Google fined $5.04 billion for forcing its apps onto Android phones

Europe has imposed a record-setting €4.3 billion ($5 billion) fine on Google for antitrust violations around its Android smartphone operating system. In 2016, the EU Commission charged Google with forcing mobile network operators to install Chrome, search and other Google apps as the default or exclusive search service on most devices sold in Europe. With a market share of over 80 percent in many countries, that effectively locked others out of the search market, creating a near-monopoly for the search giant.

"The Commission's fine of €4,342,865,000 takes account of the duration and gravity of the infringement," the EU Commission wrote. "In accordance with the Commission's 2006 Guidelines ... the fine has been calculated on the basis of the value of Google's revenue from search advertising services on Android devices in the EEA [European Economic Area]. The Commission decision requires Google to bring its illegal conduct to an end in an effective manner within 90 days of the decision."

In a statement to Engadget, Google said it would launch an appeal. "Android has created more choice for everyone, not less. A vibrant ecosystem, rapid innovation, and lower prices are classic hallmarks of robust competition. We will appeal the Commission's decision."

Google committed antitrust violations in three ways, the Commission said: It required manufacturers to pre-install Google Search and the Chrome browser on Android devices; paid manufacturers and mobile operators on the condition that they exclusively install the Google search app; and prevented manufacturers from selling any mobile devices running Android forks not approved by Google.

As an example of the latter, the EU's competition commissioner Margrethe Vestager noted that Google stopped a large number of manufacturers from building and selling Amazon Fire TVs and other devices based on FireOS, an Android Fork. (That might explain why Amazon Fire TVs, conspicuously absent in Europe, are reportedly now coming soon.)

"Google is entitled to set technical requirements to ensure that functionality and apps within its own ecosystem run smoothly, but these technical requirements cannot serve as a smokescreen to prevent the development of competing Android ecosystems," she said during a press conference this morning. "Google cannot have its cake and eat it."

The record-setting fine nearly doubles the €2.4 billion ($2.8 billion) penalty levied against Google last year for pushing its own shopping results to the top of search pages. (Google has appealed the amount of that fine.) The higher figure reflects the fact that search has a much bigger impact than shopping on Google's bottom line. The EU had the right to fine Google up to 10 percent of its annual revenue of $110 billion in 2017.

"Google's practices have denied rival search engines the possibility to compete on the merits," the Commission wrote. "The tying practices ensured the pre-installation of Google's search engine and browser on practically all Google Android devices and the exclusivity payments strongly reduced the incentive to pre-install competing search engines. Google also obstructed the development of Android forks, which could have provided a platform for rival search engines to gain traffic."

While the fine is a record, it represents just two weeks of Google's yearly revenue. More significantly, the EU also ordered Google to allow phone manufacturers and telecom operators to install non-Google apps on Android devices. That would significantly open Android up to more competition, and possibly reduce Google's advertising revenues.

"At a minimum, Google has to stop and to not re-engage in any of the three types of practices," the EU said. "The decision also requires Google to refrain from any measure that has the same or an equivalent object or effect as these practices."

However, it added that Google could still install its own apps, as long as it plays by new ground rules. "The decision does not prevent Google from putting in place a reasonable, fair and objective system to ensure the correct functioning of Android devices using Google proprietary apps and services, without however affecting device manufacturers' freedom to produce devices based on Android forks."

The fine is obviously significant, but Google could be open to further damages. The EU said it that it's "also liable to face civil actions for damages that can be brought before the courts of the member states by any person or business affected by its anti-competitive behavior."

Google has one reason for optimism that on appeal, the fine might at least be reduced. Europe's high court recently ruled that a then-record €1.06 billion ($1.4 billion) EU fine against Intel be "re-examined," meaning it could be reduced. On the other hand, the EU isn't quite done with Google yet. It's also expected to fine the search giant for abusing its position by restricting third-party services from displaying their own ad listings.

Whether it appeals or not, the EU said Google had better obey the ruling within the 90 day time frame. "If Google fails to ensure compliance with the Commission decision, it would be liable for non-compliance payments of up to five percent of the average daily worldwide turnover of Alphabet, Google's parent company. The Commission would have to determine such non-compliance in a separate decision, with any payment backdated to when the non-compliance started."

Updated with a statement from Google.