Friday, 20 July 2018

EU slapped Google with record $5billion fine for breaching competition laws

US President Donald Trump has blasted the EU for 'slapping a $5billion fine on one of our great companies, Google' - days after describing the bloc as a 'foe'.

Trump wrote 'I told you so!' as he hit out at the European Union in a tweet after the internet giant was handed a record-breaking fine for breaching competition laws.

It comes days after he called the EU a 'foe' and singled out 'what they do to us in trade' as he prepared to head to Helsinki for his summit with Russian President Vladimir Putin.

In his latest criticism of the bloc, he wrote: 'I told you so! The European Union just slapped a Five Billion Dollar fine on one of our great companies, Google. They truly have taken advantage of the U.S., but not for long!'

This morning, Google Chief executive Sundar Pichai hit back at EU regulators over the huge fine, accusing the EU of trying to destroy the company's business model as he announced the firm's decision to appeal the ruling.
Mr Pichai argued that Google's Android operating system had 'created more choice for everyone, not less' by providing a credible challenge to Apple.

It comes after Margrethe Vestager, the EU's commissioner for competition, found Google had used illegal business practices to establish market dominance.

Ms Vestager announced the fine on Wednesday after a three-year investigation into Google's business.

While dominance itself is not a problem, Ms Vestager said, market-leading companies have a 'special responsibility' to ensure rivals can compete 'on merit'.

She ruled that Google violated that responsibility by strong-arming manufacturers into installing its software on phones and choking-off competition.

Why was Google fined?
Google has been hit with a record-breaking $5billion fine for breaching EU competition laws.

Competition commissioner Margrethe Vestager found the company used illegal practices to establish market dominance for its Android operating system, search engine and Chrome web browser on smartphones.

She found that the company did this in three ways:

1) Google provides Android to phone manufacturers for free, but if they want to install its most popular apps - including the 'must-have' Play Store, where users shop for additional apps - then they have to pre-install Google search and the Chrome web browser on the phone.

While users are free to download alternative software after activating the phone, evidence gathered by the EU suggests that most stick with whatever is already on their device.

2) Google was also caught offering financial incentives to manufacturers which only installed Google search and the Chrome browser on their devices, meaning this was the only choice presented to users when they turned the device on for the first time.

Again, users were able to seek out alternative software if they chose, but evidence suggests most didn't.

3) Google banned manufacturers selling devices based on its version of Android from marketing devices using different variations of the software.

The EU says this hurt rival companies and in particular Amazon, whose Fire operating system is based on Android.

Android, Google search and Chrome are used on about 80 per cent of smartphones.

Speaking at the hearing, Ms Vestager said: 'Google has engaged in illegal practices to cement its position.

'It must put an effective end to this practice or face penalty payments.

'Google must comply with EU rules for dominant companies. Google has breached these rules since 2011.'

The firm must now comply within 90 days or face additional hefty fines that will levied for each day it fails to meet the guidelines.

Shares in the search giant fell by 0.4 percent in premarket trade in the US on news of the fine, according to reports in CNN.

The EU takedown of Google is six to eight years too late, with users paying the price, said Geoff Blaber of CCS Insight.

'Any action by the EU is akin to shutting the stable door after the horse has bolted,' he said.

'There is a significant danger of unintended consequences that penalises the consumer. This ranges from increased fragmentation and greater app inconsistency to increases in hardware cost should Google decide to change or adapt the Android business model.'

Lobbying group FairSearch, whose 2013 complaint triggered the EU investigation, welcomed the ruling.

The fine focuses on Google using its influence as the dominant firm in the marketplace to maximise revenue by suppressing traffic to any rivals.

Vestager said Google had shut-out rivals by forcing major phone makers including South Korea's Samsung and China's Huawei to pre-install its search engine and Google Chrome browser, thereby freezing out rivals.

They were also made to set Google Search as the default, as a condition of licensing some Google apps. Google Search and Chrome are as a result pre-installed on the 'significant majority' of devices sold in the EU, the European Commission says.
Google also prevented manufacturers from selling smartphones that run on rival operating systems based on the Android open source code, it said.

The company finally gave 'financial incentives' to manufacturers and mobile network operators if they pre-installed Google Search on their devices, the commission said.

Google provides Android free to smartphone manufacturers and generates most of its revenue from selling advertisements that appear along with search results.

Commissioner Vestager explained in the press conference: ‘Our case focuses on three types of restrictions that Google imposed on mobile device manufacturers and mobile operators to ensure traffic goes to google search.

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