google written into foam of coffee
Google announced changes to its European shopping ads one day before an EU deadline expired PHOTO: Yuko Honda

Google made a major concession to the European Union yesterday.

To comply with anti-trusts penalties levied against the Mountain View, Calif.-based tech giant in June, Google has agreed to change its search engine rankings for products to treat its own shopping service the same as competitors.

The penalties included a record $2.7 billion fine for favoring its own shopping services.

Spinning Off Google Shopping

Al Verney, spokesman for Google in Brussels, said competitors would now have a chance to compete on equal terms.

"Google Shopping will compete on equal terms and will operate as if it were a separate business, participating in the auction in the same way as everyone else," he said.

In effect, Google is creating a standalone unit for its shopping services. The unit will now have to bid against rivals for prime position on search pages.

“Starting today, Comparison Shopping Services have a new opportunity to use Shopping ads to advertise on Google.com in EEA countries and Switzerland on behalf of retailers they represent,” Olivier Heckmann, VP of Engineering for AdWords wrote.

“Google Shopping in these countries will operate in the same manner, bidding alongside Comparison Shopping Services on equal terms. If you run a Comparison Shopping Service and are interested in learning more, visit our help center.”

The post also promised Google competitors they will benefit from any improvements Google introduces in the lead up to the holiday season to increase the reach of ads. 

Clearing the Search Page Ad Panel Playing Field

This will change the ad panel at the top of search pages to allow the highest bidder prime position in those panels. Google Shopping will bid on this placement just like the others.

Clear labelling on every advertising panel will indicate who is offering the ad so consumers can know where the link will redirect them. 

Google will run Google Shopping as a separate company subject to the same bidding procedures as non-Google services.

However, this only applies to Google services in Europe, a sign the $2.7 billion fine and threat of further penalties for failure to change had an impact.

EU With Teeth

Google had until Sept. 28 to comply with the June ruling. The company appealed the fine earlier this month, but yesterday's actions indicate it is taking no chances.

The company is up against a formidable opponent in EU Competition Commissioner Margrethe Vestager. Before Google, she had taken on Apple, investigating its financial affairs which led to the August 2016 declaration that its tax benefits in Ireland were illegal. In that case she demanded a payment of $15 billion plus interest.

Apple is also appealing that ruling.

Vestager isn't targeting US-based tech industries alone. Earlier this week she imposed a $1 billion fine on Swedish truck manufacturer Scania for participating in a truck manufacturing cartel.

A further five major EU automotive companies were also found guilty last year and have since reached a settlement with the EU.

Why Google Matters

The Google case is one of many others. However, in an interview with the British Guardian newspaper Vestager explained why this case is so important for online commerce:

“They[Google] do some amazing, innovative things, but they are really an old-school advertising business,” she said.

“The way their products are set up, you have to take their browser and their search engine. People then don’t go looking for anything else, so competitors never have a chance of showing us something else. And because the market doesn’t work, then nobody invests in innovation ….”

Vestager said the EU would not be the final judge of whether Google’s changes are enough or not, rather the market will decide whether it genuinely opens access up to competitors.

Competition Still See Google Blocking

The competitors are already circling. 

Last week, Foundem, which provides a "vertical search" service to compare products available on online markets for the UK, slammed any suggestion of paid advertising panels and claimed it would create just another barrier to non-Google services.

“Unless Google is volunteering to break up its general- and specialized-search businesses, the inclusion of Google’s comparison shopping competitors into a new or existing pay-for-placement auction would simply create an additional anti-competitive barrier — one that would formalize the transformation of free, relevance-based traffic into paid, pay-for-placement traffic for all services but Google’s own,” the company said in a statement.

“This would only serve to escalate the inability of these services to compete against Google’s services in the face of Google’s immensely powerful search manipulation practices.”

The initial judgement against Google gave the company 90 days to outline how it would change its practices. That 90 days runs out today, but this isn't the last we'll hear of this case.