The European Commission has told the internet search giant that it now has 90 days to stop the practice or face a penalty of up to 5 per cent of the average daily turnover of the firm’s parent company, Alphabet.
However, Google said it was considering launching an appeal against the commission once it had reviewed the decision.
The penalty comes after the competition watchdog launched an investigation into Google Shopping seven years ago, amid complaints it gave the service a prominent position on the internet search engine, while rival services were demoted.
In a statement, commissioner Margrethe Vestager said: “Google has come up with many innovative products and services that have made a difference to our lives.
“That’s a good thing. But Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals.
“Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.”
The watchdog said Google was the most dominant search engine across the 31 countries in the European Economic Area (EEA).
It found that Google had handed its comparison shopping service an illegal advantage in 13 EEA countries, including in the United Kingdom and Germany where it was launched in 2008.
The abuse caused traffic to Google’s shopping service to jump 45-fold in the United Kingdom, 35-fold in Germany and 19-fold in France.
However, the demotions to rival websites triggered sharp reduction in traffic, with some UK sites seeing visitor numbers plunge 85 per cent.
Ms Vestager added: “What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on their merits and to innovate.
“And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.”
The fine handed to Google is a significant hike of the previous record penalty of 1.06 billion euros (£937 million) dished out by the commission to US microchip firm Intel in 2009.
It follows the internet search giant’s £130 million deal with HM Revenue & Customs in January 2016 to settle a 10-year tax inquiry into its UK business.
In response to the commission’s decision, Google said: “When you shop online, you want to find the products you’re looking for quickly and easily.
“And advertisers want to promote those same products. That’s why Google shows shopping ads, connecting our users with thousands of advertisers, large and small, in ways that are useful for both.
“We respectfully disagree with the conclusions announced today. We will review the commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case.”
Google launched its comparison shopping service as Froogle in 2004, before changing the name to Google Product Search in 2008 and later Google Shopping in 2013. The service had initially struggled to make headway against the established players within the market.