EU Google antitrust case: Report suggests “record fine”
After years of investigations, the European Commission (EC) has issued formal antitrust charges against Google, claiming it has abused its dominant position in smartphone operating systems with Android to support its position in internet searches.
The EC has issued what it calls a formal statement of objections to Google, which is the first step in cases where a company is accused of breaking European Union (EU) competition law.
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According to a report in The Sunday Telegraph, Google faces a fine of around €3 billion, which would be a record amount levied by the European Commission. This fine is related to accusations that the company promoted its own shopping services on search results, in a case which has been brewing since 2010. Although this is not the same case as the accusations over Android, it indicates that the European Commission is very serious in its desire to see Google curb what it sees as anti-competitive practices.
What are the accusations over Android?
According to Margrethe Vestager, the EC commissioner for competition, Google has harmed consumers and competitors by placing requirements on mobile phone makers and network operators. These forced them to preinstall Google products and, in some cases, make them the default or exclusive options. The company is also accused of giving financial incentives to manufacturers and networks for preinstalling Google Search on devices.
Although Android’s code is open source, Google is accused of barring manufacturers from using versions of the operating system built on the open-source code, instead requiring them to use Google’s pre-built version of Android.
Why is the EC taking action?
It believes that Google has “implemented a strategy on mobile devices to preserve and strengthen its dominance in general internet search”. This strategy “closes off ways for rival search engines to access the market via competing mobile browsers and operating systems. In addition, [Google also seems] to harm consumers by stifling competition and restricting innovation in the wider mobile space.”
Using a dominant position in one market to shore up or prevent competition in another market is a breach of EU antitrust law, since it harms competition and reduces consumer choice.
What is Google saying?
Google has yet to release its defence. However, it is likely to argue that its efforts to stop manufacturers from using non-Google variants of Android is an attempt to reduce fragmentation in the market, which itself would damage consumers.
However, according to Kent Walker, Google’s senior vice-president and general counsel, “Android has helped foster a remarkable and, importantly, sustainable ecosystem, based on open-source software and open innovation”. “We look forward to working with the European Commission,” he added.
What happens next?
Google has 12 weeks to respond in writing and request an oral hearing to present its defence. The statement of objections doesn’t prejudge the case, and a decision will be taken by the EC only after a full argument has been heard. This can take years.
What is the likely outcome of the case?
Until Google presents its defence, it’s difficult to judge the outcome. However, there are strong parallels with several cases that the EC brought against Microsoft in the early 2000s. The EC’s first case, which concluded in 2004, concerned Microsoft’s licensing agreements with PC manufacturers, which forced them to pay a royalty to Microsoft for any machine they made – even if it didn’t have Windows installed. This has parallels with Google’s deals with smartphone manufacturers, which prevent them installed non-Google versions of Android.
The second Microsoft case, which concluded in 2009, concerned Internet Explorer, which was pre-installed on Windows computers. The EC claimed this damaged competition in the market for web browsers and led to Windows having a “ballot box” system which allowed new users to choose from a variety of browsers when they first set up their machine.