Legal pressure in both Europe and the US could result in Google facing billions in fines and even being broken up, say Adam Satariano and Jenny Gross in The New York Times. In particular, the EU’s highest court denied the company’s appeal over a decision to fine it €2.4 billion for giving preferential treatment to its own price-comparison shopping service over rival offerings in its search results.
Meanwhile, a trial has begun in the US over whether it “abused its dominance in the digital advertising sector”, with another US judge already ruling last month that Google had “rigged the search engine market”. The latest case in the US over digital advertising focuses on the fact that Google took 20% commissions for advertising transactions that ran through its platform – more than the percentage charged by another company in the industry, says Lauren Feiner on The Verge.
Internal documents reveal that even Google’s own executives “privately worried the fee was difficult to defend”. While the company suggests that this premium rate was due to the company’s “better service” compared with rivals, the Department of Justice argues that it was because it “illegally tied together its publisher advertising server and its advertising exchange”.
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What's the likelihood of Google being broken up?
While the Department of Justice may be “spearheading efforts” to break up Google, it’s not clear whether splitting the company up would be “that simple, or even practical”, especially for consumers, says Ronan Shields of Digiday. You could even argue that the fragmentation of a “foundational industry cornerstone” could actually harm publishers’ advertising revenues”. This is because most buyers of advertising “dread the prospective disruption to their established workflows”, while “even the most vocal of Google’s critics among publishers acknowledge that the divestiture of its sell-side advertising tech would negatively affect their advertising revenue, at least in the short term”.
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The government is “a long way from actually breaking Google up”, not least because the judgement in the latest case is not due until next year, and it will probably be appealed, says Dan Gallagher in The Wall Street Journal. However, most experts believe that this is “a difficult trial for Google to win”, and as a result, investors are “starting to treat the possibility as a foregone conclusion”, says Gallagher. The stock of Alphabet, Google’s parent company, has slid 14% in the third quarter, a “notable drop even against other major tech stocks”. The company now trades on only 19 times forward earnings, below the average of the S&P 500 index.
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