Why the EU is upset with Google, what its $5 billion penalty really means

EU announced its first antitrust probe against Google in November 2010 for misuse of its dominant position in the online search market. A probe into Google’s dominance in the operating system market began in 2013.

Written by Pranav Mukul | New Delhi | Updated: July 23, 2018 1:03:56 am
EU antitrust chief Margrethe Vestager said Google has imposed three types of restrictions on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine. EU antitrust chief Margrethe Vestager said Google has imposed three types of restrictions on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine.

The European Commission’s €4.3-billion (around $5 billion) penalty on Google last week may not financially hurt the technology company that is sitting on over $100 billion in cash reserves, but it could bring about changes in the way the Android ecosystem functions, and create a precedent for other antitrust cases against Google.

Three-pronged problem

EU antitrust chief Margrethe Vestager said Google has imposed three types of restrictions on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine.

One, asking device manufacturers to preload the Google Search app and Chrome browser as a condition for licensing Google’s Play Store. As a result, Google Search and Chrome were installed on practically all Android devices sold. “Pre-installation can create a status quo bias… (There is) evidence that the Google Search app is consistently used more on Android devices, where it is pre-installed, than on Windows Mobile devices, where users must download it. This also shows that users do not download competing apps in numbers that can offset the significant commercial advantage derived through pre-installation,” the Commission said.

Two, the Commission has said that Google “granted significant financial incentives to some of the largest device manufacturers as well as mobile network operators on condition that they exclusively pre-installed Google Search across their entire portfolio of Android devices”. This significantly reduced their incentives to pre-install rival search apps. However, it said that by 2014, Google had stopped the practice.

Three, the antitrust body said, Google had not allowed “forked” versions of Android to pre-install Google’s proprietary apps, including Google Search and Play Store. Android being an open-source operating system, it has its code published by Google online whenever a new version is released. Based on this source code, developers create their own versions, many of which do not get approval from Google. “Google’s conduct prevented a number of large manufacturers from developing and selling devices based on Amazon’s Android fork called ‘Fire OS’,” the antitrust body said.

Not the first time

In June 2017, the EU fined Google €2.42 billion for prioritising its own services on the search platform, thus giving itself an advantage over third-party service providers.

Closer home, the Competition Commission of India in February fined Google Rs 136 crore for unfair business practices in the Indian online search market. The National Company Law Appellate Tribunal stayed the ruling on Google’s appeal, but asked it to pay 10% of the penalty. The matter will now be heard by the tribunal on July 27.

EU announced its first antitrust probe against Google in November 2010 for misuse of its dominant position in the online search market. A probe into Google’s dominance in the operating system market began in 2013. In 2014, the EU Parliament even voted, in a non-binding manner, for Google to be broken up.

The US had already seen a major antitrust case involving pre-installed software on devices back in 1998 when the Department of Justice filed a case of misuse of dominant position against Microsoft on account of the company bundling its browser Internet Explorer for free with its Windows operating system loaded on computer devices. This hit several competitors including Netscape, and established a monopoly for Microsoft. The ruling of the Justice Department went against Microsoft, and over time paved the way for other companies, including Google, to establish themselves in the browser market.

What the case means

“The commission is shutting the stable door after the horse has bolted,” said Geoff Blaber, analyst at California-based research firm CCS Insight. “Also, there is no clear alternative to Android. Had the Commission’s determination been made even five years ago, it would have opened a door of opportunity for others…,” he said. Also, insisting that Google allow forked versions of Android, Blaber said, could lead to a deteriorated consumer experience. By maintaining a combination of strict standards over the way the operating systems are designed and providing its own bouquet of basic apps, Google has been able to control the experience of Android users.

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