EU fines Google a record $5 billion over mobile system

EU Commissioner Margrethe Vestager holds a press conference on a Competition Case involving Google Android at the European Commission building, in Brussels on July 18, 2018. AP

BRUSSELS  — The European Union fined Google a record $5 billion Wednesday for using the market dominance of its Android mobile operating system to force handset makers to install Google apps, reducing choice for consumers.

EU Competition Commissioner Margrethe Vestager said Google went against EU rules when it required mobile phone producers to pre-install the Google Search and browser apps as a condition for licensing Google’s app store. She said Google also paid big producers to exclusively pre-install the Google Search app.

Vestager said that “companies must compete on their merits,” playing by antitrust rules that favor consumers and open markets, and not restrict competition.

Google said it would appeal. “Android has created more choice for everyone, not less,” said company spokesman Al Verney.

The EU’s fine is the biggest ever imposed on a company for anticompetitive behavior.

Vestager said that once the size of the company and its turnover is taken into account, the 4.34 billion euro fine is not disproportionate. Google parent company Alphabet made $31.15 billion in revenue in the first three months of the year.

In June last year, regulators already fined Google 2.42 billion euros ($2.8 billion) for favoring its shopping listings in search results.

The ruling comes at a sensitive time for trans-Atlantic relations, with U.S. President Donald Trump lambasting the EU as a “foe” only last week. The US has imposed tariffs on EU steel and aluminum this year and the EU has responded with tariffs on American goods. The U.S. is now also considering taxes on imports of European cars.

The US has also complained that the EU has mainly targeted U.S. companies — including Microsoft and Apple — for breaking competition or tax rules.

In her role, Vestager has continued that tough regulatory approach, but dismissed suggestions there was anything personal.

“I very much like the US,” she said, but added such a ruling “has nothing to do with how I feel. Nothing whatsoever.”

“We have to protect consumers and competition to make sure consumers get the best of fair competition,” she said. “We will continue to do it, no matter the political context.”

As technology’s impact in modern life spreads, European regulators have set the pace in shaping rules for the industry, which tends to get a freer hand in the US New European rules on data privacy that went into force this year influenced the way some companies operate outside of the region as well, particularly after high-profile data breaches, including at Facebook.

Wednesday’s ruling on Google caps an investigation that goes back at least three years. Regulators came out with a preliminary ruling in April 2016 in which they said Google had market shares exceeding 90 percent in most European countries in the realm of licensable mobile operating systems. They said Google abused that share by forcing manufacturers to take its apps and by preventing them from selling altered versions of Android, which is technically open-source software.

At the time, the European Commission said it wanted to ensure that manufacturers are free to pre-install apps of their choosing and allow for competition in services such as internet search.

Google has opposed the Europeans’ definition of the market, arguing its real competition is Apple, even though Apple doesn’t license its iOS operating system to other device makers.

It also argues that it allows other apps to be pre-installed alongside Google apps, and that agreements not to support altered versions of Android enable it to provide a baseline experience on tens of thousands of different devices.

Functionally, preventing an altered version — or “fork” — of Android also prevents Samsung, a hugely popular maker of Android devices through its Galaxy line, from breaking off and taking much of the Android ecosystem with it.

Google argues that its main way of making money from Android is through advertising and the sale of content and apps, unlike Apple, which makes its profits from device sales. If its business activities are too harshly constrained, the argument follows, Google might no longer be able to provide Android for free to handset makers. /ee