The EU is going after Google's bread and butter

Most of us associate Google with visible products like Search, Chrome, Android, Pixels, and hundreds of messaging apps. But what powers Google as a corporate entity is its ad business. Revenue from Google’s advertising business is around $225 billion, which is about 80% of the company’s annual revenue. The European Union thinks these numbers come from an abuse of its dominant position in the market.

The European Commission has filed a formal Statement of Objections against Google around its ad business. This is the first step of a formal antitrust complaint for suspected violations of EU antitrust rules and is not to be confused with a formal ruling proving Google guilty of these practices.

According to the complaint, the Commission has preliminarily found that Google is a dominant entity in the publisher ad business.

The Commission further notes that since at least 2014, Google has abused its dominant positions to favor its own ad exchange in various ways. The company occupied a central role in the ad tech supply chain, reinforcing its ability to charge a high fee while foreclosing rival ad exchanges from entering and operating in the market.

As mentioned, these are preliminary findings. After the filing of the Statement of Objections, the accused party can examine documents, reply in writing, and request an oral hearing to defend its position.

If the evidence still stands, the Commission will announce a guilty verdict and take punitive action. This can amount to up to 10% of the company’s annual worldwide turnover, or be decisions prohibiting such anti-competitive conduct.

As Bloomberg notes, Google has already paid penalties in the EU totaling more than $8.6 billion across three rulings. What would have a more significant impact is the Commission’s recommendation of breaking up Google’s ad business.

As the company operates the largest ad exchange in the EU, and then also has a dominant position with its publisher ad server with its ad-buying tools, the Commission notes that there is an inherent conflict of interest for Google in being active on both sides of the market. Therefore the Commission’s preliminary view is that Google should be made to mandatorily exit from part of its services, to address its competition concerns.

It remains to be seen how the defence plays out, and if Google can successfully convince the European Commission that it wasn’t abusing a dominant position in the market.