Google Appeals Record $5B EU Antitrust Fine

by Bamidele Ogunberu Posted on October 9th, 2018

Google has filed an appeal in EU court against the record €4.34bn ($5B) fine it received for allegedly abusing the dominant market position of its Android mobile operating system, in the latest step in its eight-year antitrust battle in Europe – it’s spokesman said today. It had previously said it would take the case to Europe’s second highest court in Luxembourg.

The US technology company had until Wednesday to file its case with the European Court of Justice against the EU decision from July. That ruling took aim at a core part of Google’s business strategy by outlawing contractual restrictions that Brussels said had cemented its dominant position in general internet search.

With more than 80 per cent of the world’s smartphones running on the Android operating system, the product is vital to the group’s future revenues and profitability.

But in July, Margrethe Vestager, the EU competition commissioner, said Google had engaged in three practices that “denied rivals the chance to innovate and compete”.

Ms Vestager said Google had forced Android phonemakers to pre-install its Chrome browser and search app as a condition of using Google Play, the smartphone app store.

The European Commission also determined that the company had paid manufacturers and network operators anti-competitive incentives to exclusively pre-install Google’s search app and prevented the companies from using rival Android operating software on any of their handsets. Google has denied any wrongdoing.

The company has already appealed against a separate EU decision from 2017 to fine it €2.4bn for using its power to favour its own shopping services.

A third continuing EU probe is investigating whether the tech giant unfairly banned rivals from websites that used its search bar and adverts.

While the appeals will take years to work through the ECJ, Google has until October 28 to address the issues identified by Ms Vestager in the Android agreements.

The commission can fine Alphabet, Google’s parent company, up to 5 per cent of its average daily worldwide turnover if it concludes the company has not taken adequate steps to fix the abuses identified in the decision.

Ioannis Kokkoris, director at London’s Institute for Global Law, Economics and Finance, said: “The decision here is clear cut, the conduct here is clear cut.”

But he added: “At the same time there may be room to abide by the decision while trying to maintain some of the profitability that this conduct was giving.”

For example, if Android users were presented a choice of search providers when setting up their phone, many could — and probably would — still choose Google.

Agustín Reyna, chief competition adviser at the BEUC, the European consumer organisation, said: “Google needs Android to continue to push search and then they can monetise advertising. The CEO’s public statement the day after the decision shows they are taking it seriously.”

Sundar Pichai, Google chief executive, has defended Android’s existing arrangements, writing in a blog post in July that the EU’s “decision rejects the business model that supports Android, which has created more choice for everyone, not less” and that Google intended to appeal against the fine.

Google could try to delay their Android fixes by asking the European court to grant “interim measures” that would require them to make the mandated changes only after the court ruled on its appeal.

But Mr Kokkoris said the high legal requirements mean such a move would be unlikely to succeed.

Meanwhile, Thomas Vinje, a lawyer who has represented complainants against Google, said: “As we have seen in the search case, Google is extremely creative in avoiding the consequences of antitrust decisions, so I wouldn’t be surprised to see Google playing games with the Android [remedies] as well.”

The complex case could take several years before judges rule on it. A final appeal is possible at Europe’s top court, the Court of Justice of the European Union, but only on points of law.

EARLIER : Google Fined $5B By EU, Told To Alter Android Model

The European Union’s Competition Commissioner Margrethe Vestager said Wednesday that Google been fined a record $5 billion for abusing the market dominance of its Android mobile phone operating system. Google was also ordered to change the way it puts search and web browser apps on Android mobile devices.

In a press release , The EU antitrust chief said that Google went against EU rules when it required mobile phone producers to pre-install the Google Search and browser apps as a condition for licensing Google’s app store. She said Google also paid big producers to exclusively pre-install the Google Search app.

Vestager said that “companies must compete on their merits,” playing by antitrust rules that favor consumers and open markets, and not restrict competition….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.”

The commission said Google’s conduct violates Article 54 of the European Economic Area Agreement and Article 102 of the Treaty on the Functioning of the European Union.

Google said that instead of restricting competition, it did the opposite. “Android has created more choice for everyone, not less,” said Google spokesman Al Verney. “We will appeal the Commission’s decision,” he added.

Google previously said it will argue that the EU is wrong and that it doesn’t block users or handset manufacturers from installing other apps. In its view, an EU ruling will harm app developers and customers by undercutting Google’s business model of giving away Android software and generating revenue from mobile advertising. That keeps smartphone prices low, it says.

The EU’s fine is the biggest ever imposed on a company for anticompetitive behavior.

Wednesday’s ruling caps an investigation that goes back at least three years. Regulators came out with a preliminary ruling in April 2016 in which they said Google had market shares exceeding 90 percent in most European countries in the realm of licensable mobile operating systems, and abused that share by forcing manufacturers to take its apps and by preventing them from selling altered versions of Android, which is technically open-source software.

The penalty is far higher than any other dished out by the U.S., Chinese or other antitrust authorities. More significantly, Google was given 90 days to stop what the EU said were “illegal practices” on contracts with handset manufacturers that push Google services in front of users.

Google has built a massive business of banner and video ads, thanks largely to its central role on Android devices. Google will account for a third of all global mobile ads in 2018 giving the company around $40 billion in sales outside the U.S. Google risks losing that traction if it is forced to surrender its real estate on millions of Android phones.

Although the fine is a record, Google owner Alphabet Inc. generated about the same amount of money every 16 days in 2017, based on the company’s reported annual revenue of $110.9 billion for the year.

Alphabet shares were down 0.5% in premarket trading in New York on Wednesday.

EU officials have been investigating Google contracts that require manufacturers of Android phones to take Google’s search and browser apps and other Google services when they want to license the Play app store, which officials say is a “must-have” for new phones.

The EU is also targeting Google’s payments to telecoms operators and manufacturers who exclusively install Google search on devices and contracts that prevent handset makers selling phones using other versions of Android.

In June 2017, regulators also fined Google 2.42 billion euros ($2.8 billion) for favoring its shopping listings in search results.

US President Donald Trump has condemned the European Union for imposing hefty fine on Google over violating anti-trust rules.

“I told you so! The European Union just slapped a Five Billion Dollar fine on one of our great companies, Google,” Trump said on Twitter Thursday, a day after the European Commission punished the internet giant with a fine of €4.34 billion ($5 billion) for illegally using Android mobile devices to strengthen its dominance among internet search engines.

“They truly have taken advantage of the U.S., but not for long,” he tweeted.

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