Why the EU just fined Google over 4 billion euro
In a decision years in the making, the European Union's Antitrust Commission has fined Google €4.34 billion (US$5 billion) for illegal practices that have been deemed to breach EU antitrust rules. The fine relates to what the EU sees as Google's use of its Android operating system to restrict competition.
The Commission opened its formal investigation into Google's Android business practices over three years ago after two complaints and an initial investigation. The allegations were that Google abused its dominant market position and hindered the development of market rivals by requiring smartphone and tablet manufacturers that utilize its Android operating system to exclusively pre-install several of Google's own applications or services.
A separate EU investigation by the Commission culminated in 2017 with a €2.42 billion (US$2.7 billion) fine alleging Google breached antitrust rules by promoting its own comparison shopping service in its search results. That verdict is still moving through an appeals process.
This latest decision, and fine, addresses a whole other side of Google's business practices, its Android strategy. The Commission found that the company engaged in three separate practices that were deemed to violate antitrust rules.
First, the company is alleged to have illegally tied its search and browser apps to all Android devices and that part of the Android licensing conditions required manufacturers to pre-install certain apps. To this point, Google has responded by arguing apps such as Google Play ensure phones work "out of the box," and because Google offers Android to phone makers for no cost, it is not unreasonable to include apps that generate revenue for the company.
The second illegal practice alleged by the Commission is that Google offered financial incentives to major device manufacturers to ensure Google Search was exclusively pre-installed in Android devices. Google's response to this point was that these practices (alleged to have occurred in 2011 and 2014) were necessary at the time in order to convince manufacturers to use the Android ecosystem.
The final practice the Commission suggested Google had engaged in was obstructing the development of competitor's Android operating systems. It was claimed that Google would not allow any of its proprietary apps to be pre-installed on devices that utilized alternate iterations of Android. This meant that the development of competing versions of Android was stifled, with the Commission pointing to an iteration of Android developed by Amazon, called "Fire OS", as an example of this.
Google argued that these restrictions were vital to prevent the Android ecosystem from "fragmenting" and becoming riddled with technical failures, but the Commission claimed the company did not provide any credible evidence to validate this argument.
In a general response to the massive EU verdict Google's CEO, Sundar Pichai, has suggested that all of the company's decisions regarding Android operations have been with the goal of creating more choice, and not less. Pichai argues that some rules have been absolutely necessary to make sure the operating system maintains its overall functionality.
"To be successful, open-source platforms have to painstakingly balance the needs of everyone that uses them," Pichai writes. "History shows that without rules around baseline compatibility, open-source platforms fragment, which hurts users, developers and phone makers. Android's compatibility rules avoid this, and help make it an attractive long-term proposition for everyone."
So what happens now?
According to EU protocol, Google has 90 days to "bring its illegal conduct to an end in an effective manner." If it does not comply within that period of time further fines may be instituted that equal up to five percent of the daily worldwide turnover of Alphabet, Google's parent company. As well as appealing the fine, Google is suggesting that it will have to reconsider its Android business model, which up until now has been delivered to phone manufacturers for no fee.
How this will all play out in the long term is still yet to be seen. A few billion dollars certainly won't cripple a giant like Google, but it highlights the European Union's growing concern with big tech companies dominating our increasingly interconnected world.
Source: European Commission