Money-grabbing EU snaffles $5 billion from Google

The massive fine against Google by European competition authorities is a money grab that hardly benefits its own consumers, and raises prices for everyone else.

Ivo Vegter.
Ivo Vegter.

The European Commission has slapped Google with a EUR4.34 billion ($5 billion or R67 billion) fine for engaging in 'illegal practices to cement its dominant market position in internet search'.

It accuses Google of requiring Android-based handset manufacturers that want to use Google's Play Store to also pre-install Google Search and the Chrome internet browser. It also accuses Google of paying manufacturers and network operators not to pre-install rival search engines, nor to use mobile operating systems that compete with Google's version of Android. These acts are illegal under EU competition law.

The Commission itself acknowledges Google's right 'to set technical requirements to ensure that functions and apps within its own Android ecosystem run smoothly'. It is arguable that this is exactly why Google expects a consistent set of default applications. Allowing handset manufacturers to chop and change what they install risks harming consumers who do not have the technical expertise to solve problems resulting from software incompatibilities.

The language of the ruling refers to 'licensable smart mobile operating systems', which means that the EU is punishing Google merely because other handset manufacturers use its Android operating system. Rivals like Apple have even more exclusive and restrictive rules about the software on their smartphones, but get away with it because they manufacture their own handsets.

It's clear Apple acts even more anti-competitively than Google does, but it appears to get a free pass from the European Commission.

Google pre-installs Chrome on Android handsets, for example, but permits users to install rival browsers and open them by default for internet links. Apple pre-installs Safari, but while it is possible to install an alternative browser, it is not possible to change in which browser links open by default. Google allows alternative app stores on Android handsets, but on Apple handsets, this is forbidden. Clearly, Apple acts even more anti-competitively than Google does, but it appears to get a free pass from the European Commission.

The EU has a long history of extracting cash from large technology companies. It first went after Microsoft in 2004 for supposedly forcing Windows Media Player on consumers who bought Windows PCs. A series of large fines followed over the next decade for non-compliance with this ruling, and similar ones involving the Internet Explorer browser. The total siphoned from Microsoft amounts to EUR2.2 billion.

Intel was hit with a fine of EUR1.06 billion in 2009 for its actions towards rival chip-maker AMD. Philips, LG, Panasonic and others were fined a total of EUR1.47 billion for allegedly running a cartel in 2012. Facebook paid EUR110 million over its acquisition of WhatsApp in 2017. Google was fined EUR2.4 billion just last year, over prioritising its own Google Shopping results in Google Search. Qualcomm coughed up EUR997 million earlier this year over a deal with Apple. Apple is itself under investigation over its acquisition of music app Shazam. This brings to EUR11.1 billion the fines levied by the EU against global technology companies over alleged anti-competitive behaviour.

Being able to fine companies a staggering 10% of their annual global revenue - which would work out to $11 billion for Google's parent company, Alphabet, alone - is a great money-spinning racket for the EU. It is questionable, however, how much European citizens or anyone else stand to benefit from such decisions.

Being able to fine companies a staggering 10% of their annual global revenue - which would work out to $11 billion for Google's parent company, Alphabet, alone - is a great money-spinning racket for the EU

If the EU's record with Microsoft is anything to go by, enforcing compliance is hard or impossible to do. The tech giant just meekly submits to paying off the European regulators every other year, without substantively changing its behaviour.

At best, this ruling will make it easier for handset manufacturers to offer non-Google builds of Android on their devices, and for consumers to install alternative browsers, search engines and app stores, in Europe. This may spur some competition, but it will also likely fragment the market and confuse consumers who use 'google' as a verb and couldn't care less what browser they use, as long as it works. Those who do care, and don't like Google products (like me), probably already use alternative browsers and search engines anyway.

In the rest of the world, the existing deals with handset manufacturers and network operators will not change. Those consumers will not benefit at all, but they will end up paying higher prices to reimburse companies for the high cost of doing business in Europe.

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