EU Fines Google $5 Billion for Android Abuses

Posted on July 18, 2018 by Paul Thurrott in Android with 45 Comments

Regulators from the European Commission issued a record $5 billion antitrust fine to Google today, asserting that the search giant has abused its power in the smartphone market.

“Our case is about three types of restrictions that Google has imposed on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine,” EU Competition Commissioner Margrethe Vestager said in a prepared statement. “Google has used Android as a vehicle to cement the dominance of its search engine. These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules.”

Those three types of restrictions, the EU says, are:

  • Google requires hardware makers to pre-install the Google Search app and Chrome web browser as a condition for licensing Google’s mobile app store, the Google Play Store.
  • Google pays “certain large manufacturers and mobile network operators” to exclusively pre-install the Google Search app on their devices.
  • Google prevents hardware makers that want to pre-install Google apps from selling even a single mobile device running on alternative Android versions (or “forks”) that were not approved by Google.

The EU says that Google has imposed these illegal restrictions on Android device makers and mobile network operators since 2011, and it has done so to illegally “cement its dominant position in general Internet search.”

Google now has 90 days to change its business practices or it will face a daily fine of up to 5 percent of the average daily worldwide turnover of Alphabet, Google’s parent company, the EU says.

Google, predictably, says it will appeal, and given the speed at which justice works in Europe, this case will continue to be dragged out for several years.

“The [EU] decision ignores the fact that Android phones compete with iOS phones,” Google CEO Sundar Pichai writes in an op-ed piece on an official Google blog. “It also misses just how much choice Android provides to thousands of phone makers and mobile network operators who build and sell Android devices; to millions of app developers around the world who have built their businesses with Android; and billions of consumers who can now afford and use cutting-edge Android smartphones.”

 

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Comments (45)

45 responses to “EU Fines Google $5 Billion for Android Abuses”

  1. Avatar

    woelfel

    A couple years later than I would have thought...now will the US do the same?

  2. Avatar

    skane2600

    I wonder if Google competitors lobbied for this. Certainly that was the root of Microsoft's antitrust problems. Which is why those competitors were the primary beneficiaries of the process rather than the consumer. Of course some of them botched it by paying too much to buy the "injured" companies thus losing money overall on the process.

    • Avatar

      lvthunder

      In reply to skane2600:

      Yes of course they did. They are talking business to business transactions and not business to consumer.

    • Avatar

      MikeGalos

      In reply to skane2600:

      Antitrust since the DOJ v Microsoft trial is about damage to companies not about harm to consumers. You might note that one of the few things Microsoft was found guilty of as an abuse of their monopoly power was giving discounts to OEMs on their Windows license fee if they didn't load their computers down with crapware like multiple trial versions of antivirus and 3rd party utilities (often spyware). Since OEMs were making more off that bundling than on the hardware in that very competitive market and since that crapware was making Windows systems perform badly and made the platform look bad, Microsoft offered to compensate OEMs that avoided the temptation a few dollars off on their Windows license. The court found that harmed the crapware vendors even though it helped consumers.

      • Avatar

        skane2600

        In reply to MikeGalos:

        My recollection is that the main OEM issue was Microsoft's exclusivity agreements. An OEM would have to pay a higher price for Windows if they offered even one model of PC with a non-Microsoft OS. As it ultimately turned out however, the court didn't really require Microsoft to stop the practice.


        Instead, the settlement had a more narrow restriction, not allowing Microsoft to retaliate against OEMs including for:


        "shipping a Personal Computer that (a) includes both a Windows Operating System Product and a non-Microsoft Operating System, or (b) will boot with more than one Operating System;"


        Note that it doesn't say Microsoft can't retaliate against OEMs who ship a PC with ONLY a non-Microsoft operating system.


        And of course, the economic pressure on OEMs to not ship computers with, for example, Linux as the only OS, harms consumers who wish to have a preconfigured Linux PC without the bloat (from these particular users' perspective) of Windows.


        • Avatar

          MikeGalos

          In reply to skane2600:

          You're confusing what the Press Releases said with what was actually in the court documents and what was brought up in the trial itself. I actually read the 7,000+ pages of court transcripts (I was doing a lot of international travel those days and laptops didn't last for a whole flight playing movies)


          It was an insanely bad legal environment including things like saying Macintosh was NOT a competitor (when figuring out monopoly power) and Macintosh was a competitor (when allowing Apple to testify about damage).


