The European Commission has confirmed a EUR 4.34 billion competition fine against Google for abusing its dominant position. The company was found to have imposed illegal restrictions on Android device manufacturers and mobile network operators since at least 2011, in order to cement its dominant position in the search market. Google refuted the claims and said it plans to appeal the decision.
The EU first opened an investigation into Google's practices in the Android market in 2015 and in April 2016 gave the company a charge sheet of alleged competition violations. The new fine, a record for EU competition penalties, follows the EU fine against Google last year of EUR 2.4 billion for favouring its own shopping comparison service over other providers, again to strengthen its dominance in search.
Tied sales, illegal payments
The illegal practices by Google included requiring device manufacturers to pre-install the Google Search app and Chrome browser as a condition for licensing Google's app store (the Play Store), which is considered an illegal form of tying services. The company also made payments to certain large manufacturers and mobile operators so that they exclusively installed Google Search on their devices, making it near impossible for alternative search engines to operate profitably. Finally, Google prevented manufacturers wanting to pre-install Google apps from selling any mobile device running on alternative versions of Android not approved by Google (so-called Android forks).
European competition commissioner Margrethe Vestager said the practices were part of Google's strategy to extend its lead in internet search to the mobile internet. While the EU does not question the Android operating system and its open source nature, the competition authorities dispute the restrictive terms for using Google's Android-related services, such as mobile apps and the app storefront. These practices have held back the development of other search engines, web browsers and app stores, the Commission said, citing its own research that Android users were much less likely to download alternative apps or use other search engines.
Google's practices also halted the development of alternative Android forks, such as Amazon's attempt at a Fire OS. The Commission rejected Google's argument that this was necessary to prevent fragmentation in the market, saying Google could have still set technical requirements for Android devices using its apps, without forbidding manufacturers from developing alternative software. Furthermore, the Commission found that Apple's alternative mobile OS was not sufficient competition to constrain Google's power in the Android market, as the two ecosystems operate independently.
90 days to change
Google has 90 days to change its practices or face additional penalties of up to 5 percent of its parent company Alphabet's average daily revenues. The Commission noted that the company already halted the illegal payments to manufacturers and operators in 2014, after the EU started investigating the matter.
The amount of the fine is based on the seriousness and duration of the offences and Google's revenues from search advertising on Android devices in the EU. The Commission estimates that Google has been dominant in the market for Android app stores since 2011, which is used as the starting date for the anti-competitive behaviour. More than 90 percent of apps downloaded on Android devices come from Google's Play Store, and Android has an over 80 percent share in the EU mobile device market.
'Android creates choice'
Google CEO Sundar Pichai issued a statement in response to the European Commission's decision largely repeating the arguments first put forth by the company when the EU issued its allegations in April 2016. He underlined the choice Android brings to the market, both as an alternative to Apple and in the wide range of Android devices available from multiple manufacturers, including several based in the EU.
According to Pichai, Google's strategy has been key to making the open-source Android system a success, as all the Android devices are able to run the same applications thanks to the company's "simple rules that ensure technical compatibility". The CEO added that: "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." Furthermore, phone makers are "also free to pre-install competing apps alongside ours", Pinchai said.
As for Android consumers, the CEO said they are free to download apps and use browsers and search engines other than Google's pre-loaded services. They "can easily disable or delete them, and choose other apps instead", Pinchai said, noting the millions of downloads on the Play Store for browsers such as Firefox or Opera Mini.
Finally, Pinchai said the free distribution of the Android OS and Google's suite of apps "is not only efficient for phone makers and operators—it’s of huge benefit for developers and consumers", and if this business model were to change, "it would upset the balance of the Android ecosystem". He also suggested that the EU's decision "sends a troubling signal in favor of proprietary systems over open platforms".
