Here's Why Google Just Got Hit With a Record $5 Billion Fine

Illustration for article titled Heres Why Google Just Got Hit With a Record $5 Billion Fine
Photo: Sam Rutherford (Gizmodo)

Considering Android’s massive mobile market share, this was pretty much an inevitability. But today it finally happened for real: The EU slapped Google’s parent company Alphabet with a record fine of nearly $5.1 billion for violating European antitrust regulations.

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According to EU officials, Google’s terms for licensing its full-featured version of the Android OS—which requires device makers to pre-install Google apps like Chrome, YouTube, Gmail, Google Maps, and the Play Store—violate antitrust laws and put competing products at an unfair disadvantage.

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The ruling cites deals with Samsung, Huawei, HTC, and others as evidence of Google abusing its market dominance. According to EU Commissioner for Competition Margrethe Vestager, “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.”

Additionally, the EU says Google’s history of paying large manufacturers to exclusively pre-install the Google Search app is unlawful, and that these practices have made the marketplace less competitive.

Naturally, Google denies any wrongdoing. Earlier today it posted a blog from CEO Sundar Pichai titled, “Android has created more choice, not less.” In the blog, Pichai argued that the ruling “ignores the fact that Android phones compete with iOS phones,” and “also misses just how much choice Android provides to thousands of phone makers and mobile network operators who build and sell Android devices.”

Pichai also says removing a pre-installed app is easy, and in the post, there’s even a gif showing how long it takes to delete one and replace it with something else, before Pichai concludes by saying that Google intends to appeal the decision.

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See, it’s so simple...
Gif: Google

This most recent fine follows a $2.7 billion fine from 2017, in which Google was accused of manipulating shopping results, and comes in the wake of rising fears of tech giants as a whole, especially after Facebook’s mishandling of user data in the Cambridge Analytica scandal.

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And for those who remember back when Microsoft got sued for antitrust in 2001, it was a very similar situation in which the Microsoft was accused of having a monopoly over x86-based PCs and web browsers due to the company’s practice of bundling Internet Explorer with Windows.

However, even if Alphabet is forced to hand over north of $5 billion dollars, it’s not as if Google doesn’t have the money to pay up—though with a net profit of $12.6 billion in 2017, the EU’s fine would eliminate around 40 percent of Alphabet’s gains last year. And if Google refuses to comply with the EU’s demands within 90 days, the company could get hit with additional penalties worth up to five percent of Alphabet’s “average daily worldwide turnover.”

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This is merely the start of a much bigger trend as tech giants face intensifying scrutiny from regulators and consumers alike.

Senior reporter at Gizmodo, formerly Tom's Guide and Laptop Mag. Was an archery instructor and a penguin trainer before that.

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DISCUSSION

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I predict most of the posts here will be about Apple, and there’s a point to that (below), but here’s the difference: Apple doesn’t have 80% market share for anything, let alone something not bundled on the iPhone. While Google might not be the only search engine left standing, it’s certainly market-dominant, and probably a monopoly. It’s legal to have a monopoly, it’s not legal to have a monopoly in one thing (search) and use it to extend your advantages to other things (phones).

Having said that, the EU should also take a look at pre-installed apps on all platforms (but, let’s be honest, we’re talking about iOS and Android) since they inherently limit consumer choice, flexibility, and competition, even in an absence of a monopoly. While you can switch between iOS and Android, there are a lot of factors that effectively make most users feel “locked-in:” purchases aren’t transferable even if there’s an equivalent app, familiarity, and the increasingly deep dependence on cloud services in each OS.

That means there’s every reason to make competition within each OS’s ecosystem as intense as possible. That should mean making it easy to change all default apps except those that would cause significant security concerns (e.g. the OS update function, possibly settings), and uninstall default apps.

Apple is certainly using its market share and the knowledge that most users won’t switch (and are effectively “locked in”) to elbow its way into new markets - Apple Music became an overnight Spotify competitor just because Apple released it. Apple Maps depends on a healthy ecosystem to work - and it’s only used at all because Apple bundled it. Mail, iMessage, etc. all benefit from the fact that they can’t be turned off.

(In a perfect world, to encourage competition, we’d find some way to force developers to open APIs, like to iMessage, but I don’t see a credible way of making that happen).