Google has grown from a two-person operation to a global titan and that titan is not very happy today. That’s because the European Union dished out a whopping $5.1 billion dollar fine against the company. Why such a huge fine? The E.U. says Google has been abusing its power in the smartphone market and using its Android OS to leverage deals that box out the competition. This follows a similar decision in which the E.U. fined Google $2.8 billion last year over similar accusations.
European officials said Google, which makes the Android mobile operating system used in smartphones, broke antitrust laws by striking deals with handset manufacturers such as HTC, Huawei and Samsung. The agreements required Google’s services, such as its search bar and Chrome browser, to be favored over rival offerings. European authorities said those moves unfairly boxed out competitors.
“Google has used Android as a vehicle to cement the dominance of its search engine,” said Margrethe Vestager, Europe’s antitrust chief. “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 E.U. antitrust rules.”
The E.U. has given the company 90 days to end its practices or face penalties of up to 5 percent of the worldwide average daily revenues of its parent company, Alphabet. Of course, the company has said it will appeal the decision.
Google CEO Sundar Pichai weighed in on the fine warning that Android may have to shift to a paid platform.
“If phone makers and mobile network operators couldn’t include our apps on their wide range of devices, it would upset the balance of the Android ecosystem,” explains Pichai, carefully avoiding the fact that phone makers will no longer be forced to bundle these apps but can still choose to do so. Pichai then hints that the free Android business model has relied on this app bundling.
“So far, the Android business model has meant that we haven’t had to charge phone makers for our technology, or depend on a tightly controlled distribution model,” says Pichai. “But we are concerned that today’s decision will upset the careful balance that we have struck with Android, and that it sends a troubling signal in favor of proprietary systems over open platforms.”
This entire Google vs. the European Union has been a roller coaster ride. It will be interesting to see how long they will drag out the appeal process and what the final outcome will be.
Last Updated on July 18, 2018.