The European Union has been the center of American headlines for much of 2018. The E.U. has frequently been a target for President Trump, as he works to address trade imbalances between the union and the United States. Heavy tariffs have been levied on European steel and aluminum, and the E.U. has responded with their own tariffs on American automobiles. Now the E.U. is back in the headlines again, as the European Commission has announced a record $5B fine on Google (NASDAQ: GOOG), one of America’s largest and most prominent companies.
Fined Over Antitrust Concerns
American businesses often struggle to do business in Europe, due to a more complex legal system with strong consumer protections that don’t exist in the United States. The E.U. imposes strong legal requirements on everything from data protection to competitive business practices.
In this case, the fine is being applied on it as the European Commission found the company guilty of abusing its dominant market position with the Android smartphone platform.
The E.U. said on Wednesday that “Google has used Android as a vehicle to cement the dominance of its search engine. They have denied European consumers the benefits of effective competition in the important mobile sphere.”
Google broke European law by forcing manufacturers to install its Google Chrome and Google Search applications by default if they wanted to license the Google Play store. In the process of investigating Google, it was also discovered that the company paid network operators and smartphone manufacturers to install its software on devices before they were sold.
Ongoing Repercussions for Google
The E.U. has a long history of punishing companies that abuse their strong market positions. This is not the first fine that it has received from the union. In 2017, Google received a $2.8B fine for skewing search results to prioritize its own shopping service. The E.U. is still investigating it for another antitrust case relating to its AdSense advertising platform.
Google now has 90 days to cease their anti-competitive practices in Europe.
Fortunately for investors, there was no share price slide after the news was announced. Before Thursday trading Alphabet Inc. (Google’s parent company) was down just -0.07%. Stock is still up 14.29% for the year and 23.52% for the last 12 months.
This news showcases yet again how the European Union can be a difficult operating environment for American businesses, largely due to the stronger regulatory conditions. It also serves as a warning to other market leaders that the European Commission is not likely to overlook antitrust issues and other cases where European law is deemed to be breached.
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