Accusing Google of illegally using Android mobile devices to cement its search engine, the European Commission has imposed a record fine of 4.34 billion euros ($5 billion) on the tech giant.
“Google has imposed since 2011 illegal restrictions on Android device manufacturers and mobile network operators to cement its dominant position in general Internet search,” the Commission said.
Google must now bring the conduct effectively to an end within 90 days or face additional penalty, the ruling said.
Reacting to the ruling, Google CEO Sundar Pichai said the company will appeal against the Commission's decision.
"Rapid innovation, wide choice, and falling prices are classic hallmarks of robust competition. Android has enabled this and created more choice for everyone, not less. This is why we intend to appeal today's Android decision," Pichai wrote in a blog post.
According to Pichai, the decision ignores the fact that Android phones compete with iOS phones, something that 89 per cent of respondents to the Commission’s own market survey confirmed.
"It also misses just how much choice Android provides to thousands of phone makers and mobile network operators who build and sell Android devices; to millions of app developers around the world who have built their businesses with Android; and billions of consumers who can now afford and use cutting-edge Android smartphones," Pichai wrote.
According to Commissioner Margrethe Vestager who is in charge of competition policy, their case is about three types of restrictions that Google has imposed on Android device manufacturers and network operators to ensure that traffic on Android devices goes to the Google search engine.
"In this way, Google has used Android as a vehicle to cement the dominance of its search engine. These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules," Vestager explained.
To be specific, Google required manufacturers to preload the Google Search app and browser Chrome as a condition for licensing Google's app store (the Play Store).
“The company made payments to certain large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices,” Vestager emphasised.
According to Pichai, Google offers phone makers the option of pre-loading a suite of popular Google apps (such as Search, Chrome, Play, Maps and Gmail), some of which generate revenue for us, and all of which help ensure the phone ‘just works’, right out of the box. Phone makers don’t have to include our services; and they’re also free to pre-install competing apps alongside ours. This means that we earn revenue only if our apps are installed, and if people choose to use our apps instead of the rival apps.
The Commission also found that Google prevented manufacturers wishing to pre-install Google apps from selling even a single smart mobile device running on alternative versions of Android that were not approved by Google.
"A healthy, thriving Android ecosystem is in everyone's interest, and we've shown we're willing to make changes. 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 favour of proprietary systems over open platforms," Pichai added.
The Commission, however, said that as Google earns majority of its revenues via Google search engine. The company understood early that the shift from desktop PCs to mobile Internet would present a fundamental shift for Google Search.
So, Google devised a strategy to use this shift to company’s advantage and to make sure that users would continue to use Google Search also on their mobile devices, the Commission said.