Google has been slapped with a record fine of 2.42 billion euros (£2.1 billion) by Europe’s competition watchdog after breaching antitrust rules with its online shopping service.
The European Commission has told the internet search giant that it now has 90 days to stop the practice or face a penalty of up to 5% of the average daily turnover of the firm’s parent company, Alphabet.
However, Google said it was considering launching an appeal against the commission once it had reviewed the decision.
The penalty comes after the competition referee launched an investigation into Google Shopping seven years ago, amid complaints it gave the service a prominent position on the internet search engine, while rival services were demoted.
In a statement, commissioner Margrethe Vestager said: ” Google has come up with many innovative products and services that have made a difference to our lives.
“That’s a good thing. But Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals.
“Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.”
The watchdog said Google was the most dominant search engine across the 31 countries in the European Economic Area (EEA).
It found that Google had handed its comparison shopping service an illegal advantage in 13 EEA countries, including in the United Kingdom and Germany where it was launched in 2008.
The abuse caused traffic to Google’s shopping service to jump 45-fold in the United Kingdom, 35-fold in Germany and 19-fold in France.
However, the demotions to rival websites triggered sharp reduction in traffic, with some UK sites seeing visitor numbers plunge 85%.
Ms Vestager added: ” What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate.
“And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.”
The fine handed to Google is a significant hike of the previous record penalty of 1.06 billion euros (£937 million) dished out by the commission to US microchip firm Intel in 2009.
It follows the internet search giant’s controversial £130 million deal with HM Revenue & Customs in January 2016 to settle a 10-year tax inquiry into its UK business.
In response to the commission’s decision, Google said: “When you shop online, you want to find the products you’re looking for quickly and easily.
“And advertisers want to promote those same products. That’s why Google shows shopping ads, connecting our users with thousands of advertisers, large and small, in ways that are useful for both.
“We respectfully disagree with the conclusions announced today. We will review the commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case.”
Google launched its comparison shopping service as Froogle in 2004, before changing the name to Google Product Search in 2008 and later Google Shopping in 2013.
Despite Google’s dominance, the service had initially struggled to make headway against the established players within the market.
The commission’s investigation revealed Google’s own doubts about the comparison platform, with internal emails from the tech giant in 2006 saying the service “simply doesn’t work”.
The firm changed tack in 2008 and began displaying the comparison shopping service at the top of search results, according to the watchdog.
It added that Google’s algorithms also knocked its competitors further down the search results, with the most highly ranked rival sitting on page four.
Underscoring the disadvantage, the commission cited evidence saying 95% of clicks on desktop computers were made on the first page of search results, while the first result on page 2 attracted only 1% of clicks.
The EU is also investigating whether Google had attempted to squeeze out its rivals in online search advertising and through its Android mobile operating system.
Among the rivals which complained about the dominance of Google Shopping were US travel site TripAdvisor, UK comparison website Foundem and media giant News Corp.
Shivaun Raff, chief executive of Foundem, said Google’s illegal actions had dealt “substantial harm” to the business.
She said: “Although the record-breaking 2.42 billion euro fine is likely to dominate the headlines, the prohibition of Google’s immensely harmful search manipulation practices is far more important.
“There can’t have been many competition cases where the stakes for consumers, businesses, and innovation were any higher.
“For well over a decade, Google’s search engine has played a decisive role in determining what most of us read, use and purchase online. Left unchecked, there are few limits to this gatekeeper power.”
Tom Watson MP, Labour’s shadow secretary of state for culture, media and sport, said: “This ruling has been a long time coming and is a vindication of long running concerns about Google’s anti-competitive, unfair practices.
“When a company wields such power that it is effectively the gateway to the internet, it is the duty of regulators and lawmakers to verify that power is being exercised fairly.
“This ruling makes clear that Google shopping has not been operating fairly and could open the door to other investigations of similar examples of market distortion by the company.
“This ruling rights an unfair wrong, making this a good day for fair competition and consumers.”
In a statement News Corp, which owns The Sun, The Times and The Sunday Times newspapers, said: “We applaud the European Commission’s leadership in confronting the discriminatory behaviour of Google in the comparison shopping industry.
“Other regulators and companies have been intimidated by Google’s overwhelming might, but the commission has taken a strong stand and we hope that this is the first step in remedying Google’s shameless abuse of its dominance in search.
“We strongly believe that the abuse of algorithms by dominant digital platforms should be of concern to every country and company seeking a fair, competitive and creative society.
“Google has profited from commodifying content and enabling the proliferation of flawed and fake news, to the detriment of journalism and of an informed society.”