Google’s $4bn fine shows the antitrust ‘floodgates have opened,’ experts say
The EU is largely upholding a decision to penalize Google for alleged anti-competition abuses of its Android operating systems. But the decision represents a larger sea change under way globally.
Antitrust efforts are ramping up around the world / Adobe Stock
Google is once again under fire for impeding fair marketplace competition.
Just a day after the UK and the Netherlands each filed anti-competition lawsuits against Google, an EU court sided mostly with regulators in an appeal of a 2018 decision to fine the tech company $4.33bn for allegedly exploiting the dominance of its Android operating system. The suit alleged that Google unfairly advantages its own browser and search engine on mobile devices in Europe. (It’s worth nothing that Android is by far the most popular operating system in Europe, found on four in every five mobile devices in the region).
Google appealed to a top EU court last year to push back against the original decision from the EU’s Executive Commission, Europe’s top antitrust enforcer. The tech behemoth argued that the allegations were false and relied upon incorrect accusations.
Though the European Court of Justice’s General Court, which heard the appeal, today ruled that the original decision would be mostly upheld, it did annul one component of the decision: an allegation that Google violated competition regulations by paying manufacturers to exclusively pre-install Google Search on Android devices. As such, the fine has been knocked down roughly 5%, to approximately $4.12bn.
The case was the largest of three major antitrust penalties – resulting in fines of over $8bn – issued by the EU against Google in the past five years.
Google ‘disappointed’ with the result
The Silicon Valley mainstay is not pleased with the decision. “We are disappointed that the court did not annul the decision in full,” a company spokesperson said in a statement shared with The Drum. “Android has created more choice for everyone, not less, and supports thousands of successful businesses in Europe and around the world.”
Google has said that since Android’s operating system is free and open-source, both device manufacturers and users can freely choose which apps to install or remove from their devices. The company has asserted that since it takes on the high costs of developing and maintaining the operating system, pre-installing its cash cows Google Search and Chrome was a strategy undertaken to recoup these costs.
In response to the original decision in 2018, however, the company has made a number of changes to its Android operating system to appease regulators. For example, EU users are now allowed to select from a number of search engine options on their mobile devices. Today’s decision will likely further force Google’s hand in terms of updating its systems for greater interoperability.
The power of penalization in question
Following today’s decision, some predict that Google will be pressured into yielding even further. “This precedent could spook Google further and get them to give up even more concessions in other cases, such as divesting adtech products, opening up YouTube and more,” says Shiv Gupta, managing partner at U of Digital, a digital marketing education firm.
However, some experts aren’t as confident as Gupta that decisions like those made today will catalyze meaningful change. “The issue is always, ‘Are [regulators and enforcement agencies] going to be persistent in constraining the behavior of companies?’ Multi-billion-dollar fines are not necessarily significant on their own,” says Brian Wieser, global president of business intelligence at WPP-owned media investment firm GroupM. “Right now, you can have multi-billion-dollar fines, and it’s not [prompting any] significant change, usually.”
Others echo the sentiment; Fiona Campbell-Webster, chief privacy officer at marketing firm MediaMath, notes that while this latest penalty against Google “is significant,” the ruling, at base, “does not address how to allow or compensate for a truly competitive marketplace going forward.”
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A rising swell
While one-off enforcement actions may not lead to a tipping point for competition in tech, new, more stringent regulations might do the trick.
A number of far-reaching antitrust bills, including the American Innovation and Choice Online Act and Europe’s Digital Markets Act (which has a greater chance of success than any American lookalike), threaten the very core of many tech companies’ business models. Both Amazon and Google have said that, if passed, these laws would force them to either break up or completely dissolve entire portions of their businesses. Regulators in other markets, including Canada, the UK and Australia, have also begun the process of more heavily legislating market competition and fairness.
Combined with increasing enforcement action in the US and especially in the EU, all major tech companies are likely feeling the heat. “The walls are closing in on big tech,” says Gupta.
And while many new legislative proposals and enforcement actions have garnered bipartisan support, not everyone is pleased. “The biggest problem the legal and enforcement hurdles present is [that they] take away money from the company to invest in research and development and innovating to deliver goods that consumers want,” argues James Czerniawski, a senior policy analyst at Americans for Prosperity, a libertarian lobbyist group backed by the Koch brothers.
“Foreign regulators – notably in the EU – have perverse incentives to use their hammers in their toolkit on the US tech industry almost explicitly,” says Czerniawski. “There is also an incentive to generate headlines, and standing up to Silicon Valley is certainly an attractive route to go. But they pursue these actions under the veil of competition or protecting consumers. It’s important to note the [legal] burdens in the EU are inferior to the US.”
Others disagree that increasing crackdown is bad for innovation. “It is still possible for companies like Google to achieve market success in the face of legal and enforcement hurdles, as long as they do so by innovating and not by engaging in anticompetitive practices,” says Caitlin Chin, a fellow at the Center for Strategic and International Studies, where her research focuses on technology regulation. The goal of these crackdowns, she suggests, is simply to “minimize the structural challenges that currently inhibit new players from entering the market.”
Despite differences of opinion, most experts are in agreement that antitrust efforts won’t be slowing anytime soon. With regulators across the globe turning their eye toward self-preferential practices, app store and developer competition, mergers and acquisitions and data and privacy practices, there seems to be no turning back. As Chin puts it: “The floodgates have already been opened.”