Europe hits Google with record $5 billion antitrust fine over bundling of its apps on Android smartphones, tablets

Europe hits Google with record $5 billion antitrust fine over bundling of its apps on Android smartphones, tablets

European regulators on Wednesday fined Google a record $5 billion and ordered the tech giant to cease pushing its own search and web-browsing tools on smartphones and tablets running its Android mobile operating system.

The steep penalties from Margrethe Vestager, the European Union’s competition chief, mark the second time in as many years that the region has found that Google wields its power in a way that harms competition and consumers. In this case, Vestager faulted Google for using Android as a means to solidify its strong foothold in search, while making it harder for rivals to offer competing apps and services.

Google long has given device makers such as Huawei, LG and Samsung an ultimatum: They must set Google’s search engine as the default on Android smartphones and tablets and pre-install Google’s Chrome web browser, or they risk losing access Google’s app store, called Google Play. Without that portal, owners of Android devices can’t easily download games and other tools from third-party developers.

From Google’s perspective, bundling those apps offers the tech giant a way to derive data from smartphone users while serving them lucrative ads. The company also has maintained that it never stopped Android users from downloading rival services if they preferred.

But Vestager maintained that Google’s activity instead has turned Android into a “vehicle to cement the dominance of its search engine,” she said in a statement. “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.”

In response, Google CEO Sundar Pichai said Wednesday that the company would appeal the E.U.’s decision.

“We’ve always agreed that with size comes responsibility. A healthy, thriving Android ecosystem is in everyone’s interest, and we’ve shown we’re willing to make changes,” he wrote in a blog post. “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.”

Vestager first outlined competition complaints with Android, the most widely adopted mobile operating system in the world, roughly two years ago. It is not the first case she has brought against Google: In 2017, she slapped the U.S.-based tech giant with a $2.7 billion fine for giving its shopping-comparison service prime real estate in search results over its rivals' competing offerings. Vestager previously has announced she is also probing other elements of Google’s sprawling corporate empire, including its advertising business.

The protracted scrutiny stands in stark contrast to the United States, where regulators probed Google but opted in 2013 to leave the company intact. To that end, Vestager’s new fine could add to pressure on the Federal Trade Commission to take another look at the tech giant, a position supported by some Democrats and Republicans in Congress, as well as Google’s chief corporate and political foes.

"We're hoping that U.S. regulators will be encouraged," said Barry Lynn, the director of the Open Markets Institute, which has advocated for more scrutiny of Silicon Valley's biggest tech companies. "American antitrust law enforcers should study this very closely and learn from it, and emulate it, and build on it."

The members of the FTC are testifying on Capitol Hill on Wednesday morning. A spokesman for the agency's chairman, Joe Simons, did not immediately respond to a request for comment.

Unlike Apple, which is the sole manufacturer of iPhones and iPads that run its software, called iOS, Google sells its own devices, such as the Pixel, while licensing Android to other hardware companies for free. In some cases, Google also provides significant financial incentives for those device makers to adopt Android and pre-install the search giant’s full suite of apps — a practice that the E.U. said Wednesday has “harmed competition by significantly reducing [device makers'] incentives to pre-install competing search apps.”

In response, Google charged that the E.U. has ignored the reality that Android device owners download and use apps made by a wide range of other developers -- while manufacturers are not prohibited from installing their own competing services. The company’s leader, Pichai, stressed in his public rebuttal that some of Google’s apps, including Chrome, Mail and Maps, are popular services that help Android devices work “right out of the box." Some also generate revenue and help cover the “costs involved in building Android,” he said.

In its formal decision, the E.U. also faulted Google’s policy of prohibiting Android device makers from producing other smartphones or tablets that run on modified versions of the operating system, known as “forks.” That includes Amazon’s Fire OS, a mobile operating system that is based on Android. The E.U. said it “found evidence that Google’s conduct prevented a number of large manufacturers from developing and selling” those devices. (Amazon CEO Jeffrey Bezos also owns The Washington Post.)

To Google, however, its policies ensure uniformity in how Android looks, feels and operates, and they are meant to make it easier for developers, who have to create only one version of their app for a wide array of devices. As a result, organizations such as the Developers Alliance, an app-focused advocacy group that counts Google as a board member, said that the E.U.’s decision would pose severe technical headaches for smaller companies and coders.

“Developers are not worried about competing with Google apps on the phone,” said Bruce Gustafson, the organization’s president. “Our worry is that Android becomes exactly like [Apple’s] iOS, and at that point, it is locked down. . . . There will be six, seven [or] eight versions of these closed ecosystems, which means we have to code” multiple apps, he said.

For now, Vestager said, Google must “bring its illegal conduct to an end” within 90 days, or face additional fines from the E.U. “Our decision stops Google from controlling" the apps that manufacturers “can pre-install on Android devices, or which Android system they can adopt,” she told reporters.

 

 

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