Don’t Expect Big Changes from Europe’s Record Google Fine

The European Commission ruled that Google had unfairly used its Android operating system to harm competitors and consumers.

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European regulators took a big swing at Google Wednesday for abusing the dominance of its Android mobile operating system, fining the company €4.34 billion ($5 billion) and ordering changes to Android designed to put Google rivals on a more level playing field. But it’s not clear that the fine or the operational changes will have much effect.

“Google has basically won,” says Maurice Stucke, cofounder of the Konkurrenz Group and a law professor at the University of Tennessee. “They already dominate mobile. Just think about the number of apps, like with Google Play and the like. There’s no way you’re going to have another operating system that is going to threaten that. Bing invested, gosh, billions of dollars in its search engine, and it still hasn’t really made a significant dent.”

The decision by the European Commission, the EU’s regulatory arm, found that Google manages Android, which runs roughly 80 percent of the world’s smartphones, in ways that illegally harm competition. The ruling focused on three practices: the bundling of Google’s Chrome web browser and its search app as a condition for licensing the Google Play store; payments Google makes to phone manufacturers and telecom companies to exclusively preinstall the Google search app on their devices; and Google’s practice of prohibiting device makers from running Google apps on Android “forks,” or alternative versions of the software unapproved by Google. In its ruling, the commission ordered Google to stop all of those practices.

The commission said preinstalled apps create “a status quo bias,” making users more likely to adopt default settings. It said Google’s Search app is used more often on Android phones, where it is preinstalled, than on Windows Mobile devices, where users must download it. “This also shows that users do not download competing apps in numbers that can offset the significant commercial advantage derived through preinstallation,” the release says. As a result, the commission said, other companies don’t innovate on search, harming consumers.

Stucke says Google’s search engine benefits as more people use it, helping Google’s algorithm predict better responses and understand opaque questions, and forcing website operators to develop and index content that is optimized for Google.

What’s more, Stucke says, the decision will not impact Google’s leap from mobile to voice through digital personal assistants, smart appliances, and devices like Google Home, where the default search results will introduce even more bias.

Google said it would appeal the decision. In a blog post, Google CEO Sundar Pichai argued that Android creates more choice than in “the dial-up age” by providing technology for app developers and more affordable options for consumers. “We’ve always agreed that with size comes responsibility,” wrote Pichai. “But 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.”

The Android case is one of three lodged against Google by European antitrust regulators. Last year, the commission fined Google €2.42 billion ($2.7 billion) for abusing its dominance as a search engine to illegally privilege its own comparison shopping service. Google appealed the decision. The commission also is investigating restrictions that Google has placed on websites displaying search ads from Google’s competitors. In July 2016, the commission issued a preliminary conclusion that found Google had abused its dominance in that arena as well.

Google made Android open source and lets handset makers license it for free. But the commission said the restrictions Google puts on handset makers who use Android inhibits competition. The commission began investigating Google’s management of Android in April 2015.

The order to change how Google manages Android applies only in Europe, but Stucke says eliminating the restrictions on Android forks could have a wider impact because it would be hard for Google to implement that regionally. But he and others say the order is unlikely to affect Google’s practices elsewhere unless US authorities order similar changes. Stefan Heumann, a board member at Stiftung Neue Verantwortung, a German think tank focused on new technologies and digitalization, says American intervention seems unlikely amid ongoing trade disputes between the US and Europe. “This case will probably also be politicized in the current trade standoff between the US and the EU and increase the growing transatlantic divisions in the tech sector,” Heumann said.

In the past, when Google has been ordered to change how it operates in one region of the globe, it generally has applied the changes only in that region. For instance, Google responded to similar concerns from competition authorities in Russia by showing users a “choice screen” that let them pick search engines when they opened Chrome for the first time.

Despite the multiple antitrust investigations, Heumann said the commission does not have a clear idea of how to regulate dominant platforms like Google. In an email, he said the impact of Wednesday’s ruling will likely be limited. “Unless we have better concepts on how a fair platform economy should look and what the appropriate regulation is, antitrust cases such as this one will be only imperfect short-term fixes. They won’t address the underlying structural issues,” he said.

A coalition of consumer-oriented US groups, including Consumer Watchdog, the Open Markets Institute, the Electronic Privacy Information Center, the Center for Digital Democracy, and Fight for the Future, supported the decision in a letter to EU competition commissioner Margrethe Vestager. “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 of Consumer Watchdog’s privacy and technology project.

Two nonprofit organizations that receive funding from Google criticized the ruling and echoed the argument that Android improves consumer choice. Ed Black, president and CEO of the Computer & Communications Industry Association said in a statement, “Today’s decision punishes the most open, affordable, and flexible operating system in the mobile ecosystem. Android brought more competition, innovation, and consumer choice to the market. These are precisely the things competition authorities are tasked to promote rather than jeopardize.”

Daniel Castro, vice president of the Information Technology and Innovation Foundation, said the decision was based on European protectionism. “Despite the Commission’s protests to the contrary, it is hard to see how today’s ruling aids consumers,” he said. “Instead, it merely fills European coffers at the expense of American companies.”


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