Google Expected to Be Fined Record EUR 4.3 Billion by EU Over Android

Google will be fined about EUR 4.3 billion ($5 billion) by the European Union over apps for Android mobile devices, setting a record for antitrust penalties, according to a person familiar with the EU decision.

The penalty - the same amount the Netherlands contributes to the EU budget every year - is due to be announced by EU Competition Commissioner Margrethe Vestager at 1pm in Brussels.

The EU's decision would bring the running total of Google fines to 6.7 billion after last year's penalty over shopping-search services. It could soon be followed by more fines from a probe into online advertising contracts.

Google has built a massive business of banner and videos ads, thanks largely to its central role on Android devices. Google will account for a third of all global mobile ads in 2018, according to research firm eMarketer, giving the company around $40 billion (roughly Rs. 2.7 lakh crores) in sales outside the US. Google risks losing that traction if it is forced to surrender its real estate on millions of Android phones.

Google Chief Executive Officer Sundar Pichai had a call with EU Competition Commissioner Margrethe Vestager late Tuesday for a so-called state of play meeting, a usual step to alert companies of an impending penalty, according to one of the people, who asked not to be named because the discussion is private. The probe targets Google's contracts with smartphone manufacturers and telecoms operators.

The fine exceeds last year's then-record EUR 2.4 billion penalty following an investigation into Google's shopping-search service. Google owner Alphabet and the commission both declined to comment on the Android fines.

Despite being a record fine, Alphabet generated about the same amount of money every 16 days in 2017, based on the company's reported annual revenue of $110.9 billion (roughly Rs. 7.6 lakh crores) for the year.

Levies are based on revenue in the market being probed and can't exceed 10 percent of a company's global annual revenue. Google raked in around EUR 25 billion in digital advertising in Europe in 2017, equity research firm Pivotal Research estimates.

More significant than a blockbuster fine could be an accompanying order freeing up phone manufacturers to choose non-Google apps to install on Android phones. That would yield crucial real estate for app developers given that about 80 percent of smart mobile devices use Android.

EU officials have been investigating Google contracts that require manufacturers of Android phones to take Google's search and browser apps and other Google services when they want to licence the Play app store.

The EU is also targeting Google's payments to telecoms operators and manufacturers who exclusively install Google search on devices and contracts that prevent handset makers selling phones using other versions of Android.

Google has a market share of more than 90 percent for general Internet search, licensed smart mobile operating systems and app stores for Android software, the EU said in 2016.

© 2018 Bloomberg LP