          A key government witness testified that unless the end user got to choose every component of the operating system during installation it was unfair. And by "every component" he explicitly included things like the Virtual Memory Manager and the Process Scheduler. Can you imagine the average consumer selecting literally hundreds of system-level components? Can you imagine the likelihood of most of those combinations actually working together?

  3. Avatar

    skane2600

    A novel argument that Google could make would be that today, smartphones and PCs are really in the same market, so the combined market share of Windows, MacOS, and Linux means Google doesn't have monopoly power. I don't buy that, but isn't that the basis for claiming that we are in a Post-PC world and that smartphones are worthy replacements for PCs?

    • Avatar

      MikeGalos

      In reply to skane2600:

      Monopoly power is NOT determined by market share or number of competitors but by ability to unilaterally control what happens in that market.


      Google's monopoly in this case is, also, not smartphones but search. The finding is a tying charge. That they unfairly used their monopoly power in search to unfairly influence a secondary product (smartphone system software). It's kind of hard to say Google doesn't have monopoly power in both Search and Online Targeted Advertising.

  4. Avatar

    lvthunder

    I agree with the second two. Those are bad and anti competitive. The first one though I have issues with. I'm sure a great number of apps in the Play store and probably the store app itself use API's and such from Chrome. The store probably uses Search as well. So how is that different when any other app that has requirements for it to be able to run.

    • Avatar

      wright_is

      In reply to lvthunder:

      This is about the Google Search app, not the backend service.

      I have DuckDuckGo and Firefox on my phone, but I can't remove Chrome or Google (Search) from the phone. The same for GMail, Maps and the other apps forced on the manufacturer and thus the cosumer.

  5. Avatar

    MikeGalos

    To add to the irony you might remember that Microsoft was forced by the same EU regulators to not have a default browser in Windows. The users of Windows in the EU had to choose, at setup, what browser they wanted from a list of options presented randomly and Microsoft's Windows Setup had to install 3rd party browsers such as Chrome because Windows was a monopoly and defaulting to Internet Explorer gave IE an advantage tied to Windows dominance of the OS market.

    Perhaps Google should offer, in the next 90 days, to change the image on all Android phones sold in the EU by all vendors to have the user choose the browser, search engine and utility suites they want, with those choices offered randomly.

  6. Avatar

    Trickyd

    I've just looked on my Samsung S8 and it's trivially easy to switch to Bing or Yahoo as default search engine from both the Samsung browser and Chrome and just takes a couple of taps! which doesn't say much for the abilities of the Eurocrats. I already voted for Brexit to leave the EU and this sort of nonsense on top of the GDPR fiasco only reinforces my decision! if the EU was serious about protecting consumers why not prevent banks charging high interest on loans etc. This will just load more hassle and cost on the consumer most of whom I am sure are quite happy using google for search and can switch if they want to.

  7. Avatar

    Andi

    People were overjoyed when MS was fined back in the day. The evil MS was on its knees they jubilated. The complaint was filed in by Google, Opera, Mozilla - Google ofc was the good guy. Now when Google is getting its just reward it seems that people defend it and scoff at the EU? What gives?

    • Avatar

      MikeGalos

      In reply to Andi:

      Nice to see somebody noticed that...

    • Avatar

      FalseAgent

      In reply to Andi:

      double standards for stuff that people like vs stuff they don't like. Unfortunately for them, governance in the EU is free of this bias. The precedent is a precedent. I'm surprised that Paul even brought this up. Even though people like Google stuff like Maps/Search/Youtube, it doesn't make a difference. What Google is doing is still fundamentally just like what MS did and got punished for.

  8. Avatar

    wright_is

    “The [EU] decision ignores the fact that Android phones compete with iOS phones,” Google CEO Sundar Pichai writes in an op-ed piece on an official Google blog. “It also misses just how much choice Android provides to thousands of phone makers and mobile network operators who build and sell Android devices; to millions of app developers around the world who have built their businesses with Android; and billions of consumers who can now afford and use cutting-edge Android smartphones.”


    Only he seems to forget that Apple doesn't actually do search.

    He also forgets that Android is in a monopoly position (>95% search, >85% smartphone) and is therefore held to higher standards, because they have essentially pushed everybody else out of the market. As that is the case, they have to ensure they do not abuse that dominant position, by pushing unfair terms and conditions on manufacturers.

    This smells a lot like the Microsoft case:

    Microsoft: You can't sell a PC without buying a license from us, even if you sell it without an OS or with Novell, Linux or UNIX installed. You must also include IE and a few other MS apps as standard.

