Google faces record 4.3-bn-euro($5 billion) EU fine over Android

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Google faces record $5 billion fine in EU, ordered to remove Chrome from Android

Brussels, Jul 18: Google faced a record EU anti-trust fine of 4.3 billion euros over its Android smartphone system, in a ruling that risks a fresh clash between Brussels and Washington.
EU Competition Commissioner Margrethe Vestager is expected to say that the US tech giant abused Android’s dominant market position to boost usage of its own search engine and browser. The new sanction would nearly double the previous record EU anti-trust fine of 2.4 billion euros, which also targeted Google, in that case for the Silicon Valley titan’s shopping comparison service in 2017.

The decision, which follows a three-year investigation, comes as fears of a transatlantic trade war mount due to President Donald Trump’s decision to impose tariffs on European steel and aluminium exports. Vestager is set to announce the penalty against the US tech giant at a news conference in Brussels at 1100 GMT. A source close to the matter told AFP that the fine would be 4.3 billion euros (USD 5 billion). “The fine is based on the length of the infraction, but also on whether antitrust authorities believe there was an intention to commit the offence, and whether they excluded competitors or not,” said another European source.
“The fine is based on the length of the infraction, but also on whether antitrust authorities believe there was an intention to commit the offence, and whether they excluded competitors or not,” said another European source. Danish former minister Vestager, who has targeted a string of US tech titans, spoke by telephone with Google chief Sundar Pichai yesterday night to tell him about the decision in advance. Vestager is expected to say that Google shut out rivals by forcing major phone makers including South Korea’s Samsung and China’s Huawei to pre-install its search engine and Google Chrome browser, thereby freezing out rivals. They were also made to set Google Search as the default, as a condition of licensing some Google apps. Google Search and Chrome are as a result pre-installed on the “significant majority” of devices sold in the EU, the European Commission says. An EU complaint formally lodged in April also accuses Google of preventing manufacturers from selling smartphones that run on rival operating systems based on the Android open source code. Google also gave “financial incentives” to manufacturers and mobile network operators if they pre-installed Google Search on their devices, the commission said.

Under EU rules Google could have been fined up to 10 per cent of parent company Alphabet’s annual revenue, which hit USD 110.9 billion in 2017. Vestager’s campaign against Silicon Valley giants in her four years as the 28-nation European Union’s competition commissioner has won praise in Europe but angered Washington. Brussels has repeatedly targeted Google over the past decade amid concerns about the Silicon Valley giant’s dominance of internet search across Europe, where it commands about 90 per cent of the market. As well as the Android and Google Shopping files, it also has a third investigation under way, into Google’s AdSense advert-placing business. Vestager’s other major scalps include Amazon and Apple. The EU ordered Apple in 2016 to pay Ireland 13 billion euros in back taxes that the iconic maker of iPhones and iPads had avoided by a tax deal with Dublin. It has also taken on Facebook over privacy issues after it admitted that millions of users may have had their data hijacked by British consultancy firm Cambridge Analytica, which was working for Trump’s 2016 election campaign. But Brussels has had US tech giants in its sights for a decade in a half, since it imposed a huge 497 million euro fine on Microsoft in 2004 for anti-competitive behaviour and ruled it must make changes to its Windows system.
The Google decision comes just one week before European Commission chief Jean-Claude Juncker is due to travel to the United States for crucial talks with Trump on the tariffs dispute and other issues. Transatlantic tensions are also high over Trump’s berating NATO allies on defence spending at a summit last week, over his summit with Russian leader Vladimir Putin, and over the US president’s pull-out from the Iran nuclear agreement and Paris climate deal.

The impending decision from the EU watchdog has come to pass: Google has been fined a record €4.3 billion ($5.1 billion) for abusing the Android operating system’s dominance in the smartphone market, the largest fine imposed on a company in EU history.

Google was previously penalized by the European Commission just last year, when the search giant was slapped with a $2.7 billion fine for lowering the ranking of competitor shopping comparison tools to promote its own.

A third antitrust case against Google is also still open in the EU, which alleges the tech giant holds dominance in online advertising via its Adsense tool.

The charges

According to Margrethe Vestager, the European Union’s competition chief, Google used Android’s dominant market position to strengthen its lead in search, a practice that has been deemed illegal in the EU.

More specifically, Google has been accused of:

  • forcing Android phone manufacturers to preinstall Chrome and Search as a prerequisite for including the Play Store app
  • making payments to larger phone manufacturers and mobile carriers to ensure that Google Search is the exclusive pre-installed search app
  • preventing phone manufacturers from installing versions of Android that weren’t already pre-approved by Google, despite Android being an open source software.

Fighting back

The ruling against Google stipulates that the company will need to unbundle its Chrome and Search apps from Android, which may significantly change the free business model the tech giant has been pursuing with the mobile OS.

“So far, 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,” he added.  “But we are concerned that today’s decision will 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.”

Google has been given 90 days to cease all illegal practices or face additional fines of up to 5% of Google parent company Alphabet’s global turnover.

Google has stated that it plans to appeal the decision.

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