Lambert here: The EU doesn’t mess around, does it?
By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.
In the US, the internet giants – Google, Facebook, Amazon, et al. – can do pretty much as they please, interrupted only by occasional hearings in Congress, where Mark Zuckerberg, or whoever, has to grin-and-bear it for a few hours, knowing that this too shall pass. The EU takes antitrust actions against super-dominant giants a tad more seriously.
The EU’s Competition Commission, after a three-year investigation, hit Google with a €4.3 billion antitrust fine – $5 billion – the highest fine ever by any antitrust agency anywhere.
No one dominates like Google. According to earlier EU findings cited by Bloomberg, Google’s market share exceeds 90% for general Internet search, licensed mobile device operating systems, and app stores for Android software.
“Google has used Android as a vehicle to cement the dominance of its search engine,” EU Competition Commissioner Margrethe Vestager told reporters. “These practices have denied rivals the chance to innovate and compete on the merits.”
The fine is so large because of Google’s “very serious illegal behavior” going back to 2011 and due to the huge revenues Google has earned with this behavior, she said.
In addition, Google was given 90 days to stop its “illegal practices” of forcing cellphone makers that use Google’s Android operating system to install Google apps.
This fine comes on top of the €2.4-billion fine the EU hit Google with in 2017 after an investigation into Google’s shopping-search service.
And the EU is not through yet. It’s investigating Google’s online advertising contracts and could issue an additional fine. Online advertising is Google’s primary revenues source.
The EU said Google ensures that Google Search and Chrome are pre-installed on “practically all Android devices” sold in Europe. Users who find these apps on their phones are likely to stick with them and “do not download competing apps in numbers that can offset the significant commercial advantage derived on pre-installation.”
Google’s actions reduce the incentives for manufacturers to install and for users to seek out competing apps, it said.
The probe targeted contracts that require Android-phones makers to take Google’s search and browser apps and other Google services when they want to license the Play app store, which officials say is a “must-have” for new phones.
The EU also found illegal Google’s “significant financial incentives” to telecoms operators and manufacturers that exclusively install Google search on devices. Rivals couldn’t compete with these payments, making it difficult for any other search engine to get their app pre-installed. The EU said Google stopped doing this in 2014.
Google’s contracts also prevented handset makers selling phones using other versions of Android, the EU said. This hampered manufacturers from making devices using Amazon.com Inc.’s Fire OS Android version, it said.
Regulators rejected arguments that Apple Inc. competes with Android, saying Apple’s phone software can’t be licensed by handset makers and that Apple phones are often priced outside many Android users’ purchasing power. Users face “switching costs” to move from Apple to Android and would continue to face Google Search as a default on Apple devices.
In a long statement on its blog, holier-than-thou Google praises itself from A through Z, in essence portraying itself as the greatest gift to mankind and that therefore, it should be allowed to do as it pleases. It includes this:
Today, because of Android, there are more than 24,000 devices, at every price point, from more than 1,300 different brands, including Dutch, Finnish, French, German, Hungarian, Italian, Latvian, Polish, Romanian, Spanish and Swedish phone makers.
And these devices are running on Android. In other words: Google is everywhere, and its ads and apps are on all these devices. Hence the Competition Commission’s point: if you’re this dominant, you’ve got to follow some rules.
At the end of its long statement, Google said: “We intend to appeal.” Companies always appeal fines. Google is no exception. And the end product might be much less ambitious.
At the press conference, Vestager said it was up to Google to figure out how to comply with the Commission’s order. “The obvious minimum” Google would need to do, she said, is that the “contractual restrictions disappear.”
But don’t cry for Google. These practices helped it earn it a net profit of $12.7 billion in 2017 and of $19.5 billion in 2016. The decision and a fine of enormous magnitude has been expected. And Google’s shares are currently flat for the day.
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