$5 Billion European Fine That Irks Trump Isn't So Massive For Google
By James Langford, WASHINGTON EXAMINER
July 19, 2018
he $5.1 billion that the European Commission fined Google parent Alphabet for anticompetitive practices like coercing Android phone makers to install the company's apps sounds massive.
Until you compare it to the $103 billion in available funds the Mountain View, Calif.-based company had at the end of March. Or the $28 billion in free cash flow that Swiss lender UBS estimates the tech firm will generate this year.
"While a large headline fine, the actual amount is small in relation," said UBS analyst Eric Sheridan. "While the ruling contains a number of restrictions on pre-installed apps, we think it is unlikely to slow or deter the download/usage of Google’s mobile app ecosystem." Google has nine of the top 50 apps in rival Apple's online store, despite having no connection with Apple's operating system, he noted.
How the fine will affect relations between the European Union and the U.S., strained by a trade dispute started by President Trump as well as his combative rhetoric during a meeting with allies this month, is less clear. Trump has described the trading bloc as a foe and said on Twitter that the penalty proves his point.
"They truly have taken advantage of us, but not for long," the president said.
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!
— Donald J. Trump (@realDonaldTrump) July 19, 2018
Europe is already retaliating against the U.S. for Trump's double-digit tariffs on and steel and aluminum imports from the region, duties designed to bolster American metals producers that were imposed on national security grounds allowed under a 1962 trade law. The region's leaders scoffed at the White House's logic and have urged it to refrain from imposing 25 percent levies on automobiles and auto parts on similar grounds, moves that Trump has threatened.
For Silicon Valley, the European fine has different, but still ominous, implications. The penalty illustrates the rising concern internationally that U.S. technology firms such as Alphabet, Facebook and Amazon have become large enough to constitute monopolies.
Even in the U.S., lawmakers have begun paying attention to free-market advocates questioning whether the companies' size — and in some cases, their competition with their own customers — is enough to justify blocking future acquisitions, if not breaking them up altogether. UBS's Sheridan noted the rising risk of tighter regulation as long ago as December, though he suggested that any changes were likely to be piecemeal.
Europe's case against Google appears to bear out that premise. It was built around three specific practices: requiring phonemakers who used the company's open-source Android operating system to install the Google Search and Google Chrome apps on devices in order to connect to the Google Play app store; paying large phonemakers and network operators if they installed the Google Search app exclusively; and barring phonemakers from pre-installing Google apps on any devices if they also offered products running Android software developed without the company's approval.
"Google has used Android as a vehicle to cement the dominance of its search engine," said Margrethe Vestager, the European Union's Commissioner for Competition. "These practices have denied rivals the chance to innovate and compete on the merits. They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules."
Google is appealing the decision to the European Court of Justice.
The fine the commission decided on, which amounts to €4.34 billion in the region's common currency, was based on the value of ad revenue from Google's search engine in the 31 European Union states. The ruling, which also requires the company to halt anticompetitive practices within 90 days, quickly garnered widespread attention in the U.S.
“Google has clearly used its monopoly power," said John M. Simpson, privacy and technology project director for Consumer Watchdog, a Los Angeles-based advocacy group that often files lawsuits over what it considers unfair business practices. “The U.S. Federal Trade Commission or Department of Justice should also act to end Google’s monopolistic abuses, instead of letting the Europeans be the only cop on the antitrust beat.”