Google fine illustrates the EC still needs a new approach to digital markets

The European Commission has today fined Google €4.3bn arguing the company engages in illegal practices regarding the Android operating system in order to strengthen dominance of Google search. The EC notes Google has required manufacturers to pre-install the Google Search app and browser app (Chrome), as a condition for licensing Google's app store (the Play Store); paid large manufacturers and mobile network operators on condition that they exclusively pre-installed the Google Search app on their devices; and prevented manufacturers wishing to pre-install Google apps from selling devices running on alternative versions of Android that were not approved by Google (so-called "Android forks").

Luca Schiavoni, Senior Analyst at Assembly comments:

"The EC’s fine is quite a slap (around half of Alphabet’s turnover for Q1) but neither this, nor the remedies Google are being required to put in place are likely to structurally alter the market.

Not only does this case resemble a previous one between the EC and Microsoft, which was then ordered not to lock PC customers into Internet Explorer; it also fails to set out structural remedies for a market which almost inevitably tends towards concentration, and therefore is difficult to break up without significant disruptions. End users value interoperability, and so do application developers, which means the case for more competition in the space of operating systems is not so clear. Similarly, search engines are successful because of their algorithm and of the large data pools they can rely on, which creates a spiralling network effect driving users towards the largest providers almost naturally.

Competition authorities are still grappling with questions of how to make these markets more open, and most of them are still at the stage of asking questions. Regulators in the US and Australia are running consultations on how to best oversee online platforms’ activity, and even the EC competition commissioner has today admitted they have not yet decided whether Google is compliant with the order issued in 2017 on vertical search for e-commerce. While regulators figure out how to best approach all these issues, fines help the public coffers – but do not solve any market problem."

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