Google's adtech likely to face formal EU probe by year-end

It would mark a new front by the EU competition enforcer against Google.
It would mark a new front by the EU competition enforcer against Google.PHOTO: REUTERS

BRUSSELS (REUTERS) - Alphabet unit Google could face its biggest regulatory threat, with European Union antitrust regulators set to open a formal investigation into its lucrative digital advertising business before the end of the year, said people familiar with the matter.

It would mark a new front by the EU competition enforcer against Google. It has in the last decade fined the company more than €8 billion (S$12.8 billion) for blocking rivals in online shopping, Android smartphones and online advertising.

An EU probe would focus on Google's position vis-a-vis advertisers, publishers, intermediaries and rivals, one of the people said, indicating deeper scrutiny than the French antitrust agency's case concluded earlier this month.

Google made US$147 billion (S$198 billion) in revenue from online ads last year, more than any other company in the world. Ads on its properties, including Search, YouTube and Gmail, accounted for the bulk of sales and profits.

About 16 per cent of revenue came from its display or network business, in which other media companies use Google technology to sell ads on their websites and apps.

The United States Justice Department, joined by some American states, sued Google last year for abusing its dominance in search ads. A group of states led by Texas in a later lawsuit focused on anti-competitive behaviour on the network side of the house.

Early this month, France settled with Google for US$268 million and various commitments over similar allegations related to the network business.

The Google unit also must work closely with Britain's competition regulator on upcoming software changes as part of a settlement reached days later.

The EU watchdog declined to comment. Google did not immediately respond to a request for comment.

A new EU inquiry could end up targeting Google's entire ad empire. Market researcher eMarketer expects Google to control 27 per cent of global online ad spending this year, including 57 per cent for search ads and 10 per cent of display.

While the numbers may not look monopolistic at first blush, advertisers and rivals contend that Google's software plays a role in so many facets of the market that the company is impossible to avoid.

They allege that Google takes advantage of the dependence that buyers, sellers and intermediaries have on it to extract high fees from all sides and block rivals from fairly competing with it.

In a questionnaire sent to Google rivals and third parties earlier this year and seen by Reuters, the EU watchdog asked if advertisers receive rebates when they use Google intermediaries which allow advertisers or media agencies to buy advertising inventory from many sources.

The watchdog should conclude ongoing cases before starting new ones, said law firm Hausfeld partner Thomas Hoppner.

"From the practitioner's point of view and from the industry's point of view, it appears equally important to bring investigations into local search and Google's job search to an end when other authorities have opened investigations into Google's adtech," he said.