EU fines Google a record €4.3 billion for Android antitrust violations

© iStock/LightFieldStudiosgmutlu
© iStock/LightFieldStudiosgmutlu

Was the record fine deserved for Google abusing the market dominance of Android to extend the reach of Google search?

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The EU has slapped Google with a record antitrust fine of €4.34 billion (£3.9 billion) for using Android as a vehicle to cement the dominance of its search engine.

Investigators found that Google had illegally bundled its search and browser apps as a condition for licensing the Play Store, made payments conditional on exclusive pre-installation of Google Search, and obstructed the development and distribution of competing Android operating systems. The European Commission claimed that this was part of an overall strategy to cement the dominance of Google search, at a time when the importance of mobile internet was growing significantly.

In a press conference in Brussels, European Commissioner for Competition Margrethe Vestager argued that the fine was a deserved punishment for abusing the dominance of Android to unfairly restrict competition.

"In this way, Google has used Android as a vehicle to cement the dominance of its search engine," said Vestager. "These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules."

Was the record fine deserved?

Google CEO Sundar Pichai said the company would appeal the EU decision. In a statement, Pichai argued that Android had in fact created more choice for everyone, pointing to falling prices, wide choice and rapid innovation as evidence of robust competition.

"The decision ignores the fact that Android phones compete with iOS phones, something that 89 percent of respondents to the Commission's own market survey confirmed," said Pichai.

"It also misses just how much choice Android provides to thousands of phone makers and mobile network operators who build and sell Android devices; to millions of app developers around the world who have built their businesses with Android; and billions of consumers who can now afford and use cutting-edge Android smartphones.

"Today, because of Android, there are more than 24,000 devices, at every price point, from more than 1,300 different brands, including Dutch, Finnish, French, German, Hungarian, Italian, Latvian, Polish, Romanian, Spanish and Swedish phone makers.

"The phones made by these companies are all different, but have one thing in common - the ability to run the same applications. This is possible thanks to simple rules that ensure technical compatibility, no matter what the size or shape of the device. No phone maker is even obliged to sign up to these rules - they can use or modify Android in any way they want, just as Amazon has done with its Fire tablets and TV sticks."

Not everyone is convinced that Android's compatibility rules are the best way to protect consumers, developers and manufacturers.

Mark Skilton, a digital consultant and Professor of Practice in Information Systems and Management at Warwick Business School, argued that the penalty was justified due to Google's market dominance and manipulation.

"Google has always been a contradiction, in that it is a market facilitator who also wants to control that market," he said. "Google claims that it has to compete with other big players and that swapping to an alternative search service is 'one click away', but in my view it is its locking up of around 80 percent of mobile devices with pre-installed Google Android software that is the issue.

"The real issue is not the supplier side 'problems' which have been dominating the shape of the market; it's having a demand side where consumers have real choice instead of being locked into just one vendor's worldview of the digital economy. It must be remembered Google 'defines the market' and is not just an innocent bystander."

His views were shared by Luther Lowe, Yelp SVP of Public Policy, who applauded the European Commission for its efforts to restore competition in the marketplace.

"Commissioner Margrethe Vestager has removed the straight-jacket Google has placed on innovation with Android," he said. "This enforcement action will unlock a potential for incredible benefit for consumers. For example, if a developer wants to have a direct relationship with an OEM and create superior experiences compared to what exists in the Android straight-jacket, they now have a viable path forward."

What's next?

Google must end the illegal activities within 90 days or face penalty payments of up to 5 percent of the average daily worldwide turnover of parent company Alphabet.

The fine may be a record but it won't do too much damage to Google's finances. The €4.34 billion sum represents just a fortnight of revenue based on the $31.16 billion Google reported for the first quarter of this year.

There may be further fines ahead, however. Non-profits such as the Open Markets Institute and corporations including Yelp are calling for US authorities to take similar actions to protect American consumers.

"Given the unhealthy state of the open internet, Yelp believes it is time for renewed antitrust scrutiny of Google in jurisdictions beyond the EU, including the United States," said Lowe.

"In the months ahead, we will make this case directly to the newly confirmed antitrust authorities at the Federal Trade Commission and Department of Justice. In the meantime, we believe it is imperative the European Commission extend its finding of guilt related to Google search bias from comparison shopping into local search and demand broad non-discriminatory remedies across all search verticals."

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