The European Union’s anti-trust regulators have been investigating Google and its Android operating system in regard to anti-competitive practises for almost two years now, and decided to file formal charges back in April. A 150 page document, which contains a charge sheet, sent to the complainants last week reveals that the Commission is preparing to slap Google with a hefty fine.
The European Commission launched its investigation into Google after it received a complaint from FairSearch that Google offers financial incentives and punishing term of usage to smartphone manufacturers who pre-install Google Search and other apps exclusively on their handsets. The EU competition enforcer plans to compel Google to halt payments or discounts to mobile phone manufacturers in return for pre-installing the Play Store.
The document also reveals that regulators want to prevent Google from cajoling manufacturers into installing proprietary apps, such as Maps, Docs, and Search, if Google plans to continue to restrict their ability to install a competing Android-based operating system. Currently, many forked versions of Android, such as Tizen or CyanogenMod, do not come bundled with Google apps because of licensing restrictions. Google was recently fined $6.75 million for similar charges brought in Russia.
The Commission intends to set the fine at a level which will be sufficient to ensure deterrence
As for financial penalties, the document doesn’t set a specific amount, but the company can expect a large fine because these practices have been ongoing since January 2011 and are still running today, according to the document.
The financial penalty could be based on the amount of ad revenue that Google has generated through AdWord clicks from European customers, or perhaps from Play Store app purchases and AdMob’s in-app advertisements.
The European Commission has declined to comment on the document, but Google appears determined to fight the charges. Google intends to argue that its Android business model is designed in a way that benefits both consumers and innovation.
“We look forward to showing the European Commission that we’ve designed the Android model in a way that’s good for both competition and consumers, and supports innovation across the region.” – Google
In addition to the case against Android, the European Commission has also charged Google with favoring its own shopping services over those of its rivals. This case is also expected to hit Google with a fine, and the company may be forced into ranking rival shopping services using the same methods as it does for its own, along with potentially allowing Google to charge competitors to display their services more prominently. This cost would likely be kept artificially low, by pegging it to Google’s operating costs or the lowest reserve price for AdWords, which currently sits at 0.01 euro per click.
The European Commission has stepped up its rhetoric against Google this year, but has appeared rather inconsistent in its message. For instance, Margrethe Vestager, the European Commissioner for Competition, earlier in the year admitted that Google has played a significant role in smartphone innovation and didn’t “want to take away the rewards Google has got from that”. However, she is now fining the company for cultivating a user experience than enables app developers to put their products in front of billions of smartphone customers.
The case also seems to ignore that companies like Amazon and Samsung have taken Android and used it for their own growing product portfolios, without offering consumers a way to opt back in to Google’s services if they prefer them. There’s also no parallel investigation into Apple’s tight grip over the iOS app store and services either.
This latest anti-trust case is not over yet, but rightly or wrongly, it’s looking increasingly likely that Google will be stuck with a notable fine and some regulatory control over its Android operating system.