Google Hit with Landmark Fine

A 39-month investigation by the European Commission’s competition authorities into Google’s Android operating system, has resulted in Google being hit with a with a record breaking £3.8bn fine over “serious illegal behavior” to secure the dominance of its search engine on mobile phones.

The Commission concluded that Google has used Android as a vehicle to cement the dominance of its search engine and that these practices have denied rivals the chance to innovate and compete on the merits of their own products.

Google was accused of breaking antitrust laws on three counts as Google:

  • required manufacturers to pre-install Google search as the default search engine on Android devices, as a condition for licensing Google’s app store, Play Store;
  • prevented smartphone manufacturers from running competing systems that had not been approved by Google; and
  • denied consumers choice by paying manufacturers and mobile phone operators to pre-install Google Search.

The Commissions verdict ends an eight year battle between the Commission and Google, which has resulted in Google being hit with multiple fines. In 2017 the Commission imposed a £2.1bn fine after finding that Google had used its dominant search engine to skew the market in favour of its internet shopping service. Google is currently appealing this decision.

The new fine is the largest ever imposed by the Commission, and reflects the "seriousness and sustained nature" of the violations. Google has been ordered to stop its practices within 90 days or face further fines amounting to 5% of its parent company, Alphabet’s, daily turnover for each day it fails to comply.

Interestingly, the above order seems to be more about preventing Google from bundling its services to Android, than forcing them to change Android significantly. Phone manufacturers will still be free to bundle Chrome and Google search apps if they wish, but they cannot be forced to do so by Google.

Whilst Google has received two record breaking fines, the question remains whether substantial fines are an effective way of stopping anti-competitive behaviour or if more robust penalties need to be imposed. As can be seen above, manufactures will still be free to carry on business with Google as normal if they so wish and many leading search engine providers have questioned the effectiveness of the Commission’s powers under competition law when anti-completive practices are able to continue.

The Commission has not shown any signs of requiring Google to divest its business (meaning Google’s market share will drop) as they question whether that would serve as an effective penalty, however if Google fails to change its practices, the Commission may need to re-consider its stance.

Google is to appeal the decision as it believes that Android has created more choice for consumers, not less by creating a marketplace for rapid innovation and lower prices.

The appeal is expected to be a lengthy legal process and until the appeal is finalised Google will have to deposit the fine in a holding account so that if Google ultimately loses the appeal, the money will be distributed among the European Union’s member states.

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