Google Bitten by 2nd Antitrust Fine in the EU, $5 Billion, Hugest Ever Anywhere. Third Waiting in the Wings

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.

Bloomberg:

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.

“This emerging trend highlights just how much risk some investors are willing to take in the current environment.” Read… As Risks Balloon, Yield Chasers Blow Off the Fed

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About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

25 comments

  1. Just another farce

    How can it be that the biggest fine ever is still a slap on the wrist?

    Also, what is EU going to do when Google won’t pay? They have zero balls to attack them properly: blocking services, closing offices, jail executives because Google is part of the US military complex.

    Reply
  2. Raulb

    It’s interesting free market advocates are always going on about regulations, the need for free markets and market efficiency but don’t seem to care so much about monopolies, outsize profits, the concentration of market power and its abuse that further impedes the operation of free markets and the billionaires that result.

    Google’s dominance in search and mobile is market failure. Facebook’s dominance of social is market failure. Amazon’s dominance is market failure, Apple being able to accumulate $800 billion it does not know what to do with is market failure.

    Under conventional market theory all these entities would have stiff competition and not be able to accumulate outsize profits or monopoly power so the question is where is the competition and how come the the market is not working? And while the theories continue these firms concentrate even more power, control and windfall profits.

    How come free market advocates always seem to be more concerned about attempts to impose minimum wages, health care or proper working conditions on amazon workers for instance than any of this? And we will not even talk about negative externalities like the emergence of a global spyware economy based on surveillance and creepily staking people 24/7. And using seemingly endless ‘VC funds’ to build these US centric monopolies.

    Reply
    1. oaf

      We are being stalked; and a virtual individual, more or less fleshed-out, is created in the Cloud for each of us…it is based on our behavior, every possible detail of which is incorporated into the dossier. How accurate these representations are can be affected by multiple variables…Fake news?…How about *Fake Browsing*…or *Fake Shopping*. Feel free to experiment!!!

      Reply
      1. Carolinian

        We are being stalked by allowing ourselves to be stalked. All Android apps carry a “permissions” warning telling how they are planning to stalk you. And of course smartphones themselves are spybots by design–a business model pioneered by Apple, not Google. One could argue that many of the worst current practices of Google are the result of trying to imitate competitors such as Apple and Facebook.

        Android is based on open source Linux and there’s probably no reason why smartphone manufacturers couldn’t get their free operating systems elsewhere. Perhaps one big reason they don’t is that they are in on the stalking.

        Reply
      2. blennylips

        Back in 2013, a google engineer, Beena Bhatia, took out this patent for google:
        http://patft.uspto.gov/netacgi/nph-Parser..blah..blah..blah…

        I found in a marginalrevolution.com article back then.

        Turns out MR got it from here:
        http://www.dailymail.co.uk/sciencetech/article-2515635/Google-files-patent-robot-writes-Facebook-posts-emails-tweets–need-FULL-access-scan-accounts.html

        The patent was filed by a Google software engineer on behalf of the firm
        It describes a system that analyses a user’s online posts, emails and texts
        The system, or bot, would then generate automated replies for future posts
        These replies would be written in a way that mimics that person’s usual language and tone

        From the patient:

        ( 1 of 1 )
        United States Patent 8,589,407
        Bhatia November 19, 2013
        Automated generation of suggestions for personalized reactions in a social network

        Abstract

        A system and method for automatic generating suggestions for personalized reactions or messages. A suggestion generation module includes a plurality of collector modules, a credentials module, a suggestion analyzer module, a user interface module and a decision tree. The plurality of collector modules are coupled to respective systems to collect information accessible by the user and important to the user from other systems such as e-mail systems, SMS/MMS systems, micro blogging systems, social networks or other systems. The information from these collector modules is provided to the suggestion analyzer module. The suggestion analyzer module cooperates with the user interface module and the decision tree to generate suggested reactions or messages for the user to send. The suggested reactions or messages are presented by the user interface module to the user. The user interface module also displays the original message, other information about the original message such as others’ responses, and action buttons for sending, discarding or ignoring the suggested message.

        If representations are not accurate, you need to volunteer more info till they get you right.

        Reply
  3. ST

    “The decision and a fine of enormous magnitude has been expected. And Google’s shares are currently flat for the day.”

    As big a fine as this is… that last sentence shows that fines don’t work. A monopolist will always pass on fines for it’s illegal behaviour to its (captive) consumer/s. The only remedy is for criminal proceedings to be bought against it’s senior officers with guaranteed jail time to persuade them to stop. That or breaking up the company.

    Reply
    1. Big River Bandido

      One serious project for the left, once it gains power, will be to reverse and destroy the entire line of legal argument that grants personhood to corporations.

