EU hits Google with record $7b fine over Android system

EU anti-trust chief Margrethe Vestager denied any anti-US bias, saying: "Just as enforcing competition law, we do it in the world, but we do not do it in political context."
EU anti-trust chief Margrethe Vestager denied any anti-US bias, saying: "Just as enforcing competition law, we do it in the world, but we do not do it in political context."PHOTO: REUTERS

US tech company faces anti-trust penalty for using operating system to force out rivals

BRUSSELS • European Union regulators yesterday hit Google with a record €4.34 billion (S$7 billion) anti-trust fine for using its Android mobile operating system to squeeze out competitors.

The penalty is nearly double the previous record of €2.4 billion which the US tech company was ordered to pay last year over its online shopping search service.

It represents just over two weeks of revenue for Google parent Alphabet and would scarcely dent its cash reserves of US$102.9 billion (S$140 billion). But it could add to a brewing trade war between Brussels and Washington.

EU anti-trust chief Margrethe Vestager denied anti-US bias, saying she very much liked the US. "But the fact is that this has nothing to do with how I feel. Nothing whatsoever. Just as enforcing competition law, we do it in the world, but we do not do it in political context."

Google said it would appeal, adding: "Android has created more choice for everyone, not less. A vibrant ecosystem, rapid innovation and lower prices are classic hallmarks of robust competition."

Ms Vestager's boss, European Commission president Jean-Claude Juncker, is due to meet US President Donald Trump at the White House next Wednesday in an effort to avert threatened new tariffs on EU cars amid Mr Trump's complaints over the US trade deficit.

Ms Vestager also ordered Google to halt anti-competitive practices in contractual deals with smartphone makers and telecoms providers within 90 days or face additional penalties of up to 5 per cent of parent Alphabet's average daily worldwide turnover.

"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," Ms Vestager said.

The EU enforcer dismissed Google's argument of competition from Apple, saying the iPhone maker was not a sufficient constraint because of its higher prices and switching costs for users.

Android, which runs about 80 per cent of the world's smartphones according to market research firm Strategy Analytics, is the most important case out of a trio of anti-trust cases against Google.

Some major Android device makers, including Samsung, Sony and Lenovo, declined to comment on the EU case.

Regulatory action against tech giants like Google and Facebook with their entrenched market power may lack sting, said Polar Capital fund manager Ben Rogoff, who has been holding the stock since its initial public offering. "The reality is that as long as they're delivering great utility to their consumers, consumers will use those platforms. If they do, advertisers will be drawn to those platforms, too, because the ROIs (returns on investment) are very difficult to replicate anywhere else," he said.

The EU takedown of Google is six to eight years too late, with users paying the price, said Mr Geoff Blaber of research and advisory company CCS Insight.

"Any action by the EU is akin to shutting the stable door after the horse has bolted," he said.

"There is a significant danger of unintended consequences that penalises the consumer. This ranges from increased fragmentation and greater app inconsistency to increases in hardware cost should Google decide to change or adapt the Android business model."

Lobbying group FairSearch, whose 2013 complaint triggered the EU investigation, welcomed the ruling, saying it could help restore competition in mobile operating systems and apps.

"This is an important step in disciplining Google's abusive behaviour in relation to Android," it said.

A third EU case involves Google's AdSense product. Competition authorities say Google prevented third parties using its product from displaying search advertisements from Google's competitors.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 19, 2018, with the headline 'EU hits Google with record $7b fine over Android system'. Print Edition | Subscribe