Google AdSense: A Systematic Vicious Circle

By abusing its dominant position to eliminate competitors, Google made websites dependent on its AdSense advertising platform.

Björn GreifEditor

Google is constantly abusing its dominant market position to prevent competition and block innovation. We have already illustrated this with the Manifest V3 interface modifications Google announced for Chrome and all Chromium-based browsers. Another example are Google’s anti-competitive practices around AdSense for Search, an online search advertising intermediation platform. In March, the European Commission fined the Internet giant €1.49 billion for breaching EU antitrust rules.

“As the AdSense case proves, Google has become so powerful that it has a stranglehold on entire industries,” says Marc Al-Hames, Managing Director of Cliqz. “Thanks to its dominant market position, Google can simply force its own rules on everyone else.”

A Vicious Circle for Website Owners and Advertisers

AdSense for Search allows website owners to embed the Google search engine into their site and earn money with ads on the search results pages. Google acts as an intermediary, like an advertising broker, between website owners and advertisers. The latter compete in an auction for available ad space. The highest bidder wins the bid and may advertise on the website. The website owner then receives a share of the advertising revenue, the rest goes to Google.

According to the European Commission, Google prevented its rivals from placing their search ads on third-party websites by imposing a number of restrictive clauses in contracts with these websites. This deprived rivals of the opportunity to expand in the market for online search advertising intermediation and to compete seriously with AdSense.

This created a vicious circle: because Google blocked competition, websites that wanted to sell ad space and advertisers that wanted to place ads on these sites had virtually no choice but to work with Google. As a result, the monopolist was able to determine contract terms and ad prices at will. Thanks to network effects, Google became even more powerful, which in turn made it even easier for them to prevent competition.

Anti-Competitive Contractual Restrictions

“Google has cemented its dominance in online search adverts and shielded itself from competitive pressure by imposing anti-competitive contractual restrictions on third-party websites. This is illegal under EU antitrust rules,” said Margrethe Vestager, European Commissioner for Competition. “The misconduct lasted over 10 years and denied other companies the possibility to compete on the merits and to innovate – and consumers the benefits of competition.”

Google first imposed an exclusive supply obligation, which prevented competitors from placing any search ads on the commercially most significant websites. Then, Google introduced what it called its “relaxed exclusivity” strategy aimed at reserving for its own search ads the most valuable positions and at controlling competing adverts’ performance.

(Source: European Commission)
(Source: European Commission)

According to the European Commission, Google was dominant in the market for online search advertising intermediation in the European Economic Area since at least 2006. Its market share exceeded 85% for most of the period.

Google’s Anti-Competitive Behavior Is Methodical

The fact that Google abuses its dominant position systematically to protect its core business – search advertising – is not only proven by the AdSense case. The Internet giant showed the same anti-competitive behavior in giving an illegal advantage to its own comparison shopping service, which earned it a fine of €2.42 billion in June 2017. A year later, the EU imposed a record fine of €4.34 billion on Google for illegal practices regarding Android mobile devices to strengthen the dominance of its search engine.

US companies like Google apparently see Europe as a digital colony in which they can do whatever they want. Their ruthless behavior massively hampers competition, leads to less innovation and ultimately harms consumers. It’s high time to stop Silicon Valley companies and restore a fair competitive environment. This requires stricter regulation and massive investment in a sovereign European digital infrastructure, with an independent search engine as the core part. That’s the only way we Europeans can avoid becoming completely dependent on Big Tech and being exposed to their arbitrariness.