Google has been fined a record breaking €4.34 billion (~$5BN) by European antitrust regulators for abusing the dominance of its Android mobile operating system. Competition commissioner Margrethe Vestager has tweeted to confirm the penalty ahead of a press conference about to take place. Stay tuned for more details as we get them. 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 In a longer statement about the decision, Vestager said: Today, mobile internet makes up more than half of global internet traffic. It has changed the lives of millions of Europeans. 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. In particular, the EC has decided that Google: 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”). The decision also concludes that Google is dominant in the markets for general internet search services; licensable smart mobile operating systems; and app stores for the Android mobile operating system. During the press conference Vestager said the Commission had determined that Google had breached its competition rules with Android since 2011. (Although its press release also notes that during 2013, after being called out by the Commission, Google gradually stopped making illegal payments to device manufacturers to exclusively pre-install Google Search. “The illegal practice effectively ceased as of 2014,” it adds.) “The decision today concludes that the restrictions Google imposed on manufacturers and network operators using Android have breached [EU] rules since 2011,” said Vestager. “First that’s because Google’s practices have denied rival search engines the possibility to compete on their merits. They made sure that Google search engine is pre-installed on practically all Android devices, which is an advantage that cannot be matched. “And by making payments to major manufacturers and network operators on condition that no other search app or search engine was pre-installed — well, then rivals were excluded from this opportunity.” “Google’s practices also harmed competition and further innovation in the wider mobile space, beyond just Internet search — and that’s because they prevented other mobile browsers from competing effectively with the pre-installed Google Chrome browser. “Finally they obstructed the development of Android forks. This could have provided a platform for rival search engines as well as other app developers to thrive.” She raised the example of Amazon’s Android fork, Fire OS, as a rival Android platform that has suffered from Google’s contractual arrangements with device manufacturers. “In 2012 and 2013 Amazon tried to license to device manufacturers its Android fork, called Fire OS. It wanted to co-operate with manufacturers to increase its chances of commercial success. And manufacturers were interested but due to Google’s restrictions, manufacturers could not launch Fire OS on even a single device,” she said. “They would have lost the right to sell any Android phone with key Google apps. Nowadays, very few devices run with Fire OS. Namely only those manufactured by Amazon themselves. And this is not a proportionate outcome. Google is entitled to set technical requirements to ensure that functionality and apps within its own Android ecosystem runs smoothly. But these technical requirements cannot serve as a smokescreen to prevent the development of competing Android ecosystems. “Google cannot have its cake and eat it.” Vestager also made a point of characterizing Google’s actions as monopolistic towards data, saying that by blocking rival apps and services it “also denied rivals access to valuable data from increased user traffic which in turn could have allowed rivals to improve their products”. What about breaking Google up? During the press conference she was asked several times about whether breaking up Google might not be a more effective remedy than the cease & desist decision the Commission has reached today — which hands responsibility for Google to come up with a compliance remedy for its illegal behavior with Android (albeit, subject to ongoing monitoring by the Commission). She replied that she wasn’t sure that breaking up Google would make for an effective competition remedy, arguing there are “no silver bullets” to ensuring competitive markets. “Here we have a decision that is very clear, which will allow mobile device producers to have a choice — that will us, as consumers, to have a choice as well. That’s what competition is about. And I think that is much more important than a discussion of whether or not breaking up a company would do that,” she said, when asked whether she would exclude the possibility of breaking up Google — so she was sidestepping a direct answer to that. “I think what will serve competition is for more players to have a real go, to be able to reach consumers so that we can use our choice to find what suits us the best,” she added. “Test out new search engines, new browsers, have maybe a phone that works in a slightly different way [via an Android fork]… maybe the totality of the phone, in the way it was presented, that would work to allow others to compete on the merits, to show consumers what can we do, what have we invented, this is where we put our efforts, this is the that innovation we want to present for you. This I think would enable competition.” She also emphasized the importance of passing proposed EU legislation related to transparency and fairness for businesses that are reliant on online platforms. “I think there is a very important discussion which is to discuss how to pass the legislation that my colleagues have tabled — legislation that will ensure that you have transparency and fairness in the business to platform relationship,” she said. “So that if you’re a business and you find that ‘oh, my traffic has stopped’, that you know why it happened, when it happened and what to do to get your traffic back…. Because this will change the marketplace, and it will change the way we are protected as consumers but also as businesses.” Google has tweeted an initial reaction to the decision, claiming Android has created “a vibrant ecosystem, rapid innovation and lower prices”. A company spokesperson confirmed to us that it will appeal the Commission’s decision. In a lengthy blog post response, CEO Sundar Pichai expands on the company’s argument that the Android ecosystem has “created more choice, not less” — writing for example: Today, because of Android, there are more than 24,000 devices, at every price point, from more than 1,300 different brands,including Dutch, Finnish, French, German, Hungarian, Italian, Latvian, Polish, Romanian, Spanish and Swedish phone makers. The phones made by these companies are all different, but have one thing in common — the ability to run the same applications. This is possible thanks to simple rules that ensure technical compatibility, no matter what the size or shape of the device. No phone maker is even obliged to sign up to these rules — they can use or modify Android in any way they want, just as Amazon has done with its Fire tablets and TV sticks. He also has a veiled warning about the consequences should Google’s “free distribution” model for Android come unstuck, writing: The free distribution of the Android platform, and of Google’s suite of applications, is not only efficient for phone makers and operators—it’s of huge benefit for developers and consumers. If phone makers and mobile network operators couldn’t include our apps on their wide range of devices, it would upset the balance of the Android ecosystem. 