Android fine may come in mid-July as EU dances around Trump

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(Bloomberg) -- It’s no secret that Google is set for another round of hefty antitrust fines.

The decision could come as soon as July 18, judging by the gaping hole in the European Commission’s calendar the week after U.S. President Donald Trump visits Brussels.

But while the size of the penalty will grab the headlines -- after last year’s record 2.4 billion-euro ($2.8 billion) fine -- the most enduring impact could be a dispute over how Google should address concerns with its Android mobile operating system.

Google will likely be told by the European Union to change how it runs its mobile phone business, according to people familiar with the case who asked not to be named because the process isn’t public. That will force the Alphabet Inc. unit to interpret what it should do to bring about more competition, they said. Regulators haven’t held any substantial discussion with Google about how it should address concerns, according to two of the people.

Adding to uncertainty over how it must comply with an order, the search-engine operator is expected to challenge any EU finding against Android at the EU courts, the only way to halt a commission decision. It may ask to suspend an EU order on Android until the appeals process is complete, which could take years, according to one of the people.

The EU announcement may come on or around July 18, according to one of the people. That’s the date of one of this month’s four meetings of EU commissioners -- where they usually approve important decisions. Regulators may be keen to avoid inciting a trade dispute with the U.S. by fining one of America’s most important companies on July 4, Independence Day or July 11, when President Trump attends a NATO summit in Brussels -- the city he once dubbed a hellhole.

Google and the commission declined to comment on the timing or content of the Android decision.

Google has built a massive business of banner and videos ads, thanks largely to its central role on Android devices. Google will account for a third of all global mobile ads in 2018, according to research firm eMarketer, giving the company around $40 billion in sales outside the U.S. The company risks losing that traction if it is forced to surrender its real estate on millions of Android phones.

“Consumers are basically barred from competition in the mobile search market,” said Agustin Reyna of the EU consumer organization BEUC in Brussels. “Because companies who try to enter markets where Google is dominant would find it very difficult to compete as they would not be able to match the amount of data Google holds."

Loaded Bundles

The EU says Google’s contracts with device manufacturers may unfairly force a bundle of Google services -- search, maps, web browser and email -- to be loaded on phones using the Android operating system. Android runs on 77 percent of the world’s smartphones, according to web traffic analysis firm StatCounter. The EU’s case also targets deals with phone makers and telecoms operators that pay them for placing Google Search on devices.

An order would likely force Google to remove or renegotiate contracts, paving the way for competing apps to be pre-installed on devices, which may erode the vast revenues it earns from mobile ads.

“By forcing Google to offer alternatives, its dominant advertising position would get weakened," said Roger Entner, an analyst with Recon Analytics LLC. "It would put Google’s mobile advertising empire on a more level playing field with the rest of the industry."

Business Model

Google has previously said it will argue that the EU has got it wrong and that it doesn’t block users or handset manufacturers from installing other apps. In its view, an EU ruling will harm app developers and customers by undercutting Google’s business model of giving away Android software and generating revenue from mobile advertising. That keeps smartphone prices low, it says.

Meanwhile, Google seems to be giving rivals a better deal in shopping search ads -- but the EU’s antitrust chief says it’s too soon to say whether the search-engine giant has done enough to avoid more fines on top of last year’s record penalty.

Google was told by the EU in June last year to design its own changes to offer "equal treatment" in shopping ads.

There’s been a “steady increase” in the number of rival products showing up in shopping search ads, EU Competition Commissioner Margrethe Vestager told lawmakers at the European Parliament last month.

--With assistance from Stephanie Bodoni

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