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Google And The $5B EU Android Fine – And Its Implications

The fine, finally.

Tongue in cheek as that sentiment may be, the EU fine levied over Android and dominance of that operating system has been a long time coming for Google.

And now there’s a definitive amount, and it’s nothing to sneeze at: $5 billion (or about 4.3 billion euros). It’s a record for an antitrust fine, and in tandem with the penalty is an order from the EU that may have far-reaching implications, as The Wall Street Journal notes – including the looming possibility that such changes might “loosen the company’s grip on its biggest growth engine: mobile phones.”

The findings via the EU are that, according to the antitrust regulator, Google abused that very dominance of the operating system to the benefit of its own mobile offerings, which includes, of course, the search engine itself. The long-entrenched business practice of pre-loading that search engine and other apps has given Google an unfair leg up over smaller rivals, those firms had complained – and now the EU’s watchdogs have concurred.

The EU has found that Google acted illegally in enticing handset makers to load those apps along with the free operating system. “These practices have denied rivals the chance to innovate and compete on the merits,” said EU Competition Chief Margrethe Vestager. She noted in a press conference that the magnitude of the fine, which is about 40 percent of the company’s net income as measured in all of 2017, reflects the seriousness of the infringement.

Google has said, perhaps not surprisingly, that it will appeal the decision. The company has responded through a blog post penned by CEO Sundar Pichai, who said that the company’s practices have actually boosted competition amid smartphone manufacturers and helped to spur consumer choice. Now, he said, the ecosystem could see a balance that is “upset” if Google has to charge for the operating system or change the way it distributes the system to those stakeholders.

The EU’s Orders

Along with the fine that is being levied, the EU has mandated that the company abandon its requirements that phone giants preinstall the Chrome browser, or make Google the default search engine. Gone, too, will be the payment incentive that ties in with exclusively pre-installing that search engine – and, as WSJ noted, the company restrictions that dissuade those same phone giants from selling hardware that runs unofficial versions of Android.

Thus, the very fabric of the mobile ecosystem could be changed a bit, with what the report termed “sizable challenges” to the extant Google business model, where revenue (the total top line is $60 billion for Google, nearly half of the parent company Alphabet’s top line) comes from ads, and where the aforementioned dominance helped the company target those ads. The EU ruling may give way to more intense competition, as the changes mandated must become reality within 90 days.

Should Google lag in implementing the prescribed anticompetitive remedies, the impact could be significant, in the form of fines that would be an additional 5 percent of global daily revenue for each day of non-compliance.

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