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The former Liverpool defender challenged Patrik Schick in the air in the first half and headed the ball away from danger.
However, a VAR check decided that Lovren challenged Schick unfairly after catching the Bayer Leverkusen striker with his elbow and leaving him with a bloody nose.
After the referee went to the screen, a penalty was awarded and Schick converted from the spot - taking his tally to three for Euro 2020 so far.
Lovren, meanwhile, received a yellow card for his challenge.
Referees had been widely praised for their performances during the tournament, while many fans were complimentary of the way in which VAR has been used.
However, this controversial call caused a massive stir on social media and led to universal agreement that a spot-kick was harsh:
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