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European Union hits Google with another record-setting multi-billion dollar antitrust fine

in Business Regulation
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The European Union (EU), on July 17, hit tech giant Google with a record-breaking €4.34 billion ($5.06 billion) antitrust fine and ordered the tech giant to make changes that will scale back its dominance of the mobile phone market.

The Wall Street Journal characterized the fine as “the EU’s sharpest rebuke yet to the power of a handful of tech giants”:

[T]he bloc’s antitrust regulator found Wednesday that Google had abused the dominance of its Android operating system, which runs more than 80 percent of the world’s smartphones, to promote and entrench its own mobile apps and services, particularly the company’s search engine.

Android phones come preloaded with Google apps and services, including Search. Competitors have long complained that Android’s dominance gives Google an unfair advantage in attracting users to those apps—and then using data from them to devise and target advertising. The preloaded apps stifle competing apps, the EU said.

With the decision, the EU argues that Google behaved illegally by leveraging its market power to encourage handset makers to pre-install those apps and services on their devices. At issue are several types of agreements that Google imposes on phone makers and telecommunications companies if they want to sell Android-based devices to their users—conditions that applied to handset makers even though Google provides the operating system to manufacturers free of charge.

“These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere,” declared EU competition commissioner Margrethe Vestager. “This is illegal under EU antitrust rules.”

The commission concluded that Google has “imposed illegal restrictions on Android device manufacturers and mobile network operators” since 2011,
and warned that “Google must now bring the conduct effectively to an end within 90 days or face penalty payments of up to five percent of the average daily worldwide turnover of Alphabet, Google’s parent company.”

News of the fine, which “accounts for around 40 percent of Google’s 2017 net profit of $12.62 billion,” has already had an impact—the Journal reported that following the announcement, “Shares in Alphabet, the company’s parent, fell as much as 1.1 percent in premarket trading.” Google says it will appeal the decision.

According to The Verge, the penalty “dwarfs Google’s previous €2.4 billion ($2.7 billion) record-breaking fine from the EU last year over manipulated search results.” Facebook was also fined last year, to the tune of €110 million ($128 million).

Some tech experts, like Open Markets Institute fellow Matt Stoller, have suggested that the company should be broken up. Executive director of the European Publishers Council, Angela Mills Wade, meanwhile, urged EU regulators to go after Google for its dominance in digital advertising, tweeting: “Google’s bundling of search, chrome and Play and pre-installations are illegal, harmful and must now stop. Next @vestager has to stop it’s end to end dominance of the buy and sell side of digital advertising built on its #data dominance.”

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