Google was served the biggest antitrust fine in history by the European Commission Tuesday.
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MACQUARIE: Google's ability to make search better for everyone has been choked by the EC fine (GOOGL)
The EC showed that it values a fair market more than good products. A valid choice in a hard decision, but one that could limit how Google innovates in the future.
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The $2.7 billion fine was aimed at Google's shopping practices, which the EC deemed unfair to Google's competition. Macquarie Research thinks that while the practice probably is unfair, the fine severely limits Google's ability to refine and improve its core product, which could mean big headwinds for Google in Europe.
The recent fine dealt directly with how Google shows shopping results at the top of the search, but the company is also facing antitrust investigations into its Android operating system and AdSense advertising platform. Macquarie argues in a recent note to clients that the recent decision to fine Google is a basic assault on its ability to do business in the EU.
Here is the firm's argument in a nutshell.
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Google has to place something in its search results. When Google chooses its own shopping service to place at the top of results, it is denying other search comparison companies access to that top spot.
This is really powerful. Citing the EC, Macquarie said that the top result in Google's search results receives 35% of the traffic, and moving that search result to the third position means the result received 50% less traffic. The EC claims that that means it's not the relevance of information that drives traffic, but the position in search. Google agrees with this logic, but not with its conclusion.
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