E.U. Slaps $5B Antitrust Fine on Google; Trump Blasts Back With Tweet

[Updated 7/19/18, 9:59 am. See below.] If top European leaders faced a testy President Donald Trump in a series of meetings this summer, imagine the mood when the president of the European Commission arrives at the White House next Wednesday.

President Trump and the European Union’s top executive officer, Jean-Claude Juncker, are slated to discuss economic issues, security, and other topics on July 25, as The Guardian reported. With a tweet, Trump has already advanced one contentious item for the agenda: the E.U.’s antitrust division on Wednesday fined Google a record $5 billion after concluding that the U.S. tech giant raised barriers to its competitors’ apps on Android devices. It was the most consequential of the E.U.’s recent actions to strengthen regulations on tech industry competition, data privacy, and the spread of false information via online channels. Google has now drawn the top two E.U. fines for anti-competitive behavior since 2008, followed by the American companies Intel, Microsoft, and Facebook, according to The Verge. [Paragraph modified and another added to include Trump statement.]

Tweeting on Thursday morning, President Trump blasted the E.U. decision: “I told you so! The European Union just slapped a Five Billion Dollar fine on one of our great companies, Google. They truly have taken advantage of the U.S., but not for long!”

Trump seemed to suggest a possible U.S. policy move to curb the E.U.’s action, but gave no further details.

Meanwhile, President Trump has been fending off stinging rebukes this week for his accommodating behavior toward Russian president Vladimir Putin at a Monday summit, just after Trump took issue with longstanding U.S. allies in Europe over trade policies, tariffs, and the cost to the United States of NATO, the U.S. mutual defense pact with 28 other member countries. While Trump has chafed at international alliances that create obligations to other nations, U.S. tech companies serving global markets can be called to answer under the laws of other countries.

The E.U. antitrust case against Google points up the growing divide between U.S. regulatory policy governing technology-based businesses and the more stringent oversight of the European Union, which is influencing statutes being drawn up in other nations such as Brazil and Japan, as noted by The New York Times.  

Europe’s increasingly assertive tech regulations involve a personal twist for President Trump. The U.K. Information Commissioner’s Office, under laws protecting the privacy of personal information, has been investigating the campaign consulting firm Cambridge Analytica for a possible role in influencing the vote of U.K. citizens to leave the E.U., known as the Brexit vote. U.K. Information Commissioner Elizabeth Denham has also been broadening the scope of her investigation and communicating with U.S. law enforcement agencies including the FBI, according to a story by The Guardian’s reporter Carole Cadwalladr. Cambridge Analytica, which worked on Trump’s presidential campaign, obtained millions of Facebook profiles allegedly used to target messages to U.S. voters in a Russian influence campaign being investigated by Special Counsel Robert Mueller. On July 10, Denham announced plans to fine Facebook the equivalent of about $650,000 for failing to protect user data.

In the E.U.’s antitrust decision against Google, which the company says it will appeal, Europe’s top antitrust regulator Margrethe Vestager charged that Google took advantage of its control over the Android operating system for mobile devices by inducing smartphone makers to incorporate its own search engine and its Chrome browser into their products. According to Vestager, Google did this by several means that are illegal under E.U. law.

The phone manufacturers had to choose: either pre-install Google Search and Chrome, or forfeit the ability to include the Google app store in its devices, Vestager said.

Google also paid large manufacturers and some mobile network operators to insure that Google had the only search app pre-installed on their devices—though the commissioner says Google stopped doing this after European regulators began investigating the tactic. “At its peak, this practice covered more than 80 percent of Android devices sold in Europe,” Vestager said.

Consumer tend to stick with the apps that come with their devices, so control over the apps to be pre-installed allowed Google to dominate the search market, Vestager maintained.

In the third Google strategy faulted by Vestager, the company effectively barred device manufacturers from modifying the Android source code. If they did, Google would withhold from them the right to sell devices containing Google Search or the Google Play Store, where consumers can download millions of apps. This closed opportunities for competing search engines and other apps to build user bases on devices running on variations of Android, the commissioner charged.

Under E.U. law, companies that dominate a market bear extra responsibility to leave other businesses room to compete for customers, Vestager explained. Currently, she says, about 80 percent of smart mobile devices in Europe and in the rest of the world run on Android—a total of more than 2.2 billion devices.

The E.U. decision requires Google to surrender control of the search and browser apps that manufacturers must or can pre-install, and the version of Android they can use. The regulator gave Google 90 days to comply. “If Google fails to achieve compliance with our decision, it would be subject to penalty payments,” Vestager wrote. “That penalty could be up to 5 percent of the average daily worldwide turnover (revenues) of Alphabet, Google’s parent, for each day of non-compliance.” Alphabet (NASDAQ: GOOG) reaped revenues of nearly $111 billion for the full year in 2017, according to Reuters.

Other E.U. cases against Google are pending.

Google CEO Sundar Pichai responded Wednesday with a defense of Google’s business practices.

In a blogpost, Pichai said Google’s decision in 2007 to offer the Android operating system source code free of charge to manufacturers has opened the door for consumers to choose from more than 24,000 devices across a broad price range.

Discouraging modifications of the Android operating system ensures technical compatibility, making it possible for phones sold under 1,300 different brands to run the same applications, Pichai said.

Having spent billions of dollars to build Android, Google looks for a return on the investment by offering manufacturers the option to pre-install Google apps that make money for the company, Pichai said. No matter what apps are pre-installed, consumers are still free to download other apps, including the competing browsers Opera Mini, Firefox, and UC Browser, he said.

Bernadette Tansey is Xconomy's San Francisco Editor. You can reach her at btansey@xconomy.com. Follow @Tansey_Xconomy

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