Google Hit with Record Antitrust Fine in Europe

Google Hit with Record Antitrust Fine in Europe

Earlier this week, the European Union’s Head of Competition, Margrethe Vestager, hit Google with a 4.3 billion Euro fine for boosting the use of its search engine with the assistance of its unique Android operating system.
 
According to Eric Limer of Popular Mechanics, this penalty “blames Google for compelling phone manufacturers who use the Android operating system—which is free for use with no fee—to bundle in Google's suite of apps like Google Chrome if they want to include the Google Play store, giving users access to Android's largest official store.”
 
More specifically, 2016 statistics provided by the European Commission and reported by Popular Mechanics state that 95 percent of all searches on Android devices occurred via Google Search or Chrome, while less than 25 percent of those on Windows Mobile devices occurred using a Google search engine.
 
Furthermore, writes Limer, the EU believes “Google's practice has…reduced the incentives of manufacturers to pre-install competing search and browser apps, as well as the incentives of users to download such apps. This reduced the ability of rivals to compete effectively with Google.”
 
Facing ample criticism for the massive amount asked of the American tech giant, Vestager dismissed claims that the fine was excessive.
 
“Using our standard methods the fine is bigger, because the effect of the infringement is bigger, and it is exactly a reflection of that,” Vestager said.
 
“It is a very serious infringement. It's a very serious illegal behaviour,” she concluded.
 
Following dismissive comments from US President Donald Trump, who referred to Vestager as a “tax lady” who “really hates the USA,” Vestager also said, “I do work with tax and I am a woman so this is 100 percent correct.”
 
However, the EU’s Head of Competition tossed aside allegations that this fine was politically motivated.
 
“This has nothing to do with how I feel. Nothing whatsoever. Just as well as enforcing competition law, well, we do it in the world, but we don't do it in the political context,” she said.
 
The American tech giant now has three months to reply to Vestager’s demand or they will be hit with an even greater fine.
 
Business Insider’s Isobel Asher Hamilton reports that the American company “will be fined up to 5% of the global daily revenue of its parent company Alphabet” if this is not resolved within the allotted time.
 
Google is expected to appeal this decision.


Google and the US Government Respond to the EU’s Antitrust Fine

Following this announcement, Google's CEO, Sundar Pichai, said, “We are concerned that today's decision will upset the careful balance of the Android ecosystem. We believe we have a strong case for benefits that Android has brought to the European marketplace as well as globally and this is why we intend to appeal.”
 
Additionally, Pichai wrote in a Google blog post: “The free distribution of the Android platform, and of Google’s suite of applications, is not only efficient for phone makers and operators—it’s of huge benefit for developers and consumers. If phone makers and mobile network operators couldn’t include our apps on their wide range of devices, it would upset the balance of the Android ecosystem. So far, the Android business model has meant that we haven't had to charge phone makers for our technology, or depend on a tightly controlled distribution model.”
 
US President Donald Trump took to his favorite venue of communication and tweeted: “I told you so! The European Union just slapped a Five Billion Dollar fine on one of our great companies, Google. They truly have taken advantage of the U.S., but not for long!”
 
The US’s Federal Trade Commission (FTC) also expressed its interest in closely studying the EU’s decision.
 
FTC Chairman Joseph Simons said, “We’re going to read what the EU put out very closely.”
 
“In the antitrust world, most of the problematic conduct occurs where firms are big and have market power,” Simons said. “This is one of the places we would focus.”
 
Keep in mind that how antitrust issues are handled in Europe differ in two significant ways to how they are treated stateside.
 
First, as explained by Henry Farrell, a political science professor at George Washington University, “in the United States, negotiations between the regulator and possible antitrust violators take place in the shadow of what the courts might do, while in the E.U., negotiations between the regulator and possible violators set the agenda for the court.”
 
Second, writes Farrell in an article for The Washington Post, “U.S. antitrust law focuses overwhelmingly on harm to consumers, which typically involve higher prices,” whereas “E.U. antitrust law also takes into account harm to competitors.”
 
This, in turn, “means that E.U. regulators are more willing in principle to rule aggressively against companies such as Google.”
 
Some Wall Street analysts view this fine as a victory for Amazon.
 
Baird analyst Colin Sebastian told his clients, “This is a pro-Amazon ruling… Overall, this ruling should have a limited direct impact on Google since it ostensibly does not force a change to the Google search algorithm, and it also seems relatively straight-forward for Google to comply.”
 
According to Market Insider, Sebastian added, “It's a win for Amazon because of the extra step that will now be required for Android users to use a search engine that isn't Google.”


Will This Decision Help European Consumers?

Many believe this fine will make it easier for other search engines to compete with the Google behemoth.
 
According to the European Consumer Organization’s (BEUC) Agustin Reyna, this decision will lead to great diversity in the market.
 
Reyna said, “Every time that you find Android phones, we can expect to find different search engines and browsers. For example, now out there are other competitors DuckDuckGo or Qwant that find it very difficult to enter the market because of these specific practices that Google is employing through Android to have Google search on the phone.”
 
Any thoughts on this decision? Drop us a line below!

Main image credited to Alexandros Michailidis / Shutterstock.com.
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