Europe has just hit Google with a record $5 billion fine. Expect fireworks.

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Publication Date: 
July 18, 2018

The European Commission, which administers antitrust policy in the European Union, has just hit Google with a record fine of 4.34 billion euros ($5 billion U.S.). This fine is intended to punish Google for the way in which it has structured the market for its operating system. Here’s what you need to know.

The massive fine is for “tying” the operating system to specific applications.

Android is the operating system used by most smartphones that aren’t manufactured by Apple. It is, in principle, an “open source” operating system, which allows phone manufacturers to modify it in various ways. For example, Samsung’s popular Galaxy phones run Android but use a “skin” and various Samsung-branded applications to differentiate it from competitors’ products.

The E.U. has fined Google for linking the operating system too closely with Google’s search service. Thus, for example, if phone manufacturers want access to Google’s app store, they have to agree to pre-install the Google Search app and Google’s browser application (Chrome), which is designed to hook into Google’s business model. People with smartphones want to download apps. It is possible for phone manufacturers to set up their own app stores, but doing so would be expensive and also less attractive to consumers, since app manufacturers are unlikely to go through the bother. Thus, for example, Amazon.com has set up its own app store for people who use its Fire devices (which have an operating system based on Android), but the selection of apps is notably smaller than on Google’s own app store. (Jeffrey P. Bezos, Amazon’s chief executive and founder, owns The Washington Post). Google has also paid manufacturers and phone network operators for exclusivelyinstalling Google Search (i.e., not making other search options available as a pre-installed app) and has made it hard for manufacturers to sell devices running other Android-based operating systems, such as Amazon’s.

Read the full piece at The Washington Post