Android smartphone

EU antitrust fine of Google is big but too late

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Smartphones can be too smart for their own good. Source: Reuters

Margrethe Vestager is continuing to lead the way in disciplining internet giants. The EU competition commissioner has even earned the dubious distinction of being the target of President Donald Trump’s wrath. The Brussels “tax lady hates the U.S.,” he reportedly said to participants at the G7 summit last month.

That ruthless pursuit continued on Wednesday with the European Union’s €4.3 billion ($5 billion) fine of Google for anti-competitive bundling of services on Android phones.

But while the severity of the fine may make the search giant wince in momentary pain, it comes too late to head off its dominance of the European smartphone market. The bureaucrats in Brussels clearly have trouble keeping up with the rapid movement of market forces in the tech sector.

The problem in view of the antitrust authorities is that Google is abusing its quasi-monopolistic position in the smartphone market to discourage rivals by pre-installing the suite of its search, navigation and music apps. Google counters that the Android operating system is free and users are able to download the rival services. But the commission found that only 1 percent of users download a rival search engine, and only 10 percent, an alternative browser.

The EU gave Google 90 days to comply with its order to abandon the bundling practice or face further fines of up to 5 percent of parent Alphabet’s worldwide revenue. Google rejected the claims and said it would to appeal the fine as it has last year’s €2.4 billion fine for favoring its shopping app.

US consumer advocates praise EU example

The antitrust commissioner listed three types of “very illegal” activities. Google forces producers of Android phones to pre-install the Google search engine and browser, with the result that consumers have little incentive to download others. Google also prohibits phone and tablet makers from installing other operating systems alongside Android. Third, Google offers financial incentives to the producers to pre-install only Google apps.

Google CEO Sundar Pichai tweeted his dismissal of the charges.

Consumer advocates in the US welcomed the EU action, however, as an example for the US. “American antitrust law enforcers should study this very closely and learn from it, and emulate it, and build on it,” said Barry Lynn, director of the Open Markets Institute, which lobbies for closer scrutiny of tech giants.

“The US Federal Trade Commission or Department of Justice should also act to end Google’s monopolistic abuses, instead of letting the Europeans be the only cop on the antitrust beat,” said John Simpson, director in charge of privacy and technology projects at the US nonprofit Consumer Watchdog.

‘Tax lady’ likes US despite fines

In Germany, newspaper and magazine associations praised the EU action. “With this decision, the EU stays on its course to set boundaries throughout Europe for the dominant digital platforms,” the two associations said.

But Silicon Valley lawyer Gary Reback, who led the attack against Microsoft’s alleged abuse of its monopoly power in the 1990s, said he was disappointed in the EU action. “Up till now, the billion-dollar fines from Brussels haven’t corrected Google’s behavior one bit,” he said.

In addition to the previous Google fine, Ms. Vestager has also charged Facebook, Amazon and Apple with various infractions and levied huge fines.

“I very much like the U.S.,” the Danish commissioner said Wednesday in announcing the Google fine. But how she feels has nothing to do with enforcing competition law, she added. Ms. Vestager has also been assiduous in scrutinizing competition in other sectors, such as her long review and numerous divestment requirements in the recent merger of Bayer and Monsanto.

Christof Kerkmann covers IT and technology for Handelsblatt. Ruth Berschens is Brussels bureau chief. Darrell Delamaide adapted this article into English for Handelsblatt Global. To contact the authors: kerkmann@handelsblatt.com and berschens@handelsblatt.com.

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