    Google: You can't sell an Android "by Google" phone if you also sell open source Android AOSP. Oh, and if you want access to the Play Store, you need to pre-install Chrome, GMail, Maps and a few other things, oh and stop the user deinstalling them.


    Next it will come out that Google has undocumented features in their search API. :-D

  9. Avatar

    FalseAgent

    If I had a real choice I would be using a Windows Phone with Youtube and Google Maps, something which the platform heavily struggled without. Google can say they created choice, but for me, they absolutely robbed me of one.

  10. Avatar

    RonH

    The EU says that Google has imposed these illegal restrictions on Android device makers and mobile network operators since 2011, and it has done so to illegally “cement its dominant position in general Internet search.”


    Why wait 7 years … The harm has already been done...

    • Avatar

      wright_is

      In reply to RonH:

      These investigations take time and they have been trying to negotiate with Google for at least 5 years to get them to change their ways and avoid fines and sanctions...

      But I guess >95% search market share and >85% smartphone market share are just too much to throw away and they'd rather pay 4.6b€

  11. Avatar

    RM

    I Love it! Thank you EU! Sure seams like the FTC was paid off not to fine Google! Maybe now they will! Really, there are billions in advertising cash just waiting for a fine and it will reduce the national debt! Maybe other companies would try to get back into search and online advertising again!

  12. Avatar

    Daekar

    Well... it's what I was hoping for. Now we'll see if they can enforce it. I can't imagine how Google could possibly deny the charges or assert that it doesn't harm competition, this seems so obviously an open and shut case.

  13. Avatar

    arunphilip

    And a Samsung Galaxy image is the best representative image of this? Not the Google logo, or something Google/Android-centric?

  14. Avatar

    Bart

    It all started so beautifully, Android, an open source OS. But let's face it, Google has turned Android into North-Korea. Many Android states, but they all have to work in favour of the evil empire

  15. Avatar

    ben55124

    I think Google has a point with competition from iOS. Apple seems to get a pass and they lock in the full stack down to hardware. I think Google could ease up on the requirements now and let google play services stand on their own merits. Likely the next step will be like the windows browser picker applied to android app stores -- but apple will get a pass.

    • Avatar

      ibmthink

      In reply to ben55124:

      Apple's marketshare compared with Google's is laughable in the EU. Apple doesn't have a monopoly, Google does. Thats why Apple gets a pass – it doesn't matter what they do.

    • Avatar

      Bart

      In reply to ben55124:

      Google's dominance is far greater here in Europe, than Apple. Google Search counts for 90% of the market. With that in mind, and EU law applied, Apple does not come into this equation

    • Avatar

      Kudupa

      In reply to ben55124:

      You cannot compare Google to Apple, Apple does its own thing and its not as dominant as Google globally. Google with it browser, Search and Android is an absolute monopoly. Think Microsoft of 90s and early 2000. It needs to be rained in. But this is just a start of that process and hopefully they will learn their lessons. But, then again, hindsight is 20-20.

    • Avatar

      wright_is

      In reply to ben55124:

      Apple doesn't do search. Google has >95% market share in Europe.

      Apple isn't a major player in the phone market. Google has >85% market share.

      If Apple was in Google's position as being the major OS provider, then they would also be under scrutiny. With big market share comes big responsibility. The small players can do more in some areas, because they don't have major market share, which means there must be choice.

      When you dominate a market, you have to take care not to abuse your position, otherwise the competition authorities will come down on you like a tonne of bricks.

      Just look at Standard Oil and IBM, in the USA or Microsoft in Europe for a couple of examples of companies abusing their dominant position.

    • Avatar

      ben55124

      In reply to ben55124:

      Sigh, this isn't just about search. Point 3 is Google prevents hardware makers that want to pre-install Google apps from selling even a single mobile device running on alternative Android versions (or “forks”) that were not approved by Google. iOS market share is about 50% in England and varies throughout EU. So I stand by apple gets a pass.

  16. Avatar

    DaddyBrownJr

    This is just going to make the consumer jump through extra hoops to get what they want: Google Search & Services and Chrome.

  17. Avatar

    MikeGalos

    Google's statement is hilarious. Having a competitor has nothing to do with either monopoly power or abuse of monopoly power. What's required to be considered a monopoly is just the ability to unilaterally be able to significantly change the market segment. Anyone who has ever been involved in a monopoly abuse trial knows that intimately.

    There's no question that Google has monopoly power and that, alone, is not against the law (in the US or the EU).

    What is against the law is using that power to harm competition.

