPINION: Why Google is fighting a losing war with EU

A version of this article appeared in the print edition of The Straits Times on June 29, 2017, with the headline 'Google's record fine could be a game changer'. Print Edition | Subscribe