Google slapped with €4.34 billion fine for Android dominance

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Google has been fined €4.34 billion by the European Commission for stifling competition and ensuring the dominance of its search engine.

The internet giant, which is planning to appeal the decision, was found guilty of abusing EU antitrust rules following a three year investigation.

The Commission's ruling highlighted Google's request for manufacturers of Android devices to pre-install its search engine app, app store and Chrome browser. Manufacturers were not able to pick and choose between them.

It also paid large manufacturers and mobile network operators to include the Google search app. In return, these companies had to exclusively pre-install it across their entire portfolio of devices.

Finally, it said Google had stopped manufacturers from pre-installing its apps if the smartphone makers ran so-called forked versions of Android, which are modified and unapproved types of the OS.

Around 80 percent of smart devices across Europe run Android. The Commission said this stipulation of pre-installation created "a status quo" bias, as users were more likely to stick with Google's services if they came with their devices.

Another finding was that Google's dominance shuts out rivals to develop their own operating systems. The Commission said: "There are high barriers to entry in part due to network effects: the more users use a smart mobile operating system, the more developers write apps for that system – which in turn attracts more users.

"Furthermore, significant resources are required to develop a successful licensable smart mobile operating system."

The Commission dismissed Google's argument that competition from Apple was an adequate check on Android's dominance. It said iOS devices were more expensive, Android users faced hurdles such as losing apps if they switched to iOS, and Google Search was the default service on Apple devices.

[Read more: iOS and Android gain smartphone market share in Europe as Windows enters tailspin]

Google's crackdown on forked versions of Android closed off competitors introducing new kinds of apps and services, the Commission said.

It added that Google did not supply credible evidence to back its claims that Android forks could be hit by technical failures or fail to adequately support apps.

Margrethe Vestager, who is in charge of competition policy at the European Commission, said: "Google has used Android as a vehicle to cement the dominance of its search engine. These practices have denied rivals the chance to innovate and compete on the merits.

"They have denied European consumers the benefits of effective competition in the important mobile sphere. This is illegal under EU antitrust rules."

Google has 90 days to pay the fine but has said that it is planning to appeal the ruling.

In a lengthy response, Sundar Pichai, CEO of Google's parent Alphabet, said consumers were free to uninstall preloaded apps if they wished and that manufacturers did not have to include Google's services on their devices.

However, as the European Commission noted, this would mean users would be unable to access Google's Play app store and therefore download new apps.

Pichai said Google's rules ensure apps can run across any kind of Android device and without this compatibility, the operating system would fragment and damage consumers, developers and device manufacturers.

He added: "We’ve always agreed that with size comes responsibility. A healthy, thriving Android ecosystem is in everyone’s interest, and we’ve shown we’re willing to make changes. But we are concerned that today’s decision will upset the careful balance that we have struck with Android, and that it sends a troubling signal in favor of proprietary systems over open platforms.  

"Rapid innovation, wide choice, and falling prices are classic hallmarks of robust competition and Android has enabled all of them. Today’s decision rejects the business model that supports Android, which has created more choice for everyone, not less."