While seemingly massive, the fine will cost Google just two weeks worth of revenues.
The European Union has fined Google $5 billion (€4.34 billion) for anticompetitive practices involving its Android phones. Specifically, the EU is penalizing Google for using its Android OS to push its apps on smart phone users and thwart competition.
Commissioner Margrethe Vestager, who is in charge of competition policy, offered the following statement via press release:
“Today, mobile internet makes up more than half of global internet traffic. It has changed the lives of millions of Europeans. Our case is about three types of restrictions that Google has imposed on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine. In this way, Google has used Android as a vehicle to cement the dominance of its search engine. 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.“
Specifically the EU found that Google had:
- Required manufacturers to pre-install the Google Search app and Google’s browser, Chrome, as a conditioning for licensing the Google app store.
- Made payments to large manufacturers and network operators so that they would exclusively install the Google Search app.
- Prevented manufacturers from running “Android Forks,” which are essentially alternative (unapproved) versions of the Android OS.
The EU argues that Google, noticing the decisive shift from desktop to mobile, made a calculated decision to help ensure its search dominance carried over into the new mobile age.
From the official release:
When Google develops a new version of Android it publishes the source code online. This in principle allows third parties to download and modify this code to create Android forks. The openly accessible Android source code covers basic features of a smart mobile operating system but not Google’s proprietary Android apps and services. Device manufacturers who wish to obtain Google’s proprietary Android apps and services need to enter into contracts with Google, as part of which Google imposes a number of restrictions. Google also entered into contracts and applied some of these restrictions to certain large mobile network operators, who can also determine which apps and services are installed on devices sold to end users.
The EU release is quick to point out that it is not penalizing the open-source nature of Android or the Android OS itself, rather the issue falls on three specific kinds of contract that Google has entered into with mobile device manufacturers and some network operators, that have been used to help cement Google’s search dominance using Android as a vehicle.
Those three contractual practices are:
- Illegally tying Google’s search and browser apps to its Play Store
- Illegal payments conditional on exclusive pre-installation of Google Search
- Illegal obstruction of development of competiting Android operating systems (forks)
Here’s a nice visualization to help explain it even more:
The effects of Google’s violations
The EU argues that Google’s conduct came at a critical moment (during the transition from deskptop to mobile) and as a result:
- Denied rival search engines the ability to compete on merits
- Obstructucted the development of Android forks
- Prevented rival search engines from collecting more data, which hurt them competitively
Furthermore, Google’s practices also harmed competition and further innovation in the wider mobile space, beyond just internet search. That’s because they prevented other mobile browsers from competing effectively with the pre-installed Google Chrome browser. Finally, Google obstructed the development of Android forks, which could have provided a platform also for other app developers to thrive.
That third bullet point almost seems a bit ironic. On the one hand you have the EU criticizing Google for its data practices and the idea that it collects too much, on the other you have it criticizing Google for practices that prevented competition from collecting more data.
This feels a little like it’s talking out of both sides of the mouth.
Google now has 90 days to end its illegal conduct, failure to ensure compliance would result in Google’s parent company, Alphabet, being fine 5% of its total revenues.
One thing to keep an eye out for, and we will have a little more of an analysis of this decision in the coming days, is the potential for this decision to further ratchet up tensions in what is now a budding trade war between the United States and the EU. Both sides have already announced tarrifs against one another, with President Trump going so far as to call the EU an “economic foe.”
Now the EU is fining an American company $5 billion.
Regardless, Google has already announced it will fight the fine. So this one may be tied up in the courts for a while.