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Google will be hit by its biggest ever regulatory fine on Wednesday, as Brussels imposes a multibillion-euro penalty on the American tech group for abusing its dominant position in operating systems for mobile phones.

The European Commission finding is the most consequential decision made in its eight-year antitrust battle with Google. People familiar with the case said the fine would significantly outstrip the €2.4 billion charge Brussels imposed on the company last year for favouring its own site in comparison shopping searches.

The decision takes aim at a core part of Google’s business strategy over the past decade, outlawing restrictions on its Android operating system that allegedly entrenched Google’s dominance in online search at a time when consumers were moving from desktop to mobile devices.

Android is the operating system used in more than 80 per cent of the world’s smartphones and is vital to the group’s future revenues as more users rely on mobile gadgets for search services. Google has denied wrongdoing.

Restrictions

Margrethe Vestager, the EU’s competition commissioner, has concluded Google used illegal “tying” methods to force phonemakers to pre-install Google services and apps, such as search and Chrome, as a condition of using Google Play, the smartphone app store.

Mobile operating networks and device manufacturers were also paid anti-competitive financial incentives if they pre-installed Google search and no other rival services, Ms Vestager has determined.

A third leg of the case relates to contractual restrictions that stopped manufacturers from selling phones using rival operating systems developed on the Android open source code.

Under such antitrust decisions, Google would be expected to end the illegal practices, forcing amendments to its operations that could have implications for its future standing in the market for mobile and other devices.

Obstructing innovation

The commission has concluded the illegal practices consolidated Google’s dominance in general search, limited the ability of rival mobile browsers to compete with its Chrome browser and obstructed the emergence of other operating systems, people briefed on the decision said.

Google argues the commission has misunderstood consumer behaviour and wrongly defined the market, excluding Apple as a competitive rival.

“The commission’s case is based on the idea that Android doesn’t compete with Apple’s iOS. We don’t see it that way,” said Kent Walker, Google’s general counsel. “We don’t think Apple does either. Or phonemakers. Or developers. Or users.”

Google also argues rival apps are only one download away, making it impossible to shut out competitors even when Google apps are pre-installed or bundled on phones. It depicts the licensing terms as minimum requirements to ensure Android works smoothly on different devices.

The Android case is one of three antitrust investigations pursued by Ms Vestager against Google. These began eight years ago with an investigation into comparison shopping, a relatively narrow part of online commerce.

The case concluded with a €2.4bn fine and Google is attempting to convince Ms Vestager the changes it made to business practices ended the competition problems. A third probe is examining whether the company unfairly banned rivals from websites that used its search bar and adverts. – Copyright The Financial Times Limited 2018

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