European Union regulators took aim at the heart of Google’s business model on Tuesday, announcing that the Silicon Valley giant is the subject of a new antitrust investigation for potentially abusing its dominance in the online advertising market to stifle competition.
The investigation is part of a broader push by the European authorities to clamp down on the world’s largest technology companies. Amazon, Apple and Facebook are also the subject of antitrust actions by the 27-nation bloc, and the European Union is drafting new antitrust and digital services laws to further tighten oversight of Big Tech.
Online advertising has helped Google become one of the world’s most valuable and powerful companies, with its parent company, Alphabet, earning a net profit of $40 billion last year. But publishers such as News Corp, as well as rival digital advertising firms, have long complained that Google’s dominance makes it harder to attract advertising revenue from their websites and for competitors to gain ground.
The European Commission, the bloc’s executive body, said the investigation was focused on the display advertising market, which is worth an estimated $24 billion in Europe and where Google offers a number of services to both advertisers and publishers. The company collects data to target advertising, sells ad space on websites across the internet and offers services that work as an intermediary between advertisers and publishers.
“We are concerned that Google has made it harder for rival online advertising services to compete in the so-called ad tech stack,” Margrethe Vestager, the European Commission’s executive vice president in charge of competition policy, said in a statement.
“A level playing field is of the essence for everyone in the supply chain,” she said.
Announcing the start of the formal investigation is one step in a process that could drag on for years. Google could face fines of up to 10 percent of global revenue and demands that it change its business practices if found guilty.
In focusing on advertising, the authorities are focusing on a cornerstone of Google’s financial success. Its dominance has helped the company build a digital empire in internet search, email, entertainment, maps, cloud computing, smartphones and other consumer electronics, shopping, and autonomous driving. With a market value of more than $1.6 trillion, Google is one of the world’s largest companies.
The commission’s investigation focuses on ways that Google leverages its power in the advertising technology market to limit competition, including forcing advertisers to use certain Google services to buy display advertising on YouTube. Investigators said they would also examine a new Google policy for its Chrome browser intended to replace tracking “cookies” placed on websites with a new system created by Google.
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