- EU says Google illegally App practices pushes searches, browser Android
- The Company has 90 days to make changes or face more Penalties
- Google’s Play Store accounts for more than 90 per cent of apps downloaded
- The company is able to make its ads appear in more apps than its rivals
- Last year, a landmark EU penalty saw Google fined £2.1bn over online shopping
- Google ‘engaged in illegal practices to cement its position’ ruled commissioner
- These fines will be up to five per cent of parent firm Alphabet Inc’s average daily worldwide turnover for each day that Google refuses to comply
The latest anti-trust penalty for the US search firm is equal to the amount of money the Netherlands contributes to the EU budget each year.
The fine was announced during a press conference held by EU Competition Commissioner Margrethe Vestager in Brussels.
Google faces more penalties if it doesn’t pay-up in the next 90 days.
The fine will exceed last year’s then-record 2.4 billion euro penalty following an investigation into Google’s shopping-search service.
Despite the eye-popping dollar amount, the fine is less than 1% of the company’s market capitalization which is about $830 billion. Additionally, the company’s sales topped $31 billion in the first quarter.
Shares rose on Thursday, a sign investors are not concerned at this point. For the year, the stock has gained 15% exceeding the 5% gain of the S&P 500.
The crux of the issue is the monopoly Google has garnered within the Android app marketplace and the advertising advantage this provides the company.
The EU conducted a three-year investigation into Google which found the Mountain View-based company was using its Android operating system to marginalise rivals.
The EU has also charged Google with shutting-out competitors by forcing major phone manufacturers including South Korea’s Samsung and China’s Huawei to pre-install its search engine and Google Chrome browser.
Google is able to run advertisements inside applications pre-installed with the Android mobile operating system — something rivals are not permitted to do.
Speaking at the hearing, EU Competition Commissioner Margrethe Vestager said: ‘Google has engaged in illegal practices to cement its position.
‘It must put an effective end to this practice or face penalty payments.
‘Google must comply with EU rules for dominant companies. Google has breached these rules since 2011.’
If Google refuses to pay up within the next 90 days, it could face additional fines of up to five per cent of parent firm Alphabet Inc’s average daily worldwide turnover for each day it refuses to comply.
The original fine could have been as high as $11 billion (£8.5bn / 9.5bn), or up to five per cent of Alphabet’s annual global revenue, according to EU guidelines.
Shares in the search giant fell by 0.4 percent in premarket trade in the US on news of the fine, according to reports in CNN.
Google said that instead of restricting competition, it did the opposite.
‘Android has created more choice for everyone, not less,’ said Google spokesman Al Verney. ‘A vibrant ecosystem, rapid innovation and lower prices are classic hallmarks of robust competition. We will appeal the Commission’s decision.’
The latest fine comes more than a year after the European Commission issued a landmark $2.8bn (£2.1 billion / €2.4bn) penalty on Google for favouring its own shopping service over competitors.
That takes the total expenditure from the search firm on EU imposed fines to $6.7 billion (£5.1 bn / €5.7bn) since 2017.
The EU penalty is likely to exceed the 2017 fine because of the broader scope of the Android case, experts claim.
Vestager stated in the press conference that “Google has used Android as a vehicle to cement its dominance as a search engine,” something that has denied European consumers choice and businesses the ability to innovate.
Fine of €4,34 bn to @Google for 3 types of illegal restrictions on the use of Android. In this way it has cemented the dominance of its search engine. Denying rivals a chance to innovate and compete on the merits. It’s illegal under EU antitrust rules. @Google now has to stop it
— Margrethe Vestager (@vestager) July 18, 2018
What is the case against Google?
The three illegal restrictions Vestager mentioned in her tweet are below:
- has required manufacturers to pre-install the Google Search app and browser app (Chrome), as a condition for licensing Google’s app store (the Play Store);
- made payments to certain large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices;
- and has prevented manufacturers wishing to pre-install Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google (so-called “Android forks”).
Vestager went onto say that the EU welcomes successful companies, but “with market dominance, comes responsibility.” She said that EU antitrust laws put a “special responsibility” on dominant businesses, meaning they cannot deny other companies the chance “to compete with them on merit.”
In other words, dominance is fine, but monopolies “harm consumers.”
Ms Vestager acknowledged that Google’s version of Android does not prevent device owners downloading alternative web browsers or using other search engines.
But she said that only 1% of users downloaded a competing search app, and 10% a different browser.
“Once you have it, it is working, very few are curious enough to look for another search app or browser,” she said.
Vestager has charged Google in the past. Last year, she announced a €2.4 billion ($2.79 billion) fine after the company was found to be abusing its position as the leading search engine. It did this by prioritizing its own shopping results over those of competitors.
Since then, Google has been fighting the case and it’s currently stuck in court.
Google will have 90 days change its illegal practices, but it seems unlikely that the tech giant will comply so soon, so don’t hold your breath.
Is it just about the money?
Hardly. While the amount Google has been fined is massive, the technology giant will be more concerned with the changes it’ll have to make to Android.
Currently, Google’s other services are so intertwined in the mobile operating system that other providers of similar services have no hope of gaining a foothold. This ruling will aim make Android a true open source piece of software and may loosen the company’s grip on much of our data.
In regards to the record-breaking fine, Vestager said “it’s a very serious infringement. It’s very serious illegal behavior.”