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EU fines Google a record US$5b over mobile practices

Wednesday, July 18, 2018

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BRUSSELS, Belgium (AP) — European regulators came down hard on another US tech giant today, fining Google a record US$5 billion for forcing cell phone makers that use the company's Android operating system to install Google search and browser apps.

The European Union said Google's practices restrict competition and reduce choices for consumers.

While Google can easily afford the fine, the ruling could undermine the company's business model, which relies on giving away its operating system in return for opportunities to sell ads and other products.

Google immediately said it will appeal, arguing that its free operating system has led to lower-price phones and created competition with its chief rival, Apple.

Android has "created more choice for everyone, not less," Google CEO Sundar Pichai tweeted.

Google has 90 days to put remedies in place regardless of its appeal — which could involve unbundling key apps and allowing Android handset manufacturers to sell devices using altered versions of Android.

Mozilla Foundation, the non-profit group that creates the lightweight ad-blocking browser Firefox Focus, said the ruling gives it the opportunity to displace Chrome as the default browser in some phones. It has been in talks with manufacturers from Huawei to Samsung about that.

The ruling creates "a huge opportunity," Denelle Dixon, Mozilla's chief operating officer, said Wednesday.

It's also possible not much will change. Google Search, Chrome and the Play Store are popular with consumers and developers. Handset manufacturers could choose them despite unbundling.

"It's possible phone manufacturers won't actually take advantage of the newfound freedom they have," said Thomas Vinje, lead lawyer for FairSearch, the Brussels-based lobbying group backed by Oracle, TripAdvisor and others that was the main complainant in the case. "It at least opens up the possibility."

The fine, which caps a three-year investigation, is the biggest ever imposed on a company by the EU for anticompetitive behaviour.

The ruling could stoke tensions between Europe and the US, which regulates the tech industry with a lighter hand. Still, some US politicians welcomed it.

Democratic Senator Richard Blumenthal of Connecticut tweeted that the fine should "be a wake-up call" to the Federal Trade Commission and should lead US enforcers to protect consumers. Blumenthal previously called on regulators to investigate how Google tracks users of Android phones.

In its ruling, the EU said Google broke the rules by requiring cell phone makers to take a bundle of Google apps if they wanted any at all.

The bundle contains 11 apps, including YouTube, Maps and Gmail, but regulators focused on three that had the biggest market share: Google Search, Chrome and the company's app store, called Play Store.

The EU also took issue with Google's payments to wireless carriers and phone makers to exclusively pre-install the Google Search app.

It ruled, too, that Google broke the law by forcing manufacturers that took its apps to commit to not selling devices that use altered versions of Android.

Regardless of the pending appeal, failure to come up with remedies to rectify the behaviour after 90 days risks a further penalty of up to US$15 million a day.

EU Competition Commissioner Margrethe Vestager said that given the size of the company, the 4.34 billion euro fine is not disproportionate.

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