July 18, 2018 / 2:55 PM / 3 months ago

Breakingviews - EU’s $5 bln fine is the least of Google’s worries

NEW YORK (Reuters Breakingviews) - The European Commission’s $5 billion fine on Google is the least of parent company Alphabet’s worries. A companion order requiring it to stop forcing handset makers to pre-install its Google search app and Chrome browser may cause much more damage – and curb the firm from expanding in areas like self-driving cars.

European Competition Commissioner Margrethe Vestager addresses a news conference on Google in Brussels, Belgium, July 18, 2018. REUTERS/Yves Herman

Giant fines are becoming something of a habit for Alphabet. The European Union’s antitrust regulator slapped the company with a $2.8 billion penalty last year for unfairly favoring its own shopping offerings over rival services. A third case, over whether Google prevented third-party websites from sourcing search ads from competitors, is ongoing. But with a market value of $840 billion and more than $100 billion in cash and short-term investments on its books, the tech giant can easily absorb the latest hit.

More important than fines are forced changes of habit. The commission found that the firm had used three illegal tactics to cement its dominance in mobile search: requiring phone makers to pre-install Google Search and its Chrome browser as a condition for accessing the company’s app store; making payments to companies such as Apple to pre-install Google search, and preventing firms from selling devices with alternative versions of its Android operating system. New tactics that have an equivalent effect are also now forbidden.

Google’s dominance in mobile – about 80 percent of smartphones in Europe use Android – won’t fade as a result of this ruling. Consumers are lazy, and tend not to switch operating systems. The ruling could slightly erode Google’s more than 90 percent share in mobile search however, if manufacturers start installing competing offerings, and growth in browsers other than Chrome could eat away at margins.

The bigger effect may come in markets that don’t yet exist. Appeals mean Google will be walking through a swamp of litigation for years. European antitrust action against Microsoft, which dates back to the 1990s and included a then record $1.4 billion fine in 2008, diverted executives’ attention for over a decade and tamed the firm’s aggressive culture. Google’s ambitions include self-driving cars, bioinformatics, and most importantly artificial intelligence. If the company fears using search and mobile to gain dominance in new markets, that could hasten the day it becomes just another tech firm past its prime.

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