19 Jul 2018

Google hit with record $7 billion EU antitrust fine

8:35 am on 19 July 2018

EU antitrust regulators hit Google with a record €4.34 billion ($NZ7.4 billion) fine and ordered it to stop using its Android mobile operating system to block rivals.

The logo of Google on the facade of headquarter of the parent company Alphabet.

Google warned that the Android model of not charging for use of the technology or having a tightly controlled distribution model may change as a result of the EU ruling. Photo: AFP

The US tech giant said it would appeal the ruling.

The penalty is nearly double the previous record of €2.4b 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 $US102.9b ($NZ150b). 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," Mr Pichai said in a blog.

EU antitrust chief Margrethe Vestager's boss, Commission President Jean-Claude Juncker, is due to meet Mr Trump at the White House next week in an effort to avert threatened new tariffs on EU cars amid Mr Trump's complaints over the US 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," Ms 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," Ms Vestager said.

On concerns that Google may subsequently decide to charge for using Android, Ms 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 monetize 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.

- Reuters

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