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Abu Dhabi, UAETuesday 21 August 2018

EU slaps Google with record fine and 90 days to halt 'illegal' apps practices

EU Competition Commission imposes penalty of €4.34 billion over firm's requirement that makers must take its apps and exclude rivals'

EU Commissioner for Competition Margrethe Vestager. Google has been fined over 'illegal restrictions on the use of Android.' EPA
EU Commissioner for Competition Margrethe Vestager. Google has been fined over 'illegal restrictions on the use of Android.' EPA

Google was fined €4.34 billion (Dh18.51bn) by the European Union and ordered to change the way it puts search and web browser apps on Android mobile devices, setting a global record for antitrust penalties.

The penalty - the same amount the Netherlands contributes to the EU budget every year - is far higher than any other dished out by the US, Chinese or other anti-trust authorities. More significantly, Google was given 90 days to stop what the EU said were "illegal practices" on contracts with handset manufacturers that push Google services in front of users.

"Google has used Android as a vehicle to cement the dominance of its search engine," EU Competition Commissioner Margrethe Vestager said. "These practices have denied rivals the chance to innovate and compete on the merits."

Google has built a huge business of banner and videos ads, thanks largely to its central role on Android devices. Google will account for a third of all global mobile ads in 2018, according to research firm eMarketer, giving the company around $40bn in sales outside the US. Google risks losing that traction if it is forced to surrender its real estate on millions of Android phones.

The EU’s decision would bring the running total of Google fines to about €6.7bn after last year’s penalty over shopping-search services. It could soon be followed by more fines from a probe into online advertising contracts.

The European Commission fine exceeds last year’s then-record €2.4bn penalty following an investigation into Google’s shopping-search service. Google owner Alphabet and the commission both declined to comment on the Android fines.

Although the fine is a record, Alphabet generated about the same amount of money every 16 days in 2017, based on the company’s reported annual revenue of $110.9bn for the year.

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Alphabet shares were down 0.5 per cent in pre-market trading in New York on Wednesday.

EU officials have been investigating Google contracts that require manufacturers of Android phones to take Google’s search and browser apps and other Google services when they want to license the Play app store, which officials say is a "must-have" for new phones.

The EU is also targeting Google’s payments to telecoms operators and manufacturers who exclusively install Google search on devices and contracts that prevent handset makers selling phones using other versions of Android.

Google has previously said it will argue that the EU is wrong and that it doesn’t block users or handset manufacturers from installing other apps. In its view, an EU ruling will harm app developers and customers by undercutting Google’s business model of giving away Android software and generating revenue from mobile advertising. That keeps smartphone prices low, it says.

Google has a market share of more than 90 per cent for general Internet search, licensed smart mobile operating systems and app stores for Android software, the EU said in 2016.

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