In the global regulatory battle with Big Tech, mark that Europe: 2, Google: 0.
Margrethe Vestager, Europe’s competition chief, announced a record €4.3 billion ($5 billion) antitrust fine on Wednesday against Android, the search giant’s popular mobile software. It comes just over a year after the Danish politician announced a separate €2.4 billion ($2.8 billion) financial penalty linked to some of the tech giant’s search services. Google denies wrongdoing and is appealing both charges.
“What we want is for Google to change its behavior,” Vestager told reporters on Wednesday. “This is a market, and there are rules.”
The antitrust penalty represents the largest ever antitrust fine levied by Europe’s competition authorities against a single company, and marks a significant step by Vestager in her ongoing battle with the U.S. search giant.
By focusing on Android, which is free to use and powers more than three-quarters of the world’s smartphones, the European Commission is taking direct aim at Google’s aspiration to be central to people’s digital lives increasingly run through mobile devices.
It also represents a serious setback for the search giant, which must now open up its Android software to greater competition. That includes permitting phonemakers greater freedom to choose which digital services appear on people’s handsets, potentially hampering its ability to garner revenue from online advertising — still its core business — if consumers shift their online attention elsewhere.
Google was quick to rebuff Brussels’ charges.
In a blog post, Sundar Pichai, the company’s chief executive, said that Android has created more, not less, competition for phonemakers and app developers across Europe and beyond. He added that consumers have benefited because of the ready access to cheap smartphones, some of which now cost less than €50 ($58).
“Today’s decision rejects the business model that supports Android, which has created more choice for everyone, not less,” Pichai wrote. “We intend to appeal.”
The fine, though, is unlikely to threaten Google’s ongoing business, at least in the short term. It represents roughly 16 days of the search giant’s revenue, according to the company’s 2017 financial report, although investors are likely to ask questions at its next earnings on July 23.
Vestager versus Google
Europe’s charges allege that Google makes unfair use of Android to maintain its dominance in online search.
As part of Wednesday’s decision, Vestager highlighted complex contractual agreements that Google demanded phonemakers sign if they wanted to access the company’s popular digital services, including its app store, known as the Play Store.
The agreements required that manufacturers pre-install Google search and its browser onto smartphones if they wanted to access the app store. That allowed the search giant to gain an unfair advantage over rivals and potentially hamper consumer choice, according to the EU’s statement.
In particular, Europe’s competition chief said the search giant had illegally paid manufacturers to exclusively install Google search on their devices. She added that Google had prevented phonemakers from accessing the company’s digital services like its app store if they did not exclusively use Google’s version of Android.
“It’s a very serious illegal behavior,” Vestager said. “What would help competition would be for other players to have a go and reach consumers.”
Google will now have 90 days to end what the EU deems its illegal activities or face fines of up to 5 percent of the daily global revenue of Alphabet, its parent company, or roughly $12 million a day. In particular, it is expected to grant greater permissions to phonemakers and telecoms operators to access the company’s app store without being forced to pre-install either Google search or its web browser.
These changes, according to industry watchers, could hit Google’s global dominance in search and online browsers, although the company’s services remain widely popular with consumers across Europe, the U.S. and beyond.
Others said Google may start to charge phonemakers for access to its version of Android, which could potentially raise costs for phonemakers worldwide that could eventually be passed on to consumers.
Antitrust experts say that the Android case holds many similarities to a previous EU investigation into Microsoft and its once dominant desktop web browser. That case eventually led to more than a billion euros in fines and other penalties against the company, as well as demands that it open up the browser market to greater competition. Google claims the cases are different because Android is free to use, while Microsoft charged for Windows.
“The problem for Google is the conditions that it puts on using Android,” said Damien Geradin, a partner with Euclid Law, a law firm in Brussels that previously worked with Microsoft during its antitrust dealings with the EU. “Google says that Android is open source, but that’s just not the case.”
By slapping Google with a record fine, Vestager is building on a yearslong investigation by the Commission into the search giant’s place in the ever-evolving digital world.
EU antitrust officials are also investigating whether the company’s advertising products restrict consumer choice, and Vestager said on Wednesday that she has yet to determine if Google is complying with previous charges that it misuses its position in some online search services. The company denies wrongdoing in all cases.
Europe’s competition czar has repeatedly claimed the investigations are not unfairly targeting U.S. tech firms in order to level the playing field for European rivals. But Vestager’s critics have been quick to focus on how the Danish politician has slapped several of Silicon Valley’s largest names with sizable fines despite European firms also feeling the brunt of her regulatory powers.
“I very much like the U.S.,” Vestager said Wednesday.
Along with the levies against Google, Brussels also has ordered Apple to repay €13 billion ($15 billion) in back taxes to the Irish government and fined Facebook €110 million ($129 million) for misleading antitrust officials. The iPhone maker and Dublin are appealing the tax decision.
The friction between the Commission and some of the largest U.S. tech names comes as tensions also build between Brussels and Washington over an escalating trade war. In an interview with CBS Evening News released on Sunday, President Donald Trump said that the European Union is one of the United States’ biggest foes.
The timing of the Android announcement had been complicated because of Trump’s visit to Brussels last week to attend a NATO summit, according to a person with knowledge of the matter, who spoke on the condition of anonymity.
Winners and losers
In the build-up to Wednesday’s decision, rival camps have taken sides depending on their views of Google’s position in the digital world.
Groups that favor greater regulation for some of Silicon Valley’s biggest names welcomed the record fine, and urged Vestager to go further in her efforts to rein in the perceived excess. Several of the complaints in Europe’s Android case, including FairSearch, a group of tech companies that includes Oracle and Naspers, a South African e-commerce giant, praised the Commission’s actions.
European politicians, notably Bruno Le Maire, France’s finance minister, similarly backed the antitrust fine, while several U.S. consumer groups similarly called for greater scrutiny on some of the tech industry’s largest companies.
“It would be great if she pursued structural solutions,” said Sandeep Vaheesan, policy counsel at the Open Markets Institute in Washington, in reference to efforts to break up firms likes Google and Facebook. “That would involve less need for constant controls and checks.’
Not everyone, though, backed Europe’s latest push against Google.
Many app developers, in Europe and farther afield, took to social media Wednesday to voice their displeasure about the fine under the hashtag #Androidworks. They claim that the search giant has created a one-size-fits-all digital ecosystem that makes it easy — and cheap — for even the smallest of companies to build services that can reach a global audience.
Ian Rumac, an app developer in Croatia, said that if phonemakers developed their own, potentially non-compatible, versions of Android, it would prove almost impossible for anyone other than large companies to build apps for these rival mobile operating systems.
“Google’s Android is the most convenient,” said Rumac. “Breaking it up would kill competition because you would have to develop different apps for so many different stores.”
This article has been updated.