Google hit with $5B fine by EU

Anti-competitive practices claimed

European Union Commissioner Margrethe Vestager said Wednesday at a news conference in Brussels that given the size of Google, the EU’s $5B fine is not disproportionate.
European Union Commissioner Margrethe Vestager said Wednesday at a news conference in Brussels that given the size of Google, the EU’s $5B fine is not disproportionate.

BRUSSELS -- European regulators came down hard on another U.S. tech giant Wednesday, fining Google a record $5 billion Wednesday for forcing cellphone makers that use the company's Android operating system to install Google search and browser apps.

The European Union said Google's practices restrict competition and reduce choices for consumers.

While Google can easily afford the fine, the ruling could hurt the company's business model, which relies on giving away its operating system in return for opportunities to sell ads and other products.

Google immediately said it will appeal, arguing that its free operating system has led to lower-price phones and created competition with its chief rival, Apple. The company must deposit the money in a holding account while the legal process unfolds. If it ultimately loses the appeal, the fine will be distributed among the EU's member states.

Android has "created more choice for everyone, not less," Google CEO Sundar Pichai tweeted.

The fine, which caps a three-year investigation, is the biggest ever imposed on a company by the EU for anti-competitive behavior.

It is likely to stoke tensions between Europe and the U.S., which regulates the tech industry with a lighter hand and has complained that the EU is singling out American companies for punishment.

Still, some U.S. politicians welcomed the ruling.

Democratic Sen. Richard Blumenthal of Connecticut tweeted that the fine should "be a wake-up call" to the Federal Trade Commission and "should lead US enforcers to protect consumers." Blumenthal previously called on regulators to investigate how Google tracks users of Android phones.

In its ruling, the EU said Google broke the rules by requiring cellphone makers to take a bundle of Google apps if they wanted any at all.

The bundle contains 11 apps, including YouTube, Maps and Gmail, but regulators focused on three that had the largest market share: Google's Search and Chrome apps, and its Play Store app marketplace.

The EU gave Google 90 days to come up with remedies that could allow rival search apps and browsers onto more phones. Failure to comply risks a further penalty of up to $15 million a day.

The EU also took issue with Google's payments to wireless carriers and phone-makers to exclusively pre-install the Google Search app.

It ruled, too, that Google broke the law by forcing manufacturers that took its apps to commit to not selling devices that use altered versions of Android.

EU Competition Commissioner Margrethe Vestager said that given the size of the company, the 4.34 billion euro fine is not disproportionate.

The penalty is on top of a 2.42 billion-euro fine ($2.8 billion) that regulators imposed on Google a year ago for favoring its shopping listings in search results.

Google's parent company, Alphabet, made $9.4 billion in profit in the first three months of the year and has over $100 billion in cash reserves.

"The important thing is not to be distracted by the size of the fine. What is important is that Google has to change its abusive behavior," said Rich Stables, CEO of the rival search engine Kelkoo.

Mozilla Corp., which makes the Firefox search engine, said it hoped the EU investigation "will help level the playing field for mobile browser." DuckDuckGo Inc., a search engine that doesn't track users, said Google's actions have "led directly to us having less market share on Android."

Android is an open-source operating system that Google lets cellphone-makers use for free. As a result, it is the most widely used system, beating even Apple's iOS.

The EU wants to ensure that phone-makers are free to pre-install apps of their choosing. It also wants cellphone-makers to be able to more easily use altered versions of Android, like Amazon's Fire OS.

Google argues that letting phone-makers choose their apps could hurt the company's main means of making money through Android -- advertising and the sale of content and apps. Apple, in contrast, makes most of its money from the sale of devices.

Giving phone-makers more freedom to use altered versions of Android could also hurt Google. Samsung, a hugely popular maker of Android phones, could, for example, break off and take much of the Android system with it. Samsung had no immediate comment.

Daniel Castro, vice president of the Information Technology and Innovation Foundation, a think tank in Washington, said the ruling "is a blow to innovative, open-source business models."

The main complainant against Google was FairSearch, a Brussels-based lobbying group that has been backed by Oracle, TripAdvisor and Nokia. It called the ruling "an important step in disciplining Google's abusive behavior."

European regulators have set the pace in shaping rules for the tech industry.

The EU has clashed repeatedly with Microsoft over the years, fining it over its bundling practices and its promotion of its Internet Explorer browser.

In 2016, the EU ruled that Apple was getting preferential treatment from the Irish government and demanded it pay $15 billion in back taxes. The EU has also tangled with Amazon and Intel.

Information for this article was contributed by Ryan Nakashima, Raf Casert, Matt O'Brien and Nick Jesdanun of The Associated Press; by Adam Satariano of The New York Times; and by Aoife White, Stephanie Bodoni and Natalia Drozdiak of Bloomberg News.

Business on 07/19/2018

Upcoming Events