The European Commission which is responsible for proposing legislation, implementing decisions and managing the daily business of the European Union has just served Google, the tech giant, a fine of 5 billion dollars (1.8 trillion naira) over Antitrust issues connected to its predominance of its search engine and web browser (google chrome) on Android devices.
What is the Antitrust policy?
Competition among companies is encouraged by the European Commission as it is believed to offer the consumers favourable rates for goods and services and there is, in fact, a policy to ensure this happens —the Antitrust policy. The Antitrust policy was developed from 2 central rules, the first rule prohibits 2 or more independent market operators from restricting market competition while the second rule prohibits firms with market dominance from abusing the position either by the charging of unfair prices, limiting production or refusing innovation to the prejudice of the consumer.
Apparently, the European Commission has found Google guilty of the latter.
Why is Google being fined?
Through the European Commission’s investigation, they discovered that Google forces mobile device manufacturers (also known as OEMs - Original Equipment Manufacturers) to make use of their Operating System - Android. Pre-installing google search and google chrome on it as the default search engine and mobile browser respectively hinders competition in an unscrupulous manner. This was also confirmed by the device manufacturers who agreed that the Google play store application is a necessity on every android device and the right to pre-install this app is a strong incentive for them to own up to Google’s demands especially since it is impossible for users to install it in on their own.
According to European Commissioner for Competition – Ms. Margrethe Vestager, who was also the prosecutor on the Google Antitrust Shopping case in 2017, Google breached the European Union Antitrust policy in the following ways:
- Offering some of the largest device manufacturers a chunk from Google search revenue on the condition of exclusivity as Google wanted its search engine to be the only preinstalled search engine on Android devices.
- Demanding manufacturers to have Google search and Google browser (chrome) pre-installed on their device which is advantage competitors are unable to match.
- Requiring manufacturers to sell devices with only Android versions that have been approved by them. Manufacturers that act otherwise lose the right to sell any device with Google play store and Google search apps pre-installed on it.
What this means for Google's Android
The European Commission (EC) gave Google 90 days to stop the actions it considers illegal, failure of which will incur additional fines.
The CEO of Google, Sundar Pichai released an article following the announcement of the Antitrust fine where he disagreed with the EC’s illegality claim that Android has made fair competition impossible, he said:
"The decision ignores the fact that Android phones compete with iOS phones, something that 89 percent of respondents to the Commission’s own market survey confirmed. It also misses just how much choice Android provides to thousands of phone makers and mobile network operators who build and sell Android devices; to millions of app developers around the world who have built their businesses with Android; and billions of consumers who can now afford and use cutting-edge Android smartphones." — Sundar Pichai
In the post, Pichai mentioned iOS phones as competition. But the EC thinks otherwise, given Android’s 80% dominance in Europe. He also added that the Android OS was offered to phone manufacturers and mobile network operators for free. And that the pre-installation of popular Google Apps generated revenue generation for them and provided a good customer experience for the users.
"Of course, there are costs involved in building Android, and Google has invested billions of dollars over the last decade to make Android what it is today. This investment makes sense for us because we can offer phone makers the option of pre-loading a suite of popular Google apps (such as Search, Chrome, Play, Maps and Gmail), some of which generate revenue for us, and all of which help ensure the phone ‘just works’, right out of the box."— Sundar Pichai
Critics and well-wishers of the internet giant have engaged in a debate as to whether the fine was too small, fair or too much. But looking at the fine in relation to the $31billion revenue Google posted in the first quarter of the year, it’s a huge chunk - 16%. Meaning, it will take Google about 2 months to service their fine assuming they devoted all their daily earnings in that period to it.
CEO – Pichai mentioned that Google intends to appeal. However, Ms. Margrethe believes it’s highly unlikely that they will win an appeal.
It is unsure if appealing such a case is a brilliant idea giving the costs associated with litigation. Likewise, whether or not the EC’s claims are exaggerated, this might be the iron-fist needed by policymakers to ensure that companies abide by the ever-evolving rules.
Talks on ethics and morals have saturated the internet industry. Hence, more stringent oversight is welcomed, even though entrepreneurs claim regulations slow down innovation.
How all of this concerns you
The effects of this new fine remain to be seen and no official statements have been made towards this. However, we can speculate a few things:
One, previously free Google apps becoming paid: Since their Android revenue is about to cut with this new policies, the company will have to find other sources of income.
Two, unbundling of formerly pre-installed Google apps including the Play store: This means, users will have to either make do with whatever apps their OEMs place on the devices they own. Or, for those already “locked-in” to the Google ecosystem, they’ll need to manually download these apps that they have become used to.
Three, Android devices might become more expensive: If you previously bought Android phones for their relatively lower price points, these new ruling will make operational costs go up which may, in turn, affect the overall price of the phone.
Finally, over time, another operating system might emerge to challenge the dominance of the Android, and this, I believe will be one of the wins recorded by the EC - competition.
Contributions and editing by Benjamin Dada