14 September 2018

Tech giants beware: Google’s record-breaking fines may have global ripple effect

The Commission’s fight against exclusivity payments, pricing and tying practices by dominant tech companies is far from over. Last summer, the Commission fined Google a record-breaking EUR 2.42 billon for abusing its dominant position as a search engine by giving illegal advantages to its own shopping comparison service. This has now been topped by a EUR 4.34 billion Commission fine for engaging in exclusivity payments and tying practices related to its Android mobile device operating system. A third fine may be imminent after the conclusion of the AdSense investigation.

Competition authorities worldwide seem to have picked up on the Commission’s investigations and may follow suit. Tech giants should double check their commercial practices and use the Commission’s decisions as guidance to avoid being fined either inside or outside of Europe. Dominant companies outside the tech sector can also use these decisions to make a proper risk assessment.

According to the press release issued by the Commission in July 2018, Google has a dominant position in the markets for general internet search services, licensable mobile operating systems and app stores for the Android mobile operating system. The Commission believes that Google has abused these dominant positions by engaging in the following practices:

  • illegal tying of Google’s search and browser apps: Google tied the Google Search app and the Google Chrome browser to the Google Play Store, which is a must-have for device manufacturers. As a result, device manufacturers were less inclined to pre-install competing search and browser apps, and users were less inclined to download those apps.
  • illegal exclusivity payments: Google paid several of the largest device manufacturers and mobile network operators to exclusively pre-install Google Search on their Android devices, reducing incentives to pre-install competing search apps.
  • illegal obstruction of development and distribution of competing Android operating systems: Google prevented device manufacturers from using any alternative version of Android that was not approved by Google (commonly known as Android forks). This left its competitors with fewer opportunities to introduce apps and services which could be pre-installed on Android forks.

On top of its EUR 4.34 billion fine, Google will also need to terminate these practices within 90 days, or face penalty payments (up to 5% of its parent company Alphabet’s average daily worldwide turnover). Google’s fines are adding up: in June 2017, the Commission imposed a EUR 2.42 billion fine for abusing its dominant position as search engine to favour its own shopping comparison service. And it is not off the hook yet: the Commission is still investigating Google’s AdSense advertising programme for potential antitrust violations.

Qualcomm, the world’s largest supplier of LTE baseband chipsets, seems to have a similar sword of Damocles hanging over it: the Commission’s investigation into possible predatory pricing practices by Qualcomm is still ongoing and a supplementary Statement of Objections has been sent. In January 2018, Qualcomm received a fine of EUR 997 million for making significant payments to its key customer, Apple, for the exclusive use of its chipsets in Apple devices. According to the Commission, these exclusive payments prevented Qualcomm’s competitors from effectively competing for Apple’s business and deprived them of the opportunity to acquire other customers that might have followed Apple’s example once it had become a customer.

Dominant companies should consider themselves forewarned by these record fines and ongoing investigations, particularly now that competition authorities worldwide are watching each other closely. The US Federal Trade Commission has indicated that it will take the Commission’s Google Android decision to heart, while the Missouri Attorney General has served an additional investigative subpoena on Google in its ongoing antitrust investigation. Similarly, the Australian Competition & Consumer Commission and the Canadian Competition Bureau have shown interest in the Commission’s Google decisions. In 2017, the Russian Federal Antimonopoly Service reached a settlement with Google to ensure competition on the mobile applications markets. Investigations into Google by Israeli, Turkish, South Korean and Taiwanese regulators have been launched or are ongoing.