EU Fines Google a Record $5 Billion for Monopoly Abuse

CASTELBUONO, Sicily (CN) — Google was hit Wednesday with a record $5 billion fine by European antitrust regulators who said it abused its market dominance in search and web-browsing tools on its Android mobile operating system.

Google was given 90 days to comply with the EU’s demands or face additional fines.

Google said it will appeal.

It’s the largest fine the European Union ever has assessed against a corporate monopolist.

“It is a very serious infringement,” said Margrethe Vestager, the EU’s competition commissioner. “It is very serious illegal behavior,” Vestager added during a news conference in Brussels.

Google denied the allegations, insisting it has had helped competition flourish rather than restrict it. “Android has created more choice for everyone, not less,” Google spokesman Al Verney said.

In announcing the enormous fine of 4.34 billion euros, EU regulators said that since 2011 Google has placed restrictions on Android device manufacturers and mobile network operators “to cement its dominant position in general internet search.”

Google CEO Sundar Pichai disputed that, saying in a statement that EU regulators failed to understand how Google’s Android “ecosystem” has benefited consumers. He cited more than 1,300 Android brands, sold at varying costs, as evidence of that.

Pichai said the free distribution of the Android platform and Google’s apps “is not only efficient for phone makers and operator, it’s of huge benefit for developers and consumers.”

The EU says Google has forced traffic on Android devices to be pushed onto Google search engines. About 80 percent of smart mobile devices in the world run on Android systems, EU regulators said.

“These practices have denied rivals the chance to innovate and compete on the merits,” regulators said. “They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules.”

Vestager said she expected consumers will benefit from the EU’s action.

“It will as likely be that prices will come down because there is competition,” she said.

Regulators said Google forced device makers to pre-install Google search and browser apps as a condition for licensing the company’s app store, called Play Store.

Regulators added that Google paid large manufacturers and network operators “on condition that they exclusively pre-installed the Google Search app on their devices” and “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.”

The EU said Google purchased the original developer of the Android operating system in 2005 to make sure its search engine would prosper in the flowering mobile internet market.

Although the Android system is in theory an open-source model, Google keeps the code for its proprietary apps and services secret. It makes device manufacturers who want Google apps and services enter into contracts in which Google sets out numerous restrictions, according to the regulators.

Google also sells licenses for the Android system to third-party manufacturers of smart mobile devices, and, excluding China, Google has a worldwide market share of more than 95 percent in this arena, the regulators said.

Apple and Blackberry do not sell licenses for their systems.

Regulators said Google benefits from “high barriers” in this market.

The regulators found Google dominant around the world when it comes to app stores. The Google Play Store accounts for more than 90 percent of apps downloaded from Android devices.

“This market is also characterized by high barriers to entry,” the EU added.

Regulators said dominant companies “have a special responsibility not to abuse their powerful market position by restricting competition, either in the market where they are dominant or in separate markets.”

But Pichai, the Google CEO, said his company has invested billions of dollars in the Android system, and that while some preloaded Google apps are profitable, all of them “help ensure the phone ‘just works,’ right out of the box.”

He said phone makers are not required to include Google services and are “free to pre-install competing apps alongside ours.”

“The Android business model has meant that we haven’t had to charge phone makers for our technology, or depend on a tightly controlled distribution model,” Pichai added.

But EU regulators rejected Google’s contention that it had to bundle its products and services to help Google make a profit from its investment in Android.

“Google achieves billions of dollars in annual revenues with the Google Play Store alone, it collects a lot of data that is valuable to Google’s search and advertising business from Android devices, and it would still have benefited from a significant stream of revenue from search advertising without the restrictions,” the regulators said.

They found that Google’s actions prevented manufacturers from developing and selling devices using, for example, Amazon’s Android system, called “Fire OS.”

“Google’s conduct has had a direct impact on users, denying them access to further innovation and smart mobile devices based on alternative versions of the Android operating system,” regulators said.

“Google’s strategy has also prevented rival search engines from collecting more data from smart mobile devices, including search and mobile location data, which helped Google to cement its dominance as a search engine.”

Pichai said the EU decision could “upset the careful balance that we have struck with Android” and that it “sends a troubling signal in favor of proprietary systems over open platforms.”

The fine was calculated on the basis of the company’s revenues from search advertising services on Android devices in European markets.

The EU fined Google $2.7 billion in June 2017 for abusing its dominance as a search engine by giving illegal advantage to Google’s own shopping service.

European Union regulators also are investigating restrictions Google has placed on third-party websites to prevent them from displaying search advertisements from Google’s competitors. This is known as the AdSense case.

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