Google Is Being Fined a Record $5 Billion by the EU and Ordered to Alter Android Model

(Bloomberg) — Google was fined 4.3 billion euros ($5 billion) 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 U.S., Chinese or other antitrust 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 in an emailed statement. “These practices have denied rivals the chance to innovate and compete on the merits.”

Google has built a massive 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 $40 billion in sales outside the U.S. Google risks losing that traction if it is forced to surrender its real estate on millions of Android phones.

QuickTake: Why Google Is Again in the EU’s Antitrust Crosshairs

The EU’s decision would bring the running total of Google fines to about 6.7 billion euros 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 2.4 billion-euro penalty following an investigation into Google’s shopping-search service. Google owner Alphabet Inc. 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 $110.9 billion for the year.

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

EU Attack on Android Boosts Rivals in the Battle of the Apps

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 percent for general Internet search, licensed smart mobile operating systems and app stores for Android software, the EU said in 2016.