So in short Google wants to use merchant's product images, which they've worked to produce or paid for as generic product images without compensation and if merchants don't like it their account is banned.
The reasoning is that they would then be using their market dominance to force merchants to forego their (IP) rights, which is in conflict with EU anti-trust regulations.
Clearly the merchant must be getting something out of the arrangement, or else they wouldn't be concerned about Google walking away from it.