Blog: Don’t be evil – Google fined record £3.8bn for abusing dominant position



David Flint and Rebecca Henderson

On 18 July the EU Commission handed Google a record fine of £3.8bn (€4.34bn) for abuse of its dominant position in relation to the Android operating system. David Flint and Rebecca Henderson of MacRoberts explain why the tech giant incurred the Commission’s wrath

 

What is a dominant position?

This is set out in what is known as the Chapter II prohibition (governed by Article 102 of the TFEU) which under UK law is set out in the Competition Act 1998.

This states that “any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market in so far as it may affect trade between Member States.”

A dominant market position can vary depending on the market in question. Sometimes having 30 per cent market share could be deemed “dominant” if all other competitors in that market only have 5-10 per cent market share each and therefore you effectively can control the market and make decisions that benefit your organisation, at times to the detriment of the other market players.

In Google’s case, its dominance is very easy to determine – Google’s Android operating system is the most popular mobile operating system in the world (it is used by over 75 per cent of all smartphones). Google’s search engine (Google Search) is also the most popular search engine – with over 95 per cent of all searches conducted via the Google search engine.

How did Google abuse its dominant position?

The EU Commission has previously fined Google £2.2bn for using the Google search engine to give its Google Shopping platform an unfair (and illegal) advantage during searches (our article on this decision is available here).

As previously discussed, this investigation into the Android platform is also accompanied by another investigation into Google AdSense platform, so we may soon see the Commission levying another record fine on Google before the year is out.

Google have been fined in relation to its activities around the promotion of its Android platform. When phone companies such as Samsung want to install the Android platform onto their phones, Google offered these companies financial incentives to pre-install its Android/Google applications which prohibit devices from using other operating systems.

As well as this, Google Search is the default search engine on most Android devices sold in Europe. The Commission have held that Google’s actions have created barriers to entry for other market entrants/participants and that this equates to an abuse of their dominant market position.

What happens next?

Along with its previous £2.2bn fine for the Google Shopping investigation, Google now has another £3.8bn fine to contend with. Along with these fines, the conduct must cease within 90 days or Google will face penalty payments of up to five per cent of the average daily worldwide turnover of Google (this could add up to tens or even hundreds of billions of pounds!)

Google also await the outcome of the Commission’s final ongoing investigation into its AdSense platform which could land them with another record fine, going by the precedent set by Margrethe Vestager and her team, who have gained a reputation worldwide for tackling these global technology giants.

David Flint is a partner and Rebecca Henderson is a trainee at MacRoberts LLP.