EU Regulators Take Action, Google May Have to Sell Adtech Business

EU regulators have warned Alphabet’s Google that it may need to divest a portion of its profitable adtech business to tackle concerns regarding anti-competitive behavior, potentially resulting in the company facing its most severe regulatory punishment yet.

The European Commission made its accusations in a statement of objections to Google two years after it opened an investigation into things like favoring its own advertising services, which could also lead to a fine of up to 10 percent of Google’s annual global turnover.

The stakes are higher for Google in this latest clash with regulators because it involves the company’s biggest money maker, whose advertising business accounted for 79 percent of total revenue last year.

Its 2022 advertising revenue, including search services, Gmail, Google Play, Google Maps, YouTube ads, Google Ad Manager, AdMob and AdSense, was $224.5 billion.

Google has a few months to respond to the payment. It can also request a closed hearing in front of the Commission’s leading competition authorities and their national counterparts before the EU makes a decision in a process that could take a year or more. The company could also potentially settle by offering stronger remedies than previously suggested.

EU antitrust chief Margrethe Vestager said Google may have to sell some of its adtech business because behavioral remedies are unlikely to be effective in preventing anti-competitive practices.

“For example, Google could drop its sell-side tools, DFP and AdX. By doing that, we would end conflicts of interest,” he said at a news conference.

“Of course I know that’s a strong statement, but it reflects the nature of the market, how it works and also why a behavioral commitment didn’t seem to be out of the question.”

Google stated that it disagrees with the Commission’s accusation.

“The Commission’s investigation focuses on a narrow aspect of our advertising business and is not new. We disagree with the EC’s view,” Dan Taylor, Google’s vice president of global advertising, said in a statement.

Vestager said investigations are continuing into Google’s deployment of a privacy sandbox toolkit to block third-party cookies in its Chrome browser and its plan to stop making an advertising token available to third parties on Android smartphones.

He said that the EU has cooperated closely with the competition authorities of the United States and Britain.

The European Publishers Council, which filed a complaint with the Commission last year, welcomed the charge.

The commission said Google favors its own online display advertising technology services at the expense of competing ad technology service providers, advertisers and online publishers.

It said Google has abused its dominance since 2014 by favoring its own Ad Exchange AdX in the ad selection auction of its ad server, which controls DFP, and also by favoring AdX in the way its ad buying tools Google Ads and DV360 bid on ad exchanges. .

According to research company Insider Intelligence, Google is the world’s dominant digital advertising platform with a market share of 28% of global advertising revenue.

Google had sought to settle the case three months after the investigation began, but regulators were frustrated by the slow pace and lack of significant concessions, a person familiar with the matter told Reuters earlier.