Google’s $5.1 billion antitrust fine could mean the end of free Android

The European Union has hit Google with a record-breaking fine of 4.3 billion euros ($5.1 billion) over antitrust issues linked to Google’s handling of the Android ecosystem. The fine is the largest ever, exceeding the previous 2.4 billion euros leveraged against Google last year for its online shopping service. It’s expected that the fine will amount to two weeks of revenue for the search engine giant, which is likely to sting a little, even with Alphabet’s vast coffers.

Now, however, we’re learning that these results weren’t exactly unavoidable. According to a Bloomberg report, Google attempted to settle the lawsuit, offering to adjust various contracts to appease the EU. However, the European Union competition commissioner Margrethe Vestager effectively indicated that it was too little too late. In an interview, Vestager said a company needs to “reach out immediately” following the reception of an EU complaint. Google, however, waited “at least a year too long,” Bloomberg reports.

Vestager noted that if Google had been sincere about settlement offers, a negotiation should have begun in 2016 after the European Union first submitted its statement of objections.

Now — and far more importantly for Google — the EU has also given Google 90 days to quit the actions the EU has deemed as illegal, or it will face further fines from the European Commission.

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A Google spokesperson has told Digital Trends that “Android has created more choice for everyone, not less. A vibrant ecosystem, rapid innovation, and lower prices are classic hallmarks of robust competition. We will appeal the Commission’s decision.” Google CEO Sundar Pichai has backed this statement up on Twitter, also adding in a blog post on the subject that Android’s existence has led to robust competition. Worryingly for Android users everywhere, Pichai indicated that today’s ruling could change the way Android is used as we know it.

“In 2007, we chose to offer Android to phone makers and mobile network operators for free,” Pichai wrote. “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 … we earn revenue only if our apps are installed, and if people choose to use our apps instead of the rival apps.”

Google’s insistence on its apps being used meant that Google could make money from what is essentially a free service. Without the ability to ensure that Chrome and Google Search are always installed and used, Google can’t expect to make money from Android in this manner anymore. This could mean the beginning of a paid Android service for manufacturers — which could possibly mean more expensive phones for users.

However, it’s likely that this ruling will simply mean more competition for Google — which, for consumers, is generally a good thing and something only Google should be mad about.

Why is the EU fining Google?

We’ve covered this question in great detail over the months it has taken for this story to develop, but in brief, questions are being raised about the requirements that Google holds third parties to when licensing out the Google Play Store and Google’s other popular apps.

The European Commission is accusing Google of using its position of power in the market to unfairly keep its own search engine in a predominant position as well as offering a cut of search profits to manufacturers and telecoms providers who exclusively install Google’s search engine on their devices. Google Search commands around 95 percent of the search engine market on Android devices, while Android itself makes up 80 percent of the smartphone market. The investigation looked at search engine use on Windows phones and observed that the use of Google as a search engine dropped to just 25 percent — implying to the EU that having Google search pre-installed lends a hefty advantage.

The EU also accused Google’s requirements as being one of the reasons behind the mass market failure of Amazon’s Fire OS. According to the investigation, Google threatened to pull Play Store permission from any manufacturer that created even a single device running a version of Android not authorized by Google — also known as an Android “fork”. Since Fire OS is an Android fork, the EU is saying that Google’s actions were in breach of EU law, and directly led to the failure of Amazon’s Fire OS.

This action taken by the European Commission is not coming as a shock to some. “Google has always been a contradiction, in that it is a market facilitator who also wants to control that market,” says Mark Skilton, professor of practice in information systems & management of Warwick Business School. “Google claims that it has to compete with other big players and that swapping to an alternative search service is ‘one click away,’ but in my view it is its locking up of around 80 percent of mobile devices with pre-installed Google Android software that is the issue.”

While device makers are not required to accede to Google’s requests to utilize the Android operating system — Amazon’s Fire tablets run a forked version of Android that does not have access to the Play Store by default — it’s heavily expected that most Android devices will want to have access to the Play Store.

The requirements Google needs to follow

With the European Commission having declared that Google’s actions were illegal, Google now has 90 days to comply with the EU’s requirements, or face further penalties. According to a statement made at the conference, this could involve further charges as high as 5 percent of parent company Alphabet’s daily revenue.

The requirements:

• Google must stop dictating which search and browser apps are pre-installed on Android phones by manufacturers
• Google must end anti-competitive deals involving Google search exclusivity
• Google must not threaten access to the Google Play Store if manufacturers express an interest in new versions of Android not backed by Google

It is not currently clear whether the requirements would apply to current Android devices, or would simply apply to Android devices released after this ruling.

Google is not the first company to have been hit by heavy regulation over anti-consumer practices in the EU. Microsoft was previously fined by the European Commission over similar practices, and was also brought up on forcing consumers to use specific web browsers.

With Google having now been fined twice over antitrust issues — and with the EU also looking at Google’s AdSense as also being problematic — expect to see some serious changes being made to EU law in response to what lawmakers are seeing as imbalances in technology markets. U.S. regulators have not traditionally done as much to regulate large companies like Google or Microsoft.

Where does the money go?

Fining Google is all very well and good — but what happens to the money after it’s taken from Google?

Margrethe Vestager, European Commissioner for Competition, fielded this very question during the announcement of the fine, and it’s actually a fairly simple process.

https://twitter.com/EU_Commission/status/1019572152855683072?s=19

After being taken from Google, the money is placed in a closed account and held until all court appeals have been heard. If the fine is upheld by the appeals process, then the money is sent to the European Union, and from there is portioned out to each member. The amount given to each country is dependent on how much money that particular country contributes to the EU, with the top donors getting the most back.

Should the appeal overturn the fine, then the money will then return to Google.

Updated July 22: Google attempted to settle the massive lawsuit back in 2017, to no avail.