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The European Commission (EC) has fined Google €4.34bn for forcing smartphone makers and operators to adhere to contract terms that the Commission deemed anti-competitive.
The EC stated that Google dominates the markets for general internet search services, licensable smart mobile operating systems and app stores for the Android mobile operating system, and has engaged in three separate practices, all of which were aimed at cementing its dominant position in general internet search.
In a blog reaction to the fine, Google CEO Sundar Pichai wrote: “The decision ignores the fact that Android phones compete with iOS phones, something that 89% of respondents to the Commission’s own market survey confirmed. It also misses just how much choice Android provides to thousands of phone makers and mobile network operators who build and sell Android devices; to millions of app developers around the world who have built their businesses with Android; and billions of consumers who can now afford and use cutting-edge Android smartphones.
“Because of Android, a typical phone comes preloaded with as many as 40 apps from multiple developers, not just the company you bought the phone from. If you prefer other apps – or browsers, or search engines – to the preloaded ones, you can easily disable or delete them and choose other apps instead, including apps made by some of the 1.6 million Europeans who make a living as app developers.”
But Margrethe Vestager, European commissioner for competition, said Google forced manufacturers to install its Android operating system, Chrome browser, Google Play Store and Google Search on every Android smartphone.
The EC found that Google had made payments to certain large manufacturers and mobile network operators on condition that they exclusively preinstalled the Google Search app on their devices. It also said Google had prevented manufacturers wanting to preinstall Google apps from selling even a single smart mobile device running on alternative versions, or forks of the open source Android operating system, that were not approved by Google.
Commenting on Google’s anti-competitive contracts, Vestager said: “Amazon has developed an Android fork and would like manufacturers to use it, but this is not possible.”
The EC has been receiving complaints about Google since 2011 and has been investigating the company’s dominance on smartphones since 2015. The preliminary findings of its investigation reported that Google had implemented a strategy on mobile devices to preserve and strengthen its dominance in general internet search.
At the time, Kent Walker, senior vice-president at Google, blogged: “We are concerned that the Commission’s preliminary findings underestimate the importance of developers and the dangers of fragmentation in a mobile ecosystem. Developers – and there were at least 1.3 million of them in Europe in 2015 – depend on a stable and consistent framework to do their work.
“Any phone maker can download Android and modify it in any way they choose. But that flexibility makes Android vulnerable to fragmentation, a problem that plagued previous operating systems like Unix and Symbian.
“When anyone can modify your code, how do you ensure there is a common, consistent version of the operating system, so that developers don’t have to go through the hassle and expense of building multiple versions of their apps?”
Walker said the EC’s proposal risked making fragmentation worse, hurting the Android platform and mobile phone competition.
Commenting on the fine, which is the largest the EC has ever imposed on a business, Vestager said: “Rivals cannot find a place on an Android phone. Very few people will use another search engine. Given that mobile search traffic is almost half of all internet search, this makes it very difficult to develop your own search engine.”
Vestager said the EC wanted Google to remove contractual restrictions. “Mobile operators will be free to choose and if someone develops a new Android fork, the smartphone maker can choose it,” she said. This will give consumers greater choice, the commissioner added.
Although there are more than 450 million people in the EU with an existing Android phone, the fine reflected past behaviour, said Vestager. As such, users with existing Android smartphones will not have a choice of operating system. “Google has to stop doing what is illegal,” she said. “The fine reflects past behaviour, which has to change in the future.”
Asked whether Google should be broken up, Vestager said: “I don’t know if it would service more competition if Google was broken up. What will make a difference is to have more players, so consumers can get new browser and search engines. To allow others to compete on their merits would enable competition.”
Google has had a number of confrontations with competition authorities, which have led to fines being imposed.
In June last year, the EC fined Google €2.42bn for breaching EU antitrust rules. It ruled that Google had abused its market dominance as a search engine by giving an illegal advantage to another Google product, its comparison shopping service.
At the time, Vestager said: “Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals. Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.”
And in 2016, the search engine giant was investigated in Russia and was found to have acted in an anti-competitive manner, The Russian Federal Anti-Monopoly Service fined Google $6.8m for forcing smartphone makers to pre-install Google apps on their Android devices. It is understood that Russia forced Google to push out an update to all Android users in the country.