Brussels, Belgium—The European Union (EU) imposed a $5 billion fine to Google for violating antitrust regulations. Google is also banned from using its Android operating system because of its inherent blocking of rivals.
EU Commissioner for Competition, Margrethe Vestager, said, “Google has used Android as a vehicle to cement the dominance of its search engine.”
She went on to say that Google has three months to cease its anti-competitive practices or seek to delay the order. The EU arch-regulator warned that if Alphabet doesn’t comply, it could receive additional fines worth of up to 5 percent of average daily global revenue.
This is the second fine Google has been ordered to pay in two years. In 2017, EU regulators penalised the U.S. tech giant with a $2.7 billion fine because its online shopping search service (Google Shopping) was found to have an unfair advantage over the competition.
An aggregate of almost $8 billion in fines would be catastrophic for most companies, whatever the industry. Google’s size, however, is so large that the fine represents less than a month’s worth of revenue — Alphabet Inc., Google’s parent company, has close to $103 billion in cash reserves. Interestingly, Alphabet’s stock price was unaffected by the announcement. A clear statement of the company’s magnitude.
President Donald Trump is set to meet European Commission President Jean-Claude Juncker next week. Their meeting was already being shadowed by clouds of scepticism over Washington’s threats of tariffs. This new development is bound to increase tensions. Although the U.S. Federal Trade Commission (FTC) didn’t protest against the decision, its misgivings were evident. FTC Chairman Joseph Simons said, “We’re going to read what the EU put out very closely.”
The decision was received with applause from many European nations. A French government spokesperson said, “No one is above the laws that have been laid down in common for all, not Google, nor any other entity.”
But why such a fuss over the Android operating system?
Google allows smartphone manufacturers to use its operating system for free. As a consequence, almost 80 percent of the world’s devices come with Google’s Android pre-installed (i.e., Google Search, Google Chrome, and Google Play). Google, however, paid manufacturers only for the Google Search option. Moreover, it threatened to block them from competitors’ Android systems if they didn’t comply. Thus, manufacturers were forced to comply, which ultimately hurt the customers’ freedom of choice.
In response to the fine, Google CEO Sundar Pichai said, “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.”
The U.S. tech giant is going to appeal the decision to ban the Android, but won’t challenge the fine. Further, Google announced that it will begin charging a fee for its previously free systems (i.e., Google Chrome, Google Play, Gmail, etc.).