    Google doesn't seem to be denying that abuse and restraint of competition went on. They don't even deny the tying charge (using one monopoly to influence a second market). Their defense is that they're not really an important enough player in the smartphone market for their search monopoly to be bothered with.


  18. Avatar

    Waethorn

    As much as I'm starting to distrust Google on this, I want to bring up a few points:


    "Google requires hardware makers to pre-install the Google Search app and Chrome web browser as a condition for licensing Google’s mobile app store, the Google Play Store."


    Microsoft requires that ULCPC manufacturers that want to preinstall a copy of Office 365 as a 1 year bonus have to install all of Office. They can't pick and choose just Word, or just Excel.


    "Google pays “certain large manufacturers and mobile network operators” to exclusively pre-install the Google Search app on their devices."


    Those same manufacturers have to pay Google a device licensing fee. Money back and forth. Large accounts get discounts. It's no different than when larger OEM's get discounts on Windows licensing over smaller OEM's and System Builders. However, those tier-1 OEM's MUST pay Microsoft for WinQual/WHQL/name-of-the-month certification on their machines to get those volume discounts.


    "Google prevents hardware makers that want to pre-install Google apps from selling even a single mobile device running on alternative Android versions (or “forks”) that were not approved by Google."


    No they don't. Xiaomi sells devices with 2 different OS images - and they have a former Googler working for them.


    • Avatar

      ins1dious

      In reply to Waethorn:


      Google strong-arming Acer and stopping them from releasing a version of their phone with AOSP+Aliyun OS is well documented. Also there have been hints of google leaning on Samsung to stop them from forking Android. Even more stories abound of the trouble Amazon has in trying to get its FireOS based phones produced by tier 1 OEMs. These are all a result of the big cudgel that Google has wielded against some of them.


      As for the Xiaomi example you've given... Google services are banned in China. They don't care that Xiaomi sells their MUI phone in China and makes available a version with AOSP+GMS for the rest of the world.


      This is not the case if LG produced a V30 Oreo edition and also a V30 FireOS edition... or maybe a stripped down version with GMS and DuckDuckGo or Bing for default search.


      I feel that is the big issue with how Google has abused its market share.

    • Avatar

      Chris Payne

      In reply to Waethorn:

      "Microsoft requires that ULCPC manufacturers that want to preinstall a copy of Office 365 as a 1 year bonus have to install all of Office. They can't pick and choose just Word, or just Excel."


      Tough to say anything here without knowing the full agreement, but ostensibly MS doesn't force OEMs to install Office if they want to use Windows. Nor do they block OEMs from installing other office productivity software.


      "Those same manufacturers have to pay Google a device licensing fee. Money back and forth."


      This doesn't mean anything. Google is still forcing them to do this... if you want to have any shot in the phone market, you need to use Android and subscribe to all of Google's services. Whether money changes hands or not is beside the point.


      "No they don't. Xiaomi sells devices with 2 different OS images - and they have a former Googler working for them."


      Uh, yes they do. It's in Google's written policies that OEMs have to agree to, and that is in plain evidence for the EU to see. If you're talking about Xiaomi's miui OS, that's just stock android with a difference skin. I'm not sure what other OS you're referring to.

      • Avatar

        Waethorn

        In reply to unkinected:


        Microsoft DOES block OEM's from installing other office productivity software if they want to engage in the royalty program for Office trial conversions.


        The second thing you said is patently false. Stop looking through your Western Goggles.


        Xiaomi has OS images that include Google Play, and images that don't - for almost every phone model that they make (some models don't have an OS image with Google Play). That's a fact.

  19. Avatar

    overseer

    I don't really have that big of a problem with the first two issues listed. Much as I didn't think Microsoft should have been punished for including IE by default on Windows, I don't have a problem with Google Search and Chrome being installed as default on Android, as long as they don't make it difficult to change to something else. User's being too lazy or uninformed to choose a different option doesn't seem like good reason to severely punish a company. And if companies want to take Google's money to exclusively push their apps, well that would seem to be on the manufacturers and networks, not on Google.


    The third issue does bother me a bit more, just because I've never felt a company should be able to dictate such terms as part of a their license (which I know kind of relates to the second issue as well).


    I don't like Google, don't trust them, and really wish we had some better alternatives. But I also don't like the fact that it seems like the EU is treating our big tech companies as an ATM by slapping them with numerous lawsuits for things that are really market issues and not outright abuse of power. These kind of fines seem ludicrous to me and look much more like a money-grab than an actual concern for making Google a better corporate citizen.



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