The European Union has levied its largest-ever antitrust fine against U.S. tech giant Google. The penalty of 4.34 billion euros ($5.04 billion) announced July 18 comes in response to the finding by EU regulators that Google's practices around its Android smartphone operating system broke the bloc's antitrust rules. This is the second large EU antitrust judgment that has gone against Google, which was slapped with a 2.4 billion euro penalty in June 2017 for using its search engine dominance to give an advantage to its online shopping service. A third antitrust investigation, this one related to Google's advertising arm, is still underway.
In the Android case, the European Commission found that Google essentially forced smartphone manufacturers to install the Google Search app and its Chrome web browser as a requirement for licensing the Google Play Store, an essential tool through which users download apps for their devices. The problem, in Europe's eyes, was Google's bundling of its search and browser apps to Android, furthering its status as search leader. EU regulators also decided that Google made payments to smartphone manufacturers and mobile network operators to ensure that they installed only Google's Search app, excluding other search software. Finally, the EU said, Google would not allow manufacturers to install Google apps on devices running versions of Android that were not approved by Google, in essence obstructing the development of competing Android operating systems.
The differences in the approaches taken by the United States and in Europe to regulate antitrust explain why the European Union, unlike U.S. regulators, has cracked down heavily on the giant tech firms. The United States' treatment of antitrust is rooted in preventing monopolies from abusing their position by increasing prices beyond market norms in cartel-like behavior. It has since evolved to emphasize economic analysis as the central aspect of its rules. The system used by the European Union, however, is rooted in the concept of "fairness," which is where bundling becomes important. While the United States has given Google a pass because it has not abused its position to raise prices (and is, in many cases, actually reducing prices), the European Union argues essentially that Google has used its dominance to make it virtually impossible for smaller competitors to emerge.
Both regulatory approaches have their pros and cons. Today's tech giants, including Google, are diversifying into a wide range of product lines. Google and its parent, Alphabet Inc., are moving into almost every area of information technology innovation to ensure that no rival can upend their business model. Moreover, despite having distinct business lines — artificial intelligence, smartphones, search, etc. — Google's strength comes from integrating them into a mutually supportive ecosystem, much as Amazon and Apple have done. This means that so long as Google or its competitors are not using their ecosystem advantages to set high prices, they may serve consumers better because of the benefits their ecosystems can provide. But this flies in the face of the European Union's arguments that Google can use its ecosystem's entrenched dominance to stifle competition and the innovation it could bring.
The European Union's antitrust approach has enabled Brussels to put U.S. tech giants in its sights. Regulatory enforcement is only one way that Europe has fought against U.S. tech firms. Other avenues include privacy requirements such as the General Data Protection Regulation, tax regulations and data localization laws. As the tech sector continues to evolve and no European heavyweight on par with Google or Apple materializes, the European Union will continue to push against encroachment by foreign tech companies on multiple fronts.
