Google gobsmacked over €4.34bn EU fine for Android dominance

18 Jul 2018

European competition commissioner Margrethe Vestager. Image: Alexandros Michailidis/Shutterstock

Google plans to appeal EU decision over claims it abused its market power with Android.

Internet giant Google has been levelled with a €4.34bn fine by the European Commission in relation to its business practices around the popular Android operating system.

Android is the operating system that runs on 85.9pc of smartphones in the world today, according to Gartner.

‘We will appeal the Commission’s decision’

Today (18 July), EU competition commissioner Margrethe Vestager ruled that since 2011, Google has imposed illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general internet search.

She ruled that Google must now bring the conduct effectively to an end within 90 days or face penalty payments of up to 5pc of the average daily worldwide turnover of Alphabet, Google’s parent company.

The ruling covered three main points:

  • Firstly, that Google required manufacturers to pre-install the Google Search app and Chrome browser on smartphones as a pre-condition for licensing the Play store
  • Secondly, Google made payments to large manufacturers and mobile network operators on the condition that they exclusively pre-install the Google Search app on their devices
  • Thirdly, the Commission ruled that Google prevented manufacturers from selling mobile devices running alternative versions of Android, known as Android forks, which were not approved by Google

Not a happy Android

“Today, mobile internet makes up more than half of global internet traffic. It has changed the lives of millions of Europeans,” Vestager said.

“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,” Vestager said.

While Google has deep coffers of about $103bn and can easily afford the fine, the company said the punishment was unjustified.

“Android has created more choice for everyone, not less,” the company stated.

“A vibrant ecosystem, rapid innovation and lower prices are classic hallmarks of robust competition.

“We will appeal the Commission’s decision.”

The next tech epoch will be about edge-based innovation

But will Google prevail? Mark Skilton of Warwick Business School is professor of practice in information systems and mnagement, and researches and consults on the digital sector.

Skilton said: “It looks like this time, the fine will fit the ‘crime’ in this long-running dispute of market dominance and manipulation.

“Google has always been a contradiction, in that it is a market facilitator who also wants to control that market. 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 80pc 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 world view of the digital economy.”

Skilton said it must be remembered that Google “defines the market” and is therefore not just an innocent bystander.

“Google claims it is a free market for users, but that’s just not true in practice. Granted, as we see in the telecoms market, network operators want to protect their billion-dollar investment in the infrastructure that enables all this internet to work, but it’s when it becomes a monopolistic control from the supplier to the end user that it becomes a problem.

“The internet is in urgent need of moving to its next level of evolution, which will be a more distributed and edge-based world. It is being seen with the rise of the internet of things that are multiplying the number of connections to smart homes, products, transport and everything else – this will bring a more open market.

“This is the next battleground for Google and the big tech players, but GDPR and the European Commission’s focus on the tech giants is becoming a significant issue for them.”

European competition commissioner Margrethe Vestager. Image: Alexandros Michailidis/Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years