Google has been fined nearly $3.5 billion for unfairly manipulating the online ad markets. European Commission officials said the move had harmed rival companies and may have meant higher prices on consumer products.

The ruling has not only been condemned by Google but could cause diplomatic and economic disputes between the European Union and United States.

The case is about advertising exchanges, which are systems where would-be advertisers and websites wanting to display ads for money are brought together. The theory is the exchanges automatically find the most efficient pairings, meaning websites get as much revenue as possible, while advertisers get the most effective placement for their ads.

Conflict Of Interests

However, in most cases advertisers and websites don't deal directly with the ad exchanges. They instead deal with intermediaries. For example, businesses wanting to advertise will often use a service that collects their chosen keywords and target audience and then looks for places to advertise. Meanwhile websites will often use services that mean they simply put a piece of code on their site and ads are automatically created and inserted to be seen by specific individual visitors.

Google operates both advertising platforms and a major advertising exchange, creating a potential conflict of interests. The European Commission ruled that Google exploited this conflict of interests unlawfully.

It says the setup meant Google had advanced knowledge of how much advertisers were willing to pay and took advantage in a way that disproportionately steered them towards using its own advertising platform. Officials say this meant advertisers overpaid and may in turn have passed the extras costs on to consumers.

Not First Offense

The fine of 2.95 billion euros was decided by factors including the turnover of the advertising exchange, the severity and length of time of the breaches, and the fact Google has been fined for similar market dominance abuses in the past. The European Commission also wants Google to explain how it can mitigate the conflict of interests. (Source: europa.eu)

Google says it disagrees with the decision and plans to appeal, arguing that the ad market remains competitive. Meanwhile the US president called it discrimination against the US of a type that that could result retaliatory tariffs. That's despite Google having also lost a US antitrust case on the same topic, with penalties to be decided in a hearing later this month. (Source: Bloomberg.com)

What's Your Opinion?

How should competition laws work online? Does it matter if the same company handles multiple elements of the advertising process? Does any of this matter for ordinary web users?