Google Shopping Unit to Be Separated, Treat Rivals Equally, in Line With EU Order

Google will treat its own shopping service the same as rivals when they bid for ads at the top of a search page, the company said on Wednesday, as it seeks to comply with an EU antitrust order and stave off fresh fines.

The European Commission slapped a record EUR 2.4 billion ($2.8 billion) fine on the world's most popular internet search engine in June and told the firm to stop favouring its shopping service.

Google, a unit of US firm Alphabet, has until September 28 to halt this anti-competitive practice or face a penalty up to 5 percent of its average daily worldwide turnover.

The company said competitors would be able to bid for ads in the shopping box via an auction, confirming a Reuters report on September 18.

"We're giving comparison shopping services the same opportunity to show shopping ads from merchants on Google's search results pages as we give to Google Shopping," spokesman Al Verney said.

"Google Shopping will compete on equal terms and will operate as if it were a separate business, participating in the auction in the same way as everyone else," he said. The changes will go into effect on Thursday and apply only in Europe.

The shopping service will operate as an independent unit, with one team working with competing sites and another with merchants, and subjected to regulatory monitoring.

The EU competition authority said it had hired auditor KPMG and marketing firm Mavens to help with the task.

"It would be premature at this stage for the Commission to take any definite positions on Google's plans. As (European Competition) Commissioner Vestager said, 'this issue will remain on our desks for some time'," Commission spokesman Ricardo Cardoso said.

Lobby group FairSearch, whose members include Google rivals such as British shopping comparison site Foundem and US travel site TripAdvisor , said it would keep a close eye on developments.

"We will be watching closely to see if this remedy ends the abuse so that consumers get the best prices and most relevant results, and competitors have an opportunity to innovate," its lawyer Thomas Vinje said.

About a dozen rivals out of an estimated 200 to 300 comparison shopping services in Europe have already provided feeds to Google. Several have criticised the proposal for not addressing the regulatory concerns.

Deutsche Bank analysts estimate the European product listing ads (PLAs) business should generate between $4 billion to $5 billion in 2017, representing about 5 percent of the company's total ad revenue.

Analyst Lloyd Walmsley estimated that if Google was forced to make changes, it could lop 30 percent off of these revenues, or about 1-2 percent of Alphabet's total revenue.

Google is also under EU fire over its smartphone operating system Android, as well as its AdSense for Search platform.

© Thomson Reuters 2017