Why Europe’s $5 Billion fine on Google won’t suffocate it

Why Europe's $5 Billion fine on Google won't suffocate it
Why Europe's $5 Billion fine on Google won't suffocate it

Europe imposed a record fine on Google, but it’s probably too little, too late.

The €4.34 billion ($5 billion) fine announced Wednesday by the Europe Commission (EC) is the newest update in an extended legal battle between Google and tech regulators in Brussels, who have mandated the tech company to three antitrust investigations in a bid to access and curb the Tech’s firm unparalleled activities, to encourage competition.

The imposed penalty may be a record, but it’s one that Google (GOOGL) can foot without spilling lots of blood. Also the fine won’t result in Europeans falling out of love with Google’s popular Android operating system or its ubiquitous smartphone apps.

“Google can brush [the fine] off without an enormous amount of difficultly,” said Richard Windsor, founder of the tech research firm Radio Free Mobile.

The Commission has ordered Google to give manufacturers more freedom when deciding which apps to install on Android smartphones. But that’s unlikely to mean dramatic changes in Europe, where around 80% of smartphones use the operating system.

Google will have to stop preloading Android apps on phones, but Gmail, YouTube, Maps and Chrome have become so essential that customers are bound to seek them out.

“Most users are already completely hooked on Google services. They are going to download the apps anyway,” said Windsor, adding that the ruling would have been more effective if it had been issued five years ago.

Mark Patterson, an antitrust expert and law professor at Fordham University, said the biggest win for Google was that the Commission did not order it to share the user data that forms the backbone of its business.

“Those data are the real basis of the success of its business … it is far from clear that this decision could allow even a firm with the resources of Amazon, which has its own but different data, to become an effective competitor for Google.”

Still, the ruling could encourage regulators in Europe and spark more complaints over the behavior of Google and other tech companies.

“Plaintiffs that were not sure whether they have a case will now feel emboldened and may be more confident to challenge Google,” said Nicolas Petit, a professor at the University of Liege and visiting fellow at Stanford’s Hoover Institution.

He said content creators could be the next to take on Google over its handling of intellectual property.

“Google is a company with a lot of enemies, including in the United States,” he said. “Lots of people will be inclined to read the decision as a form of discriminatory, protectionist behavior by the European Union, but … the complaints often come from US companies.”

Google said that it would appeal the decision.

“Android has created more choice for everyone, not less,” it said in a statement. “A vibrant ecosystem, rapid innovation and lower prices are the classic hallmarks of robust competition.”

Target tech

The Commission has been fighting Google on multiple fronts for almost a decade. Last year, it imposed a then-record €2.4 billion ($2.8 billion) fine on the company for using its search engine to unfairly steer consumers to its own shopping platform.

A third antitrust case, which is still being investigated, involves the Google advertising placement service AdSense.

Apple (AAPL), Amazon (AMZN) and Facebook (FB) have also been penalized by European regulators in recent years, leading to allegations that US companies have been unfairly targeted.

It’s a charge that top EU antitrust official Margrethe Vestager has refuted.

“No matter what the political context … if you breach Europe’s antitrust rules and we find out, there will be a penalty, there is no surprise,” she told reporters on Wednesday.

Tech companies have also been forced this year to bring their operations into compliance with GDPR, a new set of EU regulations that give consumers much more control over their personal data. Changes to copyright law that would affect tech firms are also being considered.

Google has responded by beefing up its lobbying efforts in the European Union. It spent between $6.1 million and $6.4 million on EU lobbying in 2016, according to official data. That compares to $700,000 in 2011.

Break up?

Some Europeans want regulators to go much further and perhaps even break up Google.

“Separating Google’s search engine from its commercial activities is necessary to restore level playing field,” said Ramon Tremosa, a member of the European Parliament.

Tremosa argues that Google’s dominance has obscured the original purpose of its search engine: to display most relevant choices.

“Google gives preferential treatment to its own services … or companies have to pay more to be displayed,” he said. “It is not offering the best choices for consumers.”

Bigger trends

Analysts said that EU decision could actually make a difference in other markets.

Windsor said that because many of Google’s contracts with smartphone makers are global, the ruling could force it to change its strategy elsewhere including Africa.

“You could see handset makers and operators go into the Africa market with a device that has the Google Play on it, but no other Google services,” he said. “They could these users to try their own services before they get completely hooked on Google.”

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