Google Hit With Record $5 Billion Fine in Android Antitrust Case

A multi-year investigation of Alphabet’s Google in the European Union has resulted in a record $5 billion (€4.34 billion) fine for the search giant. At issue is the way Google requires device manufacturers to build Android software for phones and other devices in order to get access to the Play Store. In addition to the fine, Google has to change its ways in 90 days or face additional fines. Google’s CEO Sundar Pichai says the company will appeal.

Android is an open source software platform, but it’s unlikely you have ever used a purely open source version of it. Device makers bundle various apps and services on phones, and the EU Commission claims Google unfairly abuses its market dominance in Europe to control what apps and services users see.

For example, all Android phones with the Play Store are required by Google to also include apps like Chrome and Google Search. The EU says this gives Google an unfair advantage over competitors, which is reminiscent of the Internet Explorer dispute with Microsoft more than a decade ago. There’s one notable difference here: Google doesn’t block OEMs from installing alternative apps — they just can’t be the default. The EU says that’s still illegal, though.

Google has long struggled to address fragmentation of the Android platform, and one of its methods for doing so was also ruled illegal by the EU. Currently, an OEM that wants to partner with Google and sell certified devices with Google services cannot also go out and sell devices with incompatible Android forks — something built from open source without support for standard Android software and features. This prevents users from accidentally buying phones that don’t work with the Android content they expect, but the EU Commission says it also unfairly benefits Google.

Fine of €4,34 bn to @Google for 3 types of illegal restrictions on the use of Android. In this way it has cemented the dominance of its search engine. Denying rivals a chance to innovate and compete on the merits. It’s illegal under EU antitrust rules. @Google now has to stop it

— Margrethe Vestager (@vestager) July 18, 2018

The last of three alleged violations by Google relates to payments made to carriers and manufacturers to make Google the exclusive search provider on phones. This is probably the most blatant abuse of Google’s market position, but also the one least connected to the core Android business model.

According to Google CEO Sundar Pichai, Android has vastly increased choice in the smartphone market. He points out that Android competes with iOS, which is a completely closed platform. Pichai also stresses that Android has become so successful because of app support, and Google’s technical compatibility rules have ensured that most devices work with those apps. Google doesn’t force any company to follow its rules if it wants to fork Android — here, Pichai points to Amazon’s Fire devices as proof.

Alphabet’s stock price initially fell more than a percent following the announcement, but it has since recovered and is now only slightly lower. Google is appealing the EU decision, so this roller coaster is far from over.

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