Update, 18th July 2018: The European Commission fined Google with €4.34 billion today for breaching EU’s antitrust rules. According to the European regulators, Google has put illegal restrictions on Android device manufacturers and mobile network operators to maintain its dominant position in the internet search market. Google, now, needs to bring this conduct to an end within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet ( Google’s parent company). For more coverage on this news, check out the official press release by EU.
Google is expected to face a record penalty this month from the European regulators. This is over the concern that Google’s policies threaten its corporate rivals by having manufacturers provide consumers pre-installed Google’s apps on Android devices.
The European Union had already charged the tech giant with a $2.72 billion antitrust fine last year for unfair promotion of its shopping services in its search result pages, thereby, breaking the antitrust laws.
Many experts speculate that the penalty from Margrethe Vestager, European Union’s Competition chief, could range somewhere around $11 billion which is 10 percent of Alphabet’s (its parent company) annual turnover. Even if it doesn’t get fined for the full $11 billion, any amount over $2.7 billion is bound to set a new record for the company.
This antitrust case has the power to cause some big changes to the world’s most widely used mobile operating system. It subsequently has the potential to cause a ripple effect on the overall mobile market altering existing business models.
Here’s what you must know about the case before the decision gets made later this week.
What are the charges made against Google?
Back in April 2015, the E.U. commission had initiated an official investigation into Google and released a statement accusing the company of allegedly using Android to maintain its dominance in the online search market, thereby, hampering the competition.
Here are few of the concerns raised:
- Limiting access to its Play Store unless the phone makers also include the Google search and other Chrome apps, a practice that breached E.U. antitrust rules.
- It reportedly blocked phone makers from creating devices that are based on the Android open source code but are not affiliated with the Google-owned property.
- It also provides financial incentives to manufacturers for pre-installing its Search services on devices. For instance, HTC and Samsung need to set Google Search as the default search app and include its Chrome browser within the devices. If not, they lose access to Android’s popular app store which will make it hard for the Android smartphone owners to easily download games or other apps.
What has Google got to say?
Google doesn’t deny the fact that Android has helped expand its advertising business. But, it has dodged the accusations made by E.U. by saying that its play store allows it to offer the entire package to phone makers which include the browser and other apps, for free.
It argues that it provided a base to the phone makers to create low-cost and reliable Android devices. It also emphasized the fact that users are free to download other apps if they want. According to Kent Walker, senior VP at Google, an average Android user downloads more than 50 apps in addition to the ones pre-installed on his/her phone in Europe. It doesn’t take a lot of time to download or replace an app.
So, is E.U. convinced with Google’s arguments?
E.U. acknowledges some of the points made by the tech giant but is not convinced entirely. According to E.U., Google has set up a restrictive contract with the mobile set manufacturers which forces them to pre-install its apps within the devices. With the help of Android, it has managed to extend the reach of its super popular apps such as YouTube, Google Maps and its play store to millions of users.
The E.U.’s concern is that when provided with pre-installed Google services, users would prefer to leverage the existing Google apps over other apps. This unfairly expands Google’s control over the mobile web market.
According to comScore, a data provider, six of the top 10 smartphones apps downloaded in Europe’s markets which includes France, Germany, Britain, Spain, and Italy are Google apps. Also, the Chrome browser is used by roughly 65 percent of the smartphone users in Europe.
What’s at stake for Google?
The stakes are quite high for Google. Apart from the hefty fine, it might have to unbundle its apps from Android and the related contracts. Now, though these apps are widely loved by the Android smartphone users, removing the tech giant’s “required” apps from the future Android phones would greatly diminish its market share.
It would also hit hard on its advertising sales which is worth billions of dollars. It will also hamper Google’s product quality because it collects the user data through these apps which helps it improve the product quality. All these efforts were a part of its strategy to beat the competition from Apple, Facebook and Amazon to remain at the core of the ever-expanding mobile web. But, if EU had their way, it is one decision away from a domino effect trampling Google’s mobile growth strategy.
E.U.’s decision would not mean the end of the world for the tech giant. It can still appeal, but, it’ll have to carefully alter its business practices and decisions. Otherwise, it risks additional penalties for each day as it fails to comply.
As for now, we can only wait for the EU decision to watch Google’s next move.