The EU opened a new battle front against Google on Wednesday (20 April), slapping the US giant with anti-trust charges alleging it had abused the dominance of its Android mobile phone operating system.
The charges are a massive blow to one of the Google’s most strategic businesses and could alter a global smartphone sector that is fast taking over traditional PCs as the biggest segment in the world of computing.
Competition Commissioner Margrethe Vestager said Silicon Valley giant Google had used practices such as making manufacturers pre-install its market-leading search engine as the default in phones.
“The preliminary conclusion from our investigations is that these practices breach EU competition law,” the former Danish economy minister told a press conference.
She said Brussels believed that “Google has abused its dominant position.” She added, “We have found that Google pursues an overall strategy on mobile devices to protect and expand its dominant position in Internet search.”
Google has already cornered 90% of the Internet search market.
The case is the second attack by the EU against Google after Vestager last year formally charged the company for abusing its dominance of the search engine market in Europe.
Taking both EU cases against Google together, the company risks a fine of 10% of worldwide global sales for one year, which would amount to a $7.4 billion fine on the basis of 2015 revenues.
In its latest charge sheet, the EU accused Google of obstructing innovation by giving unfair prominence to its own apps, and was found to have given financial incentives to mobile manufacturers such as Samsung or Huawei, to ensure they pre-installed Google apps on their phones.
The company is also accused of restricting manufacturers from installing rival operating systems based on Android on their phones.
Difference with the US?
Google now has a chance to answer the charges, either by fighting them comprehensively and risking a huge fine or proposing remedies to satisfy Brussels.
Google said it would work with the EU to show that consumers benefitted from Android.
“Android has helped foster a remarkable – and, importantly, sustainable – ecosystem, based on open-source software and open innovation,” Kent Walker, Senior Vice President and General Counsel of Google, said in a statement.
FairSearch, the lead complainant, said Google had launched Android as an open source project, but was now hindering the development of versions that might lead to new operating systems able to compete with Android.
“We look forward to working with the European Commission to demonstrate that Android is good for competition and good for consumers,” Walker said.
The Android operating system captures about 80% of the world market for mobile phones, far ahead of its closest rival Apple.
The EU’s tough line comes despite the fact that Canada on Tuesday (19 April) closed its own investigation into allegations Google abused its dominance in online search advertising, following in the tracks of the US.
Vestager rejected suggestions that Brussels was unfairly targeting US companies in her competition cases, with Apple, Amazon and McDonald’s also in the EU’s cross-hairs.
“If dominance is abuse then we have an issue,” Vestager said, adding that it was not her job to defend European companies, but to protect competition and innovation.
Google is not the only US tech company to have fallen foul of the Commission in recent years.
The case against Android resembles one against Microsoft in which the EU in 2013 fined the software giant €561 million for failing to offer users a choice of web browser on its Windows operating system.
Suppliers of browsers including Mozilla, which is behind Firefox, as well as Apple, with its Safari browser, and Norway’s Opera Software were not immediately available to comment.
US-based INTEL, the world’s biggest chip-maker, was in May 2009 fined €1.06 billion the EU’s biggest fine ever.
In June 2015 the EU’s antitrust watchdog opened a formal investigation into Amazon’s e-book distribution. Brussels is probing clauses Amazon has with publishers which may shield the company from competitors, including an obligation to be informed of more favourable terms being offered by rivals.
The Commission is already conducting a separate investigation into Amazon’s tax deals in Luxembourg, one of a series of such probes targeting major global firms, including Apple, Starbucks and Fiat.
Monique Goyens, the director general of the European Consumer Organisation (BEUC), said, "It is good news that the European Commission is flexing its muscles on competition law. This has to happen if an EU digital economy is to serve consumers and innovative players. Competition rules apply regardless of the company’s country of origin. They are crucial to prevent companies from using their market power to the detriment of consumer choice and innovation. Even more worrying is that the search giant uses Android to hoover up enormous amounts of data which extends its overall internet dominance.
"There is a striking feeling of ‘déjà vu’. This case resembles the Microsoft competition-saga a decade ago. Once again, a company is abusing its dominant position in the market by tying its products to its operating system. Google’s tying practices make it harder for consumers to access mobile apps of their choosing and strongly influence how consumers use their Android devices."
European Commission: Antitrust objections press release