The European Commission has imposed a fine under the Digital Markets Act (DMA) on Google for the first time. The two infringements concern the preferential treatment of Google’s own services in search results and restrictions imposed through Google Play. Google has been fined EUR460 million for the former and EUR430 million for the latter.
What does the Digital Markets Act regulate?
The Digital Markets Act (DMA) is an EU Regulation. It applies to large digital platforms that have been designated by the European Commission as “gatekeepers”. These are undertakings that provide core platform services, such as online search engines, app stores or messaging services, and occupy a particularly significant position in the market. Google is one such gatekeeper, alongside companies including Apple, Amazon, Meta and Microsoft.
The DMA imposes a number of obligations on gatekeepers:
- Gatekeepers must enable third-party providers to interoperate with certain services and functionalities where required by the DMA.
- They must provide business users with access to certain data generated through their use of the platform.
- They must also enable advertisers and publishers to carry out independent verification and measurement of advertising performance, and allow business users to communicate and promote offers to end users outside the gatekeeper’s platform and to conclude contracts with them.
- At the same time, gatekeepers must not treat their own services more favourably in ranking than comparable services offered by third parties.
- They must not prevent end users from uninstalling certain pre-installed software applications.
- Nor may they combine or cross-use users’ personal data across services for certain purposes without valid consent.
Breaches of the DMA may result in fines of up to 10% of an undertaking’s total worldwide annual turnover. In the event of repeated infringements, fines may reach up to 20%.
Significance of the DMA fine imposed on Google
The European Commission found that Google gave preferential treatment to its own services, including services relating to sports results, hotels and transport, in Google Search, compared with similar services offered by third parties. The Commission also found that Google restricted app developers distributing apps through Google Play from directing users to alternative, often cheaper, purchasing channels outside the Play Store.
The decision can be examined in more detail as follows.
Visibility in search results
For certain search queries, Google displays its own information boxes prominently at the top of the search results page. Searches relating to flights, hotels, restaurants or other services may show prices, comparison information and booking options directly within Google’s interface. These results may be visually enhanced and appear above ordinary organic search results.
Third-party providers that are not included in these prominent formats may therefore appear further down the search results page. For businesses that depend on organic search visibility, this can place them at a disadvantage relative to Google’s own services.
The Commission considers this to constitute prohibited self-preferencing under the DMA. A gatekeeper that operates an online search engine while also offering competing services must not treat its own services more favourably in ranking than comparable third-party services. The DMA requires transparent, fair and non-discriminatory conditions to be applied to such ranking.
Google has already announced that it will test alternative presentation formats. This could improve the visibility of businesses whose services have previously appeared below Google’s own offerings. Comparison websites, online service providers and businesses that depend heavily on product- and service-related search traffic should therefore monitor how Google changes the presentation of search results and consider whether their SEO strategies need to be adjusted.
Greater flexibility for app developers
Businesses that distribute apps through the Google Play Store are subject to Google’s platform rules. In practice, these rules have restricted app developers’ ability to inform users that a subscription or additional purchase may be available more cheaply outside the Play Store, for example through the developer’s own website.
The Commission found that Google’s restrictions prevented app developers from freely communicating and promoting alternative offers and from directing customers to alternative purchasing channels. The Commission also considered that the level and duration of certain steering-related fees charged by Google went beyond what is compatible with the DMA.
Under the DMA, app developers must be able to communicate and promote alternative offers to users and direct them to those offers free of charge. They must also be able to conclude contracts with those users through distribution channels of their choice.
Google may still be entitled to charge a fee for facilitating the initial acquisition of a new customer through Google Play. However, according to the Commission, the structure and duration of the fees imposed by Google did not comply with the DMA.
For businesses that operate their own customer-facing apps, the decision may create additional commercial opportunities. Companies that have previously had to channel transactions through the app store may have greater scope to establish direct customer relationships, retain greater control over pricing. and develop alternative distribution and payment channels.
Businesses distributing apps through Google Play should therefore review the changes Google makes in response to the Commission’s decision and assess whether these changes create new opportunities for pricing, customer communication, and direct contracting.
Conclusion: what does the decision mean for businesses?
The European Commission’s decision forms part of the DMA’s broader regulatory framework for addressing the market power of designated gatekeepers and improving the contestability and fairness of digital markets.
Google has announced that it will make changes to its systems in response to the decision. The practical extent of those changes, and the degree to which they will alter the relationship between the platform and third-party businesses, will depend on how Google implements the Commission’s requirements.
Businesses should monitor these developments closely and assess whether they create new commercial opportunities. This may include greater visibility in Google Search, more direct customer relationships, alternative subscription models and new pricing structures made possible by changes to steering restrictions and related fees.