EU fines Google €890 million over search and app store practices

The European Commission fined Google €890 million, or about $1 billion, after finding that the company gave its own services preferential treatment and failed to meet obligations for app developers. The penalty is Google’s first under the European Union’s Digital Markets Act, a law designed to scrutinize large technology companies’ operating practices in Europe.

The Commission, the EU’s executive arm, said Google favored its own services, including shopping and hotel offerings, over comparable services from third parties in search results. According to the regulator, Google displayed its own services more prominently, while rival services did not receive the same visibility.

The case goes to the way search placement can shape competition online. When a platform controls the interface through which users find products or services, prominent positioning can affect traffic, customer acquisition and the commercial terms available to outside businesses. The Commission said Google must treat third-party services in search results in a fair and non-discriminatory way.

The regulator also said Google breached anti-steering provisions under the Digital Markets Act. Those rules require that app developers distributing products through Google Play be able to tell customers about alternative offers, including offers that may be cheaper, and direct users to those offers outside the Google Play Store.

In the Commission’s account, Google did not comply with that obligation. The regulator said the company prevented app developers from freely communicating offers, promoting them and concluding contracts with users through distribution channels of their choice, including third-party app stores.

The Commission ordered Google to allow developers that distribute apps via Google Play to promote offers and conclude contracts with users both inside and outside the Google Play app store. The order addresses the commercial link between app stores, developers and end users: if developers can direct customers elsewhere, they may be able to use other sales channels rather than relying solely on the platform where the app is distributed.

Google was not immediately available for comment when contacted by CNBC.

The decision marks an escalation in European enforcement of the Digital Markets Act against one of the largest U.S. technology companies. The law is intended to examine the business practices of major digital platforms operating in Europe, including how they rank their own services and how they set rules for businesses that depend on their platforms to reach customers.

The Commission’s findings focus on two areas of Google’s European operations: search presentation and app store conduct. In search, the concern is the treatment of Google’s own vertical services compared with third-party providers. In app distribution, the concern is whether developers can communicate with customers and complete transactions through channels beyond Google Play.

This story draws on original reporting from CNBC.