Alphabet, Google’s parent company, is one of the most profitable and valuable firms globally, and one of the most admired. That admiration, however, does not extend to government regulators. Google is currently facing over 100 investigations worldwide, and in some of its biggest cases this year, it has come out on the losing side. While regulators and Google’s competitors may be celebrating these losses, the real victims will be the consumers and businesses that rely on the services Google provides.

The most recent blow to Alphabet came in Europe, where the EU’s highest court upheld a €2.4 billion fine the European Commission (EC) imposed for Google’s operation of its comparison shopping service, Google Shopping. This is the second-largest fine the EC has ever imposed, trailing only a €4.3 billion fine—also levied on Google.

The Google Shopping case stems from a 2009 complaint by Foundem, a British competitor to Google Shopping, accusing Google of biasing its Google search results to favor its own shopping platform and demoting rivals’ platforms. Although the EC and Google negotiated a settlement in 2014, competitors weren’t satisfied, prompting the EC to renew its investigation.

After 2014, the EC shifted its focus from a straightforward case of self-preferencing in search results to a broader accusation: Google was using self-preferencing to monopolize the shopping price comparison market, thus stifling competition that could one day challenge Google’s market-leading search product. Google appealed the EC decision to the European General Court, which sided with the EC in 2021, finding that Google had illegally demoted rivals’ services while promoting Google Shopping in its search results—a tactic deemed abusive because users tend to focus on the most prominently displayed search results. Google appealed this decision to the Court of Justice and lost that appeal this week.

Unfortunately, Europe’s decisions are shortsighted and flawed, perhaps even harming Google’s competitors. Here’s why:

Assume, for argument’s sake, that Google did promote Google Shopping and demote rivals. This would imply that this strategy is more profitable for Google than the alternatives. Those profits, which stem from Google Shopping and search-driven advertising, hinge on consumers choosing Google search. This incentivizes Google to continually improve its search engine to drive more traffic—benefiting not just Google but internet users, advertisers, and potentially even Google’s shopping competitors.

Now consider the opposite. Suppose Google’s demotion of rivals hurts their shopping services despite the stimulation of search traffic. This would imply that the strategy degrades the quality of Google search, depressing user satisfaction and the volume of search-driven ads and driving more consumers to rival search engines like Bing or Yahoo. Instead of eliminating competition, Google’s actions could open more pathways for competition in general search—directly contradicting the EC’s findings.

The US approach to antitrust—such as the Department of Justice’s recent case against Google for its agreements with Apple and Mozilla—presents an interesting contrast. In that case, the judge concluded that Google’s ability to innovate is so far ahead of its rivals that, for now, they are largely immaterial. He appears to conclude that the competitors cannot challenge Google unless the government places limits on Google. The logic is debatable—Google’s innovations, after all, are driven by competitive pressures—but the emphasis on the role of innovation is right. The European courts, on the other hand, have completely ignored the innovation dynamic. By viewing consumer choices in search and shopping as a zero-sum game, Europe’s regulators assume that penalizing Google will have not limit its future innovations and search quality. That assumption is deeply flawed.

The US and European approaches to regulating Google both miss the mark. But the American framework, which at least acknowledges competition and innovation processes, stands a better chance of helping businesses and consumers in the long run. The European model risks stifling the very innovation that benefits all of us, by punishing companies for competing vigorously rather than encouraging them to improve.

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