EC Fines Google $5.1 Billion for Android Antitrust Breaches; Search Engine Vows Appeal

Google said it will appeal. The decision drew praise from rivals, civil society and consumers, and harsh words from the tech industry.

The vast majority of Google's revenue derives from its search engine, the EC said. The company foresaw the shift from desktop PCs to mobile internet and developed a strategy to ensure users would continue to use Google Search on their mobile devices, it said. The tech platform bought the original developer of the Android mobile operating systems and today, around 80 percent of smart mobile devices in Europe and globally run on Android, it said.

When Google develops a new version of Android, it publishes the source code online, which in principle allows third parties to download and modify the code to create Android forks, the EC said. But the openly accessible source code covers only basic features of a smartphone operating system, not Google's proprietary Android apps and services, it said. Device makers wanting to obtain the proprietary apps and services must sign contracts with the companies, where Google imposes conditions. Google also applies some restrictions to some large operators, it said.

Illegal tying of the Google Search and Chrome browser apps to Android reduced manufacturers' incentives to pre-install rival apps and kept users from choosing other apps, the EC said. Making illegal payments conditional on exclusive pre-installation of Google Search breached competition rules by significantly reducing chances rivals' apps would be pre-installed. Illegally obstructing development and distribution of competing Android operating systems lowered chances for such alternative systems to be created, it said: This cemented Google's dominance in general internet search "when the importance of mobile internet was growing significantly."

Not ending the violations in 90 days could result in a fine up to 5 percent of the average daily worldwide revenue of its parent company, Alphabet, backdated to when the noncompliance started, Vestager said. "We will monitor this very closely."

Two other Google cases are ongoing, on Google Shopping and restrictions Google, owner of AdSense, placed on third-party websites displaying search advertisements from competitors (the AdSense case), the EC said.

Competition

"Android has created more choice for everyone, not less," said a Google spokesperson. "A vibrant ecosystem, rapid innovation and lower prices are classic hallmarks of robust competition."

Free distribution of the Android platform benefits not only phone makers and operators but also developers and consumers, Google CEO Sundar Pichai blogged. If handset makers and mobile operators couldn't include Google apps on their devices, "it would upset the balance of the Android ecosystem," which so far has meant that the company doesn't charge phone makers for its technology or depend on a tightly controlled distribution model, he said. Google agrees that "with size comes responsibility," but the EC decision "sends a troubling signal in favor of proprietary systems over open platforms."

Google got backing from tech industry and free-market groups. The decision "misses the big picture" of mobile competition for consumers, said Baker McKenzie (Brussels) antitrust attorney Bill Batchelor at a Wednesday briefing by the Computer & Communications Industry Association, whose members include Google. That competition started with iPhone, and Google spotted the opportunity, created its open-source operating system, and then delivered 14 versions free to handset makers, he said. The EC didn't mention that the average price of an Android smartphone halved between 2010 and 2016, he said: Consumers are "tech-savvy and seek out the best" apps, even if Google's come pre-installed.

The decision is "misguided and shortsighted," said Information Technology and Innovation Foundation Vice President Daniel Castro. Google's open-source project led to the development of rival mobile operating systems such as Amazon's Fire OS and many competing browsers, app stores and search tools, he said: If the decision isn't reversed on appeal, "it is time for European regulators to reset their approach to competition policy." The Software and Information Industry Association believes the action "provides no solution for how the open Android platform can ward off fragmentation," said Senior Vice President-Public Policy Mark MacCarthy.

"This may go down in history as the stupidest antitrust suit of all time," said TechFreedom President Berin Szoka. He slammed the EC for defining the relevant market to exclude Apple to make Google look like a monopoly. All the supposedly anticompetitive practices sustain Android as a viable alternative to Apple," he said. "Dominance and popularity are not the same as a coercive monopoly," blogged Competitive Enterprise Institute Vice President-Policy Wayne Crews. He accused the EC of "behaving in protectionist fashion."

Google rivals, consumers and civil society cheered. "An important step in disciplining Google's abusive behaviour" over Android, said FairSearch Counsel Thomas Vinje. FairSearch member Oracle called the decision a win for consumers and applications developers. Consumers should be able to make a meaningful choice between search engines and browsers and which apps they download on their mobile phones, said European Consumer Organisation Director General Monique Goyens.

Several organizations urged Vestager to move quickly on Google and to widen its probes against other online firms, including Facebook. "The most pressing issue is the growing power Google and Facebook exert over the online platforms where people exchange news and ideas," said the Open Market Institute, Electronic Privacy Information Center, Center for Digital Democracy, Consumer Watchdog and Fight for the Future: The next necessary step is to "break up these corporations and to impose non-discrimination obligations." The groups hope the U.S. antitrust enforcement community sees "in your courage a model."

Hill Reaction

Antitrust-focused lawmakers divided along party lines, in statements.

This “has the potential to undermine competition and innovation” in the U.S. and “further demonstrates the different approaches to competition policy between U.S. and EC antitrust enforcers,” said Senate Judiciary Antitrust Subcommittee Chairman Mike Lee, R-Utah. “A competitive marketplace requires strong antitrust enforcement. However, appropriate competition policy should serve the interests of consumers and not be used as a vehicle by competitors to punish their successful rivals.” The U.S. needs to “ensure that Google’s business practices do not violate U.S. antitrust laws and harm American consumers,” said Senate Antitrust ranking member Amy Klobuchar, D-Minn. “I expect the [FTC] to examine the conduct highlighted by the European Commission’s decision and take swift enforcement action if they find a violation.”

“This was the right decision,” said House Judiciary Antitrust Subcommittee ranking member David Cicilline, D-R.I. “There is a growing consensus that platform dominance is a threat to competition, innovation, and choice. We have a lot of work to do in the United States to ensure that our laws are working to protect and promote competition.” Europe's “bold fight against Google's antitrust abuses should lead US enforcers to protect consumers,” tweeted Senate Consumer Protection Subcommittee ranking member Richard Blumenthal, D-Conn. “This fine is a good first step.”

Some are waiting to see what happens next.

"Fines make headlines. Effective remedies make a difference," emailed Foundem CEO Shivaun Raff, the lead complainant in the Google Shopping case. "Only if this second massive fine impresses Google enough to change its anticompetitive and consumer-harming practices will competition be restored," said Initiative for a Competitive Online Marketplace Chairman Michael Weber.