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Here’s Why the EU Just Hit Google With a Record $5 Billion Antitrust Fine

July 18, 2018, 11:28 AM UTC

Google has been fined a record-breaking €4.34 billion ($5.04 billion) over antitrust violations regarding its Android operating system.

The European Commission levied the fine Wednesday, decrying the Alphabet-owned company’s tactics in forcing the manufacturers of Android smartphones to preinstall Google’s own search services and Chrome browser, to give them preference over rival services.

Google (GOOGL) also broke the rules by stopping manufacturers who preinstall Google’s Android apps from selling phones using a non-Google version of Android. Android is supposedly an open-source operating system that others can modify into a less Google-centric product, but Google’s tactics shut down that competitive potential—notably, Amazon (AMZN) wasn’t able to get any manufacturers to make devices using its Android-derived Fire OS mobile operating system.

Android has around 80% of the European smartphone market and, with the rest of the market being Apple’s, phone manufacturers cannot plausibly switch to a non-Google operating system. In other words, Google has extraordinary power in the European smartphone sector, making its actions sensitive to antitrust regulation.

“Google has used Android as a vehicle to cement the dominance of its search engine,” said Margrethe Vestager, the competition commissioner. “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.”

The European Commission accused Google of the antitrust abuses more than two years ago, saying it was breaking competition law by forcing manufacturers to install all of Google’s services in order to use its app store, and by paying manufacturers to make Google the default search engine on the devices.

Crucially, Google isn’t just being fined—it is also being forced to allow manufacturers to preinstall rival companies’ services instead of Google services. If the company doesn’t now play fair within 90 days, it faces further fines.

Google has already been targeted over similar violations in Russia, where it was forced to make it easier for consumers to use rival search engines.

The European Commission also hit Google with a separate antitrust penalty of $2.7 billion last year, relating to violations in the way it presents shopping results in Google Search—a service with a market share in Europe of over 90%.

Google is appealing that fine, and will appeal the new one too.

“Android has created more choice for everyone, not less,” the company said. “A vibrant ecosystem, rapid innovation and lower prices are classic hallmarks of robust competition. We will appeal the Commission’s decision.”

Before Google became the Commission’s current whipping-boy, the previous record antitrust fines were for Intel in 2009 ($1.06 billion) and Microsoft in 2008 ($899 million.)

The Microsoft case was analogous to that involving Android—Microsoft was abusing Windows’ dominance in the PC operating system market to push Microsoft’s own products, namely Windows Media Player. The EU also cracked down on Microsoft steering users towards its own browser, Internet Explorer, as the web was taking off.

According to Bloomberg, Google chief Sundar Pichai had a last-minute call with Vestager late Tuesday, which is unusual practice in EU antitrust cases.

Consumer advocates welcomed the Commission’s decision. “In competitive mobile markets, consumers should be able to make a meaningful choice between search engines and browsers and which apps they can download on their phones and tablets. Google misuses its market power to push its own products. This is a clear restriction of competition which hurts European consumers,” said Monique Goyens, head of the European Consumer Organisation (BEUC).