Google’s Android bundling strategy whacked by EU

by Steve Blum • , , ,

Google set two records yesterday: it was hit with the largest fine ever assessed by European Union anti-trust enforcers, which didn’t scare Wall Street because its stock price – actually, its nominal parent company Alphabet’s share price – hit the highest level ever.

The $5 billion fine was accompanied by an order for Google to radically change the way it markets the Android mobile phone operating system, according to a tweet by Margrethe Vestager, the EU’s competition commission and a former member of the Danish parliament…

Fine of €4,34 bn to @Google for 3 types of illegal restrictions on the use of Android. In this way it has cemented the dominance of its search engine. Denying rivals a chance to innovate and compete on the merits. It’s illegal under EU antitrust rules. @Google now has to stop it.

Google CEO Sundar Pichai shot back, also via Twitter, saying that the company will appeal.

The three business practices that Vestager says are illegal are:

  • Requiring mobile phone manufacturers who install the Google Play store to also install the Chrome browser and Google Search apps.
  • Paying manufacturers to give Google Search exclusivity, by not preinstalling other search apps.
  • Requiring manufacturers who preinstall Google apps to pledge not to make, or even develop, devices that run alternate Android versions, aka Android forks.

Big manufacturers have tried to launch their own app stores and operating systems, notably Samsung with Bada and Tizen, but could not compete with Google Play’s ecosystem of apps, services and content. The only company that’s made any headway with an Android fork is Amazon, which installs the Android-based Fire OS on its own devices, and uses them to sell its own services. Amazon has also attracted Vestager’s attention and, like Google, hit a record high valuation yesterday.

2018 is shaping up to be a rough year for tech giants. Lawmakers in Washington, D.C. and regulators in Brussels are taking aim at them. Politics and protectionism might be behind it, but big, dominant companies are properly the concern of trust busters. They need to move cautiously and prudently, though, else the cure will be worse than the disease.