Why Google's record antitrust fine 'doesn't matter'

Chief Tech Correspondent
Yahoo Finance

EU regulators fined Google (GOOG, GOOGL) $5.1 billion on Wednesday and demanded that it stop using its position in the mobile-phone market to block rival search engines. But the record fine might not have a long-term effect on either Google or its customers.

The ruling, which chastises Google for mandating that smartphone makers pre-install the Google search engine and its Chrome browser on its Android devices, sets a record for the highest antitrust-related penalty ever. But it’s relative chump change for Google parent company Alphabet, which had $102.9 billion in cash, cash equivalents and marketable securities stashed away as of March.  

“The fine doesn’t matter,” argues Scott Galloway, a professor of marketing at NYU Stern School of Business and author of the book, “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google.”

“If you had a parking meter in front of your house that cost $100 per hour, but the ticket/fine was 25 cents, you too would break the law,” Galloway told Yahoo Finance. “These fines, proportionally, are sweat off an elephant and, via our elected officials, are telling these companies that the shareholder-driven thing to do is to continue to lie to us, and break the law — and they will comply.”

‘Polar opposite’ approaches to antitrust regulation

Wednesday’s news comes a little more than a year after the EU fined Google nearly $2.7 billion for prioritizing its own Google Shopping service in search results over smaller rivals and nearly two years after it demanded Apple (AAPL) pay Ireland $14.5 billion in unpaid taxes accumulated over a decade.

Several antitrust professors told Yahoo Finance that U.S. antitrust authorities are unlikely to follow suit and crack down on Google the way their European counterparts have, given the U.S. has traditionally taken a more lax approach on antitrust.

“I would call the EU approach and the U.S. approach [to antitrust] polar opposites,” says Mark Bartholomew, a professor at the University of Buffalo School of Law.

As part of its decision on Wednesday, European authorities ordered Google to cease forcing device makers to make Google the default search engine and to stop making them load the Chrome browser on devices. One of the potential consequences of this “unbundling” mandate, Google CEO Sundar Pichai vaguely hinted in a blog post, is that the Android business model could potentially change — paving the way for Google to charge device makers for its Android operating system and driving up smartphone prices down the line.

“The free distribution of the Android platform, and of Google’s suite of applications, is not only efficient for phone makers and operators — it’s of huge benefit for developers and consumers,” Pichai wrote in the post. “If phone makers and mobile network operators couldn’t include our apps on their wide range of devices, it would upset the balance of the Android ecosystem. So far, the Android business model has meant that we haven’t had to charge phone makers for our technology, or depend on a tightly controlled distribution model.”  

More expensive smartphones?

In theory, a move to charge for Android could hurt consumers. “We might see a situation where you have more expensive phones in the future,” Bartholomew said.

But in reality, charging device makers for Android probably isn’t going to happen, two analysts tell Yahoo Finance. Throughout its 20-year history, the tech giant has developed many products and services free for consumers to use — Google Search, Gmail, and Android, among others — and leveraged ads to generate revenues.

“It’s unlikely Google would end up charging for Android — that goes against what they stand for,” Omar Akhtar, an analyst for Altimeter Group, explains.

A more likely scenario? Assuming the EU ruling ultimately stands (Google is appealing the ruling), Google may hammer out new, data-sharing policies with third-party app makers, with the explicit consent of users, that sends user data back to the company, which it could use to monetize. The tech giant could also work with smartphone makers to devise ways to get ads from Google’s ad network in front of users as they navigate their devices.

In other words, Google may simply have to get more creative.

Erin Fuchs contributed reporting to this article.

JP Mangalindan is Chief Tech Correspondent at Yahoo Finance. 

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