Google’s headquarters in Mountain View. (Marcio Jose Sanchez, AP, File)
Brussels - Google will create a standalone unit for its shopping service and
require it to bid against rivals for ads shown on the top of its search
page, in an effort to satisfy European Union (EU) concerns over the display
of product results, three people familiar with the investigation said.
Google faces a Thursday deadline to comply with an EU antitrust order
for it to give equal treatment in how the search engine shows
competitors’ comparison-shopping sites, according to the people, who
asked not to be named as the negotiations are private. While the
shopping service will remain part of Google, it will operate separately
and use its own revenues to bid for ads.
ordered by regulators to stop promoting its own shopping search results
over competitors’ and to make changes by September 28 designed to give
rivals a better chance to compete, the EU said in June when it fined the
company €2.4bn. The company could be fined up
to 5% of daily revenue if it fails to comply.
Al Verney, a spokesperson for Google in Brussels, declined to comment. The
offer is part of Mountain View, California-based Google’s efforts to
comply with the EU order while it challenges the regulators’ findings in
Google parent Alphabet reports revenue for Google and its "Other
Bets," like self-driving cars and Nest thermostats. The search giant
has a few divisions, like YouTube, its hardware unit and cloud-computing
business, that operate independently under Google. The new shopping
service would fit this model as a division only in Europe.
As part of the EU remedies, the company will tweak an advertising
panel at the top of the search screen that shows several pictures of
products with links to retailers’ websites, one person said.
Each of 10
slots will be auctioned off to give rival sites, such as Kelkoo.com or
Shopzilla, a chance to buy space to show links to retailers. Any
changes only affect Google’s sites in Europe.
While Google Shopping can bid for those slots, it will be run
separately to ensure that its bids reflect its own operating costs and
aren’t subsidised by Google.
Regulators have accepted that the panel is
for advertising and slots cannot be given away, the person said. Each
slot will be labelled with the name of the service providing the link,
such as "By Google," similar to pages that showed up on French and Dutch
versions of Google last week.
Google Shopping has grown quickly since 2009 to account for as much
as a fifth of the highly profitable ad revenue Google generates,
according to industry estimates. Andreas Reiffen, chief executive
officer of search firm Crealytics, estimated earlier this year that the
format accounts for roughly a quarter of ad revenue in Europe.
reported sales in Europe, the Middle East and Africa of $8.5bn
during the second quarter, a third of all company revenue.
shares rose less than 1% to $937.46 at 11.33 am in New York. They’re up 18% so far this year.
After levying the record fine in June, EU regulators have threatened further penalties if Google doesn’t make
changes that give customers a chance to choose other shopping comparison services. EU Competition Commissioner
Margrethe Vestager said last week that she would start
investigating if Google’s offer "doesn’t work" and if companies that complained about Google’s behavior are still unhappy.
Europe has become a battleground for regulators and technology
Apple ordered by the EU to pay some €13bn in back tax
and Germany examining whether Facebook unfairly compels users to
sign over personal data. Google may face more fines over its Android
mobile-phone software and AdSense advertising service in two other EU
cases due to be finalised soon.
Richard Stables, chief executive officer of Kelkoo, said Google’s
offer to sell rivals slots was worse than the search engine’s 2013
attempt to settle the EU case. Anyone who believes such an offer will
resolve problems in the shopping search market "doesn’t understand how
the market works," he said.
Foundem, a UK shopping site, last week slammed an auction for the
slots, saying it creates "an additional anti-competitive barrier" that
sees companies pay for placement instead of getting traffic for free
from relevant search results.
Foundem’s 2009 complaint to the EU helped
trigger the probe after it said links to its sites were unfairly pushed
down in Google search results. Google had argued that the links were
rated less relevant because they weren’t of high quality.
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