The European Union has notified Google of formal antitrust charges against the company relating to its Android mobile operating system. The charge sheet focuses on the company's prioritizing of its own services on Android devices, including practices that mean that Google Search is "pre-installed and set as the default, or exclusive, search service on most Android devices sold in Europe." The EU's investigation, which was originally opened last April, claims that this and other measures prevent companies from effectively competing with Android.
"Google has abused its dominant position."
"Our preliminary view is that Google has abused its dominant position," said the European commissioner for competition, Margrethe Vestager, in a press conference. Vestager said that Google's licensing practices mean that "tablet and smartphone manufacturers [are] not free to choose which search engines and which browsers to install on their devices. This hampers competing browser and search providers."
These formal charges are only the latest in a series of antitrust investigations the EU has targeted at Google. An investigation into whether or not the company unfairly prioritized its own shopping services over better search results is currently awaiting a decision from the EU (Vestager said that the commission was working its way through a "very large amount of data" it received from Google), while formal probes are currently ongoing into three separate charges focusing on advertising, the scraping of news articles, and travel and maps.
The Eu can levy fines of up to $7 billion — 10 percent of Google's annual revenue
The EU has the power to force Google to change its business model, and to levy fines of up to 10 percent of the company's annual global revenue in each of these cases, potentially leading to fines of around $14 billion for the two formalized charges. Google has the right to appeal each case before the European Court of Justice after the EU has made its decision, and can also negotiate a settlement.
Today's charges are particularly notable for the danger they pose to Google's mobile model. The company has profited hugely from the smartphone boom it helped create, but only by putting its services — and its advertisements — in front of so many customers. Research firm eMarketer predicts that in 2016 more than half of Google's net advertising income (roughly $43 billion) will come from mobile ad revenue.
Android has 90 percent of the mobile market in Europe
If the EU forces the company to change how its apps get on Android devices (forbidding them from being preinstalled, for example), it could hurt Google's revenue. This is especially true of Europe, where the EU estimates that Android's share of the mobile market is roughly 90 percent — a position that's being challenged by iOS, but that is still more significant than the 59 percent share estimated by IDC in the US.
As well as requiring manufacturers to preinstall Google Search and the Chrome browser, the EU says that the company has also prevented manufacturers from selling smartphones and tablets that run competing operating systems based on Android. "If a manufacturer wishes to pre-install Google proprietary apps [...] Google requires it to enter into an 'Anti-Fragmentation Agreement' that commits it not to sell devices running on Android forks," says the EU, adding that financial incentives Google provides for manufacturers also reinforce its dominant position.
Google responded to the charges sheet in a blog post, claiming that its business model "keeps manufacturers’ costs low and their flexibility high, while giving consumers unprecedented control of their mobile devices." The company stresses that its licensing agreements with manufacturers are voluntary, and that they are needed to ensure the consistency of the Android ecosystem.
"While Android is free for manufacturers to use, it’s costly to develop, improve, keep secure, and defend against patent suits," said the company. "We provide Android for free, and offset our costs through the revenue we generate on our Google apps and services we distribute via Android." Google now has 12 weeks to respond to the EU's charges.