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Google fined record EUR4.3bn in EU antitrust probe

Staff Writer
By Staff Writer, ITWeb
Johannesburg, 18 Jul 2018
The European Commission has fined Google EUR4.34 billion for breaching EU antitrust rules.
The European Commission has fined Google EUR4.34 billion for breaching EU antitrust rules.

The European Commission has fined Google EUR4.34 billion for breaching EU antitrust rules.

In a statement issued today, the European Commission says since 2011, Google has imposed illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general Internet search.

It says 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, Google's parent company.

Commissioner Margrethe Vestager, in charge of competition policy, 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."

The Commission points out that in particular, 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).

It also charges that the Internet search giant 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 European Commission also says Google obtains the vast majority of its revenues via its flagship product, the Google search engine. The company understood early on that the shift from desktop PCs to mobile Internet, which started in the mid-2000s, would be a fundamental change for Google Search. So, Google developed a strategy to anticipate the effects of this shift, and to make sure that users would continue to use Google Search also on their mobile devices.

The Commission decision 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.

The Commission's fine of EUR4 342 865 000 takes account of the duration and gravity of the infringement. In accordance with the Commission's 2006 Guidelines on fines, the fine has been calculated on the basis of the value of Google's revenue from search advertising services on Android devices in the EEA.

"The Commission decision requires Google to bring its illegal conduct to an end in an effective manner within 90 days of the decision," it notes.

"At a minimum, Google has to stop and to not re-engage in any of the three types of practices. The decision also requires Google to refrain from any measure that has the same or an equivalent object or effect as these practices."

In June 2017, the Commission fined Google EUR2.42 billion for abusing its dominance as a search engine by giving an illegal advantage to Google's own comparison shopping service. The Commission is currently actively monitoring Google's compliance with that decision.

Befitting the crime

Mark Skilton, professor of practice in Information Systems & Management at of Warwick Business School, comments: "It looks like this time the fine will fit the 'crime' in this long running dispute of market dominance and manipulation.

"Google has always been a contradiction, in that it is a market facilitator who also wants to control that market. Google claims that it has to compete with other big players and that swapping to an alternative search service is 'one click away', but in my view, it is its locking up of around 80% of mobile devices with pre-installed Google Android software that is the issue.

"The real issue is not the supplier side problems' which have been dominating the shape of the market; its having a demand side where consumers have real choice instead of being locked into just one vendor's world view of the digital economy.

"It must be remembered Google 'defines the market' and is not just an innocent bystander.

"Google claims it is a free market for users, but that's just not true in practice. Granted, as we see in the telecoms market, network operators want to protect their billion-dollar investment in the infrastructure that enables all this internet to work, but its when it becomes a monopolistic control from the supplier to the end user that it becomes a problem.

"The internet is in urgent need of moving to its next level of evolution, which will be a more distributed and edge-based world. It is being seen with the rise of the internet of things that are multiplying the number of connections to smart homes, products, transport and everything else - this will bring a more open market.

"This is the next battleground for Google and the big tech players, but GDPR and the European Commission's focus on the tech giants is becoming a significant issue for them."

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