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. The fine is the second major penalty for the ad tech giant for breaching EU competition rules in just over a year — and the highest ever issued by the Commission for abuse of a dominant market position. In June 2017 Google was hit with a then-record €2.4BN (~$2.7BN) antitrust penalty related to another of its products, search comparison service, Google Shopping. The company has since made changes to how it displays search results for products in Europe. According to the bloc’s rules, companies can be fined 10 per cent of their global revenue if they are deemed to have breached European competition law. Google’s parent entity Alphabet reported full year revenue of $110.9 billion in 2017. So the $5BN fine is around half of what the company could have been on the hook for if EU regulators had levied the maximum penalty possible. “It’s a very serious illegal behavior” The Commission said the size of the fine takes into account “the duration and gravity of the infringement”. It also specified it had been calculated on the basis of the value of Google’s revenue from search advertising services on Android devices in the European Economic Area (per its own guidelines on fines). Pressed during the press conference on how the Commission had determined the size of the penalty, which is double the penalty it issued in the Google Shopping case, Vestager emphasized the time period over which it had been going on, the fact of it having three components, and the effect of it, combined with Google’s rising turnover — adding finally for emphasis: “It’s a very serious infringement. It’s a very serious illegal behavior.” Google will have three months to pay the fine but has confirmed it will appeal the decision — and legal wrangling could drag the process out for many years. Vestager confirmed that while antitrust fines must technically be paid to the EU within the three month deadline they are placed in a closed account until the end of any appeals process — meaning the money cannot be used in the meanwhile. So, in the Android case, the $5BN will likely be locked up until the late 2020s — assuming Google’s appeals aren’t successful. Should Google fail to overturn the Commission’s decision in the courts, Vestager said the money would be returned to EU Member States “using the same key as the contribution to the European budget”. “You can impose a fine if someone has done someone wrong, you cannot impose a fine because you need the money. That would be wrong,” she added. “This of course means that it will take quite some time… if we win in court — and I can assure you we have done our best to make that possible — then, eventually, the money will come back to Member States to serve European citizens.” Prior to the Commission’s record pair of fines for Google products, its next highest antitrust penalty is a €1.06BN antitrust fine for chipmaker Intel all the way back in 2009. Yet only last year Europe’s top court ruled that the case against Intel — which focused on it offering rebates to high-volume buyers — should be sent back to a lower court to be re-examined, nearly a decade after the original antitrust decision. So Google’s lawyers are likely to have a spring in their step going into this next European antitrust battle.<doc-sep>Google has been given a record fine today, coming in at $5.1 billion USD. The fee was over abusing its power in the smartphone market and is part of the E.U. antitrust’s moves to curtail the power of American’s largest tech companies. The last record fine was also given to google and came in at $2.8 billion USD for unfairly ensuring its own services came in higher in Google’s search results. EU officials said that Google, makers of the Android OS system, broke antitrust laws by striking deals with manufacturers such as HTC, Huawei and Samsung that agreed that Google’s services will be favored over competitors. Margrethe Vestager, Europe’s antitrust chief, said the following about the ruling in a statement: “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 E.U. antitrust rules.” In related news, Google announced plans to build a data cable from Virginia to France.<doc-sep>
The case underscores the broader challenge regulators face in overseeing the digital economy. By the time the authorities home in on an area deserving of scrutiny, the market may have moved on. “Fast-moving markets are where competition law is most important,” said Jonathan Kanter, a partner at the law firm Paul Weiss and a former antitrust investigator for the Federal Trade Commission, who has worked for Google competitors including Yelp. But “when you have cases that are many years old, you’re fighting old battles instead of the next one.” At the heart of the European Commission’s case was the question of whether Google had abused its power by forcing handset makers like Samsung, Huawei and HTC to make its Google Search and Chrome browser the default services on Android-based devices in order to gain access to other Google apps. While Google gives Android away to handset makers, those companies must effectively pre-install 11 Google apps on their devices, giving Google’s products far greater reach and more users to click on its ads. The strategy has enabled Google to reach more than a billion monthly users for six products: search, maps, Gmail, YouTube, the Chrome internet browser, and the Google Play app and media store. Now the European authorities are ordering Google to stop tying Google Search and Chrome to the Google Play store. In addition, antitrust officials said Google must stop providing financial incentives to handset makers and wireless carriers to favor its services, a practice the company stopped in 2014. In another remedy, European officials ordered that Google must allow handset manufacturers to create their own versions of Android software, otherwise known as “forks.” Google had previously discouraged the rise of competing smartphone software based on Android by blocking manufacturers’ access to Google apps if they built devices using any alternative versions. The case has parallels to a similarly significant action against Microsoft in the 2000s, when it was heavily penalized in Europe and the United States for using its power in the personal computer market to bundle in its own internet browser, boxing out its rivals. At the time, Google, a young upstart, was among those to complain about Microsoft’s practices.