Google slapped with colossal Android fine from EU

In some truly startling news, Google has been fined a whopping €4.34bn (£3.9bn) for breaching EU antitrust rules, where illegal restrictions have been placed on Android device manufacturers and network operators since 2011 to “cement the dominance of its search engine”.

Google’s parent company, Alphabet, has now been given just 90 days to bring a halt to such practices otherwise they face greater penalties of up to 5% of its average daily global turnover. However, Alphabet has since said that they will actively pursue an appeal of this in a similar vein to the way they handled a previous fine they were handed from the EU in 2017 over its Google Shopping service.

According to reports, a third investigation by the EU is also underway regarding AdSense, Google’s advert-placing sidearm.

So what is the fine actually for?

In a recent press release published by the EU commission on the matter, Google is alleged to have violated European law and acted illegally in the three following ways:

• Android handset and tablet manufacturers were instructed to pre-install the Google Search and Chrome apps as a mandatory requirement in exchange for access to the Google Play app store.
• Payments to large manufacturers and network operators were made by Google to exclusively pre-install the Google Search app on devices.
• Manufacturers were prevented from selling any smartphones / tablets that are powered by alternative versions of Android with the threat of Google refusing permission to pre-install its apps.

These accusations were brought to the EU by Competition Commissioner Margrethe Vestager who claims that Google has acted illegally in the above ways in order to ensure that “traffic on Android devices goes to the Google Search engine”.

In doing so, Ms Vestager argues that such practices have “denied rivals the chance to innovate and compete on the merits”, while having also “denied European customers the benefits of effective competition in the important mobile sphere”. One particular example of this is in the case of Amazon’s Fire OS, where Ms Vestager claimed that this ruling could lead to manufacturers being able to sell smart devices with alternative Android operating systems, which they had been previously prevented from doing.

Despite acknowledging that Google’s particular version of Android OS does not prevent users from opting to download and use an alternative web browser to access the internet, figures show that only 1% of users have downloaded a competing search app and 10% have chosen to use a different browser than Chrome.

What have Google said on this?

Google have seemingly failed to claim ownership to any illegitimate business practices whilst rejecting the claims laid by Ms Vestager, with Chief Executive, Sundar Pichai, responded to this in a blog stating, “Rapid innovation, wide choice, and falling prices are classic hallmarks of robust competition and Android has enabled all of them… Today’s decision rejects the business model that supports Android, which has created more choice for everyone, not less.”

How have others reacted to this?

While Google has been ordered to refrain from partaking in any illegal activity, the European Commission opened formal proceedings back in April 2015 following a complaint by trade group, Fairsearch.

The group also claims that the case has taken so long to reach a decision due to Google “using every trick in the book to delay action”, with a spokesman for Fairsearch claiming that “this was an important step in disciplining Google’s behaviour in relation to Android” and “It means that Google should cease its anti-competitive practices regarding smartphones, but also in other areas – smart TVs in particular – where it is foreclosing competition by using the same practices.”

But however will they afford it?

While this fine requires Google to fork over a huge amount of money to the EU (pending the appeal), in relative terms to their annual turnover and cash reserves, it’s likely the search giant will be largely unmoved by this. They could, of course, settle on somewhat of a lesser figure, though, in a similar way to how they managed to negotiate a deal to settle at £130m with HMRC in 2016.

To put this into context, Alphabet’s annual turnover was estimated to be around $110bn in 2017, where they also have around $103bn in cash reserves as indicated at the end of March this year. While Google could clearly afford to pay the fine, (without any adverse effects to business performance since around 91% of its revenue is generated through Paid Search advertising) the fact this decision is being appealed clearly denotes that either Google simply does not want to accept liability or they genuinely believe they have not committed the offences they are accused of.

However, with one appeal already underway, another ready to launch against this decision, and potentially one in the not too distant future, it’s clear that the Competition Commissioner Ms Vestager isn’t going away any time soon.

Summary

Although it remains unclear as to whether Google will pay the figure demanded by the EU, it’s likely that this story may take some time to fully unravel. If the two year process it’s taken for the EU to arrive at this decision is anything to go by, then it’s anyone’s guess as to when this issue could be resolved. However, we’ll see in the next 90 days whether Google halts their alleged illegal business practices, so it’s expected the internet world will be keeping a watchful eye on the progression of this investigation.