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Google, hit with record $5 billion EU antitrust fine, will appeal

By FOO YUN CHEE
Reuters

July 18. 2018 10:00PM
A 3D printed Android mascot Bugdroid is seen in front of a Google logo in this illustration taken July 9, 2017. (REUTERS/Dado Ruvic/Illustration/r/File Photo)



BRUSSELS — EU antitrust regulators hit Google with a record 4.34 billion euro ($5 billion) fine on Wednesday and ordered it to stop using its Android mobile operating system to block rivals, a ruling which the U.S. tech company said it would appeal.

The penalty is nearly double the previous record of 2.4 billion euros which the company was ordered to pay last year over its online shopping search service.

It represents just over two weeks of revenue for Google parent Alphabet Inc. and would scarcely dent its cash reserves of $102.9 billion. But it could add to a brewing trade war between Brussels and Washington.

Alphabet said in a regulatory filing it would accrue the fine in the second quarter of 2018.

Google Chief Executive Sundar Pichai warned that the Android business model of not charging for use of the technology or having a tightly controlled distribution model like rival Apple Inc. may change as a result of the EU ruling.

“We are concerned that today’s decision will upset the careful balance that we have struck with Android, and that it sends a troubling signal in favor of proprietary systems over open platforms,” Pichai said in a blog.

EU antitrust chief Margrethe Vestager’s boss, Commission President Jean-Claude Juncker, is due to meet Trump at the White House next Wednesday in an effort to avert threatened new tariffs on EU cars amid Trump’s complaints over the U.S. trade deficit.

‘More players’

Vestager also ordered Google to halt anti-competitive practices with smartphone makers and telecoms providers within 90 days or face additional penalties of up to 5 percent of parent Alphabet’s average daily worldwide turnover.

The illegal behavior dating back to 2011 includes forcing manufacturers to pre-install Google Search and its Chrome browser together with its Play Store of apps on their devices, paying them to pre-install only Google Search and blocking them from using rival Android systems.

“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,” Vestager said.

Asked whether breaking up Google would solve the issue, a call made by a number of Google foes, she said she was not sure that was the solution.

“I don’t know if it will serve the purpose of more competition to have Google broken up. What would serve competition is to have more players,” Vestager told a news conference.

On concerns that Google may subsequently decide to charge for using Android, Vestager said her ruling was not related to the way the company operates.

“This is not a judgment on a business model. There is still a possibility to monetise its operating system. Revenue from its app store is quite substantial,” she said.

The EU enforcer dismissed Google’s argument of competition from Apple, saying the iPhone maker was not a sufficient constraint because of its higher prices and switching costs for users.

Android, which runs about 80 percent of the world’s smartphones according to market research firm Strategy Analytics, is the most important of a trio of antitrust cases against Google.

Some major Android device makers, including Samsung Electronics Co., Sony Corp., Lenovo Group Ltd. and TCL Corp., declined to comment on the EU case.


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