The European Commission announced a 4.34 euro (~$5 billion) fine against Google as a conclusion to its antitrust investigation into the company’s abuse of Android's dominance in the smartphone market.
Last year, the EC imposed another $2.7 billion fine, the largest in EU history at the time, against Google over market abuse in search. The EC has another antitrust case against Google opened over alleged abuse of the company’s AdSense network.
Google’s Android Abuses
The EC alleged that Google used Android's dominance in the European Union to further strengthen its lead in search, a practice that is illegal in the EU.
More specifically, Google is said to have used its control over Android to require manufacturers to install the Google Search app and Chrome browser in all Android devices if they wanted a Play Store license. Additionally, the company made payments to larger manufacturers on the condition that they exclusively pre-install the Search app, rather than installing apps from other search tools.
The EC alleged that even though the core Android OS is open source, Google prevented manufacturers from pre-installing its apps if they installed a version of Android that wasn’t pre-approved by the company. Android manufacturers who wanted to pre-install Google's apps couldn’t use Amazon’s Android fork, for instance, and could only use Google’s version of Android.
The EC also said that Google invested in Android because it anticipated users' shift from the desktop to mobile devices, so it planned all along to use Android’s dominance to protect its search business as that shift happened.
Android has an 80% market share among mobile operating systems and a 95% market share in “licenseable mobile operating systems,” a market which doesn’t include vertically integrated operating systems such as iOS or Blackberry OS because those can’t be licensed by manufacturers. Google’s search market share in the EU is over 90% in most countries.
The EC investigated whether or not the iOS competition is sufficient to restrain Google from certain market abuses, but it discovered that it’s not for the following reasons:
Customers are influenced by a variety of factors, such as hardware features, when buying a smartphone
Apple devices are priced at the high-end of the spectrum, so they are inaccessible to most customers
There is a switching cost between operating system so users can’t easily switch from Android to iOS or viceversa
Google’s search business would not be significantly harmed even if Android users did switch to iOS, because Google also has deals with Apple to implement Google search on iOS.
In a statement, the EC said:
"Google's practices also harmed competition and further innovation in the wider mobile space, beyond just internet search. That's because they prevented other mobile browsers from competing effectively with the pre-installed Google Chrome browser. Finally, Google obstructed the development of Android forks, which could have provided a platform also for other app developers to thrive."
In a blog post, Google CEO Sundar Pichai argued that Android has expanded choice for users, not lowered it. The main argument seems to rely on the fact that iOS exists and that Android has enabled many app developers, including European ones, to make a living through the platform. Pichai also mentioned that there are over 24,000 Android smartphone SKUs from 1,300 phone maker brands currently.
Pichai added that the restriction against Android forks was needed in order to keep Android app compatibility among all Android devices. However, that’s should not necessarily be up to Google, and even so, the main issue is that Google also requires OEMs to install other Google apps alongside the Play Store.
This is one of the main abuses that the EC mentioned, because it prevents competition from other search services or browsers such as Firefox to gain significant market share on Android. In other words, it’s the same antitrust issue that Microsoft created when it pre-loaded Internet Explorer on Windows.
Google said that it will appeal the $5 billion fine. In the meantime, the EC has given Google 90 days to end all the illegal practices or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, Google's parent company.