      Of particular harm are the court decisions on this point in the last 20 years or so, which have brought this concept to its logical extreme. (I’m thinking in particular of the recent gay-wedding-cake case, in which the Court [i.e., Justice Kennedy] implied that corporations have a right to hold, promote, and exercise political opinions, just as if they were a real person with the fiat. The so-called rationale of that decision is far worse in its long-term implications than the immediate outcome of the case.)

      Reply
    2. nervos belli

      Even a monopolist cannot simply Ma pass on the fines. Cause if they could have increased prices already since as you write, they are monopoly. Why haven’t they done it?
      Monopolists are not dumb, they already extract the maximum price they think the market can bear.

      Reply
  4. LarryB

    In the end, the only effect that this is going to have is to transfer money from Google to the EU. Cell phone manufacturers will install Chrome and Google Search whether Google requires it or not. There simply isn’t anything else out there that works as well.

    Reply
  5. Arizona Slim

    Yours Truly has an Android phone. With more than 150 apps, and guess what: I didn’t install most of them. They simply came with the phone.

    I can recall a recent incident when I needed to call 911 and my phone was off. I turned it on, and, guess what, those 150-plus apps just HAD to update. That process took 15 minutes.

    Fortunately, I wasn’t in a life-threatening situation. I was only trying to call to report gunfire nearby. In central Tucson, that happens fairly often.

    Since the phone was in update mode for 15 minutes before I could even get to the opening screen with the “emergency call” link, I decided not to call 911. It was simply too late to make a timely report.

    If I had my druthers, I’d rather have a phone with just a handful of apps. I don’t need all of this Google crud. Especially if if poses a risk to health and safety.

    Reply
    1. ChiGal in Carolina

      An unlocked phone direct from the mfg instead of the carrier will have fewer apps. Also you can disable many apps, just ignore the “may cause other apps to misbehave ” message; it isn’t true. Some of the apps you do need, and online forums will list which you need and which you don’t.

      On my current Android form I have not signed into Chrome and use DDG instead of Google. Pretty much easy as pie Slim, attagirl–if you can quit FB cold turkey you can reduce your exposure to Google. For example I went back to using a paper calendar.

      Reply
    2. oh

      Root your phone and delete all those apps including Google’s. Don’t use anything google — gmail, youtube, chrome, google search, google voice, google groups and more of the EVIL company’s concoctions created solely to spy on you and sell your data.

      Needless to say the crooked cell phone carriers will farm your data and track you.

      I’m so sick of these crooked companies, google, facebook, netflix, whatsapp, linkedin and others that snoop on you. Get tutamail or protonmail for your e-mail.

      Reply
      1. nervos belli

        Root your phone and delete all those apps including Google’s.

        This is the wrong way to approach this. The right way ist to install a 3rd party ROM like LineageOS and then not install any gapps.
        Be prepared however that only very few programs will work. You will then lack google play services and they are needeed for many many programs. Not much more than what is in f-droid. There is of course no play store whatsoever then.

        Reply
        1. nervos belli

          For whatever reason my reply didn’t go through this morning.
          PS: this is now the third attempt even. Now replacing all URLs in hope it will go through

          I wrote exact model for a reason: there are about two dozen different Moto G versions over 6 years of releases.

          Pretty much all of them allow however LineageOS or other third party Android images. Those have no bloatware apps except what comes with the OS itself. If the LineageOS download section has no image for your specific phone, then visit xda-developers forum or needrom which both have even more.

          LineageOS is a current Android version and not several years old like with earlier Moto G versions, it gets up to date security patches, has no spyware. You can even install only the Google Apps you want, and can delete or uninstall pretty much anything.
          Especially on older phones with limited storage this is a godsend.

          Reply
  6. Synoia

    I believe that under German law (and I’m not 100% positive of this), executives and directors can become personally liable for the actions of the businesses they manage.

    A $5 Billion levied on directors and management, and not shareholders, would appear to be more effective.

    Those responsible bear none of the penalty. And, if corporation be people, then is the corporation and its officers conspiring?

    Reply
    1. ChiGal in Carolina

      I hope Eric Schmidt pays all $5b out of his pocket and they use it to fund the studies of monopoly impacts he put the kibosh on. Some community service too wouldn’t be a bad idea for such a bully.

      Reply
    2. nervos belli

      We have the same sort of corporate veil in Germany as all other modern western capitalist countries in form of “Kapitalgesellschaft”. A public company is such a company, the other would be the GmbH aka Ltd.

      A manager who does criminal things (see Diesel scandal VW/VAG an Audi manager was recently held in custody) can be held liable including fines or jail. But I don’t know of any anti-trust actions which pierced the veil.

      Reply

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