European Union authorities have fined Google (NASDAQ: GOOGL) an astounding $5.1 billion (4.3 billion euros) over antitrust issues linked to how Google has handled its collaborations with Android systems. This is the largest fine ever levied on Google, exceeding the 2.4 billion euro fine they were hit with last year in relation to their online shopping services. Google plans to appeal and the case could drag on for years. The company will have to deposit the money into a holding account; if they ultimately lose the appeal, the money will be distributed amongst EU member states in proportion to their EU contributions. If the appeal is overturned, the money will be returned to Google. Google has been given 90 days to cease the actions that the EU has deemed illegal or they will face further fines from the Commission, which could be as high as 5% of the daily revenue of Google parent company Alphabet.
The fine amounts to an estimated two weeks of revenue for Google, which might hurt them a little, but more troublesome for the company is the future impact of the EU's ruling on Google's business.
The EU is accusing Google of using its powerful position in the market to unfairly place its own search engine in a dominant position by pre-installing Google on Android devices and offering a cut of search profits to manufacturers and telecoms who exclusively install Google. The EU blamed Google's exclusivity requirements for the failure of Amazon's (NASDAQ: AMZN) Fire OS. Google had threatened to pull Play Store permission from manufacturers that created even one Android device not authorized by Google. The EU has three requirements in particular: Google must stop dictating which apps are pre-installed on Android phones, they must end anti-competitive deals regarding exclusivity of their search engine on devices, and Google must not threaten to terminate access if manufacturers create versions of Androids not approved by Google.
Google controls about 95% of the search engine market on Android devices, which comprise 80% of the smartphone market. The investigation team looked into search engine use on Windows phones and found that Google was used 25% less, implying that they had a large advantage when using pre-installations.
If unable to ensure Google is the default search engine, manufacturers might have to pay for Android service, which could also mean more expensive phones. Then again, this would also mean more competition, which is usually a plus for the consumer. Google CEO Sundar Pichai commented, "...there are costs involved in building Android, and Google has invested billions of dollars over the last decade to make Android what it is today...we earn revenue only if our apps are installed, and if people choose to use our apps instead of the rival apps." Google claims that EU's decision is essentially an attack on their ad-based model which is the main driver of their revenue.
Margrethe Vestager, the EU's antitrust chief, commented that Google has "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."
President Trump weighed in via Twitter: "I told you so! The European Union just slapped a Five Billion Dollar fine on one of our great companies, Google. They truly have taken advantage of the US, but not for long!"