EU fines Google a record €4.34 bn for Android antitrust violations

The European Commission ordered Google to pay a record €4.34 bn ($5 bn) antitrust fine for exploiting its dominant market position in search engines, mobile operating systems and app stores for Android. This means that the Commission did not fully exhaust the available framework of fines of up to 10 % of the annual worldwide turnover. In the case of Google and its parent company Alphabet, a fine of up to $11 bn would have been possible.

However, Google is likely to be hit even more by the fact that it must not continue its anti-competitive practices in the mobile sector condemned by the EU Commission. Google must now bring the conduct effectively to an end within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet.

Commissioner Margrethe Vestager, in charge of competition policy, 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.

Update from October 10th, 2018: Google has filed an appeal against the antitrust fine at the General Court of the European Union in Luxembourg. The complex case could take several years before judges rule on it.

According to the Commission, Google has engaged in three separate types of practices, which all had the aim of cementing its dominant position in general internet search:

1. Illegal tying of Google’s search and browser apps
2. Illegal payments conditional on exclusive pre-installation of Google Search
3. Illegal obstruction of development and distribution of competing Android operating systems

In particular, Google:

• has required manufacturers to pre-install the Google Search app and the Chrome browser, as a condition for licensing Google’s 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”).

These illegal restrictions made it impossible for Android device manufacturers, for example, to pre-install only the Play Store without additional Google apps, or Firefox instead of Chrome, or any map service other than Google Maps. They were forced to discriminate against Google’s competitors if they wanted to distribute devices running the free Android operating system.

Marc Al-Hames, Managing Director of Cliqz, explains:

In the analog world, no one would dare to come up with an idea like this: A powerful corporation like Nestlé would be allowed to take over the infrastructure and store fixtures of virtually all supermarkets and then provide the equipment to store operators at no charge. In return, the stores would not sell any products by Nestlé’s competitors. But this is exactly what is happening in the digital world. The EU’s decision to force the market-controlling Android platform to be opened to other providers is long overdue. We are calling on the EU to prevent Alphabet from binding browser developers such as Mozilla/Firefox and Apple/Safari to Google’s search engine by offering them lucrative contracts.

As the biggest provider of online advertising by far, Alphabet can always spend more money than the competition can. The Internet giant takes in more than $100 billion from ads each year. And most of this money comes from search-engine advertising. This is why it makes sense for Alphabet to pour more than $20 bn into traffic acquisition costs each year to underpin and expand its dominant market position. Al-Hames: “It is time for Europe to finally step in and create a fair competitive environment for all search engines.”