Google faces €4.34 billion fine over Android dominance

The European Commission is fining Google €4.34 billion for what the Commission considers illegal practices involving the Android platform that “cement its dominant market position in internet search.” Google’s parent company Alphabet has 90 days to pay the fine or face further penalties.

There were three charges against the company from the Commission, determining that Android forces consumers into a dependency on Google search and into sharing personal data with Google:

  • First, Google has required manufacturers to pre-install the Google search and browser apps on devices running on the Android mobile operating system. Manufacturers had to do this if they wanted to be able to sell devices with the Google app store.
  • Second, Google paid manufacturers and network operators to make sure that only the Google search app was pre-installed on such devices.
  • Third, Google has obstructed the development of competing mobile operating systems. These could have provided a platform for rival search engines to gain traffic.

The Commission determined that Google’s strategy was based on the realisation in the mid-2000s that we were moving to a mobile-first world and that having an OS that could adapt to those consumer habits and the devices that would evolve to satisfy them was critical. By acquiring Android in 2005, as an open operating system, Google has established a footprint in 80% of mobile devices used in Europe and around the world.

The Commission finds that Google’s practice of limiting open source Android to basic functions and forcing device manufacturers who want to include Google apps, including those accessible through the Google Play store, to accept restrictive terms, is uncompetitive. Because it includes a provision that developers cannot modify the source code, it establishes a closed ecosystem.

EU Commissioner Margrethe Vestager said:

“Google has come up with many innovative products and services that have made a difference to our lives. That’s a good thing.

Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals.

Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.

What Google has done is illegal under EU antitrust rules.

It denied other companies the chance to compete on the merits and to innovate.

And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.”

The Commission finds that Google’s restrictive effect on innovation and competition has been considerable, as well as its dominance of search.

“Given Google’s dominance in general internet search, its search engine is an important source of traffic. As a result of Google’s illegal practices, traffic to Google’s comparison shopping service increased significantly, whilst rivals have suffered very substantial losses of traffic on a lasting basis.

“Since the beginning of each abuse, Google’s comparison shopping service has increased its traffic 45-fold in the United Kingdom, 35-fold in Germany, 19-fold in France, 29-fold in the Netherlands, 17-fold in Spain and 14-fold in Italy.

“Following the demotions applied by Google, traffic to rival comparison shopping services on the other hand dropped significantly. For example, the Commission found specific evidence of sudden drops of traffic to certain rival websites of 85% in the United Kingdom, up to 92% in Germany and 80% in France. These sudden drops could also not be explained by other factors. Some competitors have adapted and managed to recover some traffic but never in full.

“In combination with the Commission’s other findings, this shows that Google’s practices have stifled competition on the merits in comparison shopping markets, depriving European consumers of genuine choice and innovation.”

Google’s immediate statement distributed on Twitter with the hashtag #AndroidWorks was succinct:

“Android has created more choice for everyone, not less. A vibrant ecosystem, rapid innovation and lower prices are classic hallmarks of robust competition. We will appeal the Commission’s decision.”

Tim Cowen, a leading tech expert and author of the ResPublica report “Technopoly” and what to do about it: Reform, Redress and Regulation commended the EU finding as adequate deterrence:

“The Commission’s decision shows that Google took a strategic decision to embed search and ‘cement’ into Android mobile phones. It also shows that Google has been breaking the law for many years. How Google remedies the position is not specified. The separating of Search and Chrome from Android looks to be mandatory and unrestricted access for third part apps to the Android platform to be needed to meet the Commission’s charges. The record fine is a mark of the scale of the infringement. The law requires that Google put forward a remedy—the industry will now wait with baited breath to see what that remedy will be”.

About any potential break-up of Google, he said:

“Unbundling requires a policing mechanism and as with Google Shopping some degree of functional separation will be needed to police non-discriminatory access – the case for a greater functional separation of Google Search from other Google products is now stronger than ever.”

A case can be made—and Google is trying to make it—that the proliferation of Android has helped make mobile devices affordable to a greater number of consumers and is therefore a positive and democratic advancement.

Apple’s iOS, by comparison, restricts users to Apple devices and apps on the App Store are restricted in their approval process and development. They may default to secondary Apple applications unless users change the settings.

But the big difference is the data gathered through these processes and how it is monetized.

In many cases, search on Safari will still default to Google and Google IDs are used to share data between iOS apps which again gives information to Google which the company can monetise through targeted advertising. Some iOS apps also push data to Facebook, which Facebook can monetize.

Even if alternative operating systems appeared in the market, there is no guarantee that they would not also link-out to Google or Facebook, or both, because of the convenience to users of single log-in applications and data exchange between related apps.

At the end of the day, it is this user data, and not the devices or the operating systems which have become the assets. A significant fine on Google and others may force a re-set on development practices, but will still not address the real threats to consumers.

Software and devices are merely conduits for a thriving data-mining industry which has potential to make our lives significantly better and significantly worse. They can make our daily lives easier, eliminate friction in transactions, help us keep in touch when travelling, help us find our way.

But they are also helping us lose our way through the spread toxic disinformation, the targeting citizens with muddy political agendas, undermining the world’s leading democracies. At some point, very soon, we’re going to have to tackle that threat.

Related reading from tnooz:

Travel apps strengthen in 2017, airlines start to catch up (Jan 2018)

10 Years of the App Store: two million apps and counting (July 2018)

 

 

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Marisa Garcia

About the Writer :: Marisa Garcia

Marisa Garcia is the tnooz aviation analyst. She has covered travel technology, design, branding, and strategy for leading publications, including Aircraft Interiors International Magazine, APEX Magazine, AirlineTrends, and Travel+Leisure. She also shares industry insights on her site Flight Chic. Fly with her on Twitter.

 

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  1. Adriano

    Google runs roughshod over regulations. The fine is small by any standard. Google’s monopoly can no longer be tolerated, and their business tactics are shameful. I hope that this is just the beginning of a new era of fair competition.

     
 
 

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