Europe Misfires on Google

(The Bloomberg View) -- In a long-awaited decision, the European Commission on Wednesday fined Alphabet Inc.'s Google a record 4.3 billion euros ($5 billion) for unfair business practices. The commission won some praise for standing up to big tech. But theatrics aside, this decision is misguided, harmful to consumers, and almost entirely beside the point.

Start with the alleged offenses. Google licenses its Android software to phone-makers for free. If they want to offer its app store, called Google Play, they must also install a suite of the company's other products, such as its search engine and web browser. All told, this is a pretty popular trade-off: Android is now used in about 80 percent of the world's smartphones.

Europe's regulators object. "These practices have denied rivals the chance to innovate and compete on the merits," says Margrethe Vestager, the competition commissioner. "They have denied European consumers the benefits of effective competition in the important mobile sphere."

This statement is wrong in nearly every particular.

For starters, Google isn't unduly inhibiting competition. Android users can select among more than 3 million apps on the Play store, including plenty of alternatives to the Google products that come pre-installed. It may be true, as Vestager says, that few users "are curious enough to look for another search app or browser." But fostering curiosity probably isn't a job for antitrust regulators.

More to the point, the decision conceives of competition too narrowly. Android may be a dominant operating system. But because it's free and open-source, it has vastly expanded the range of choices otherwise available to consumers. Developers around the world have built products using Android — including many of the 1.6 million Europeans who make apps for a living — and often offer them free of charge. 

All this, though, is premised on that initial trade-off: Manufacturers get a free operating system; consumers get cheap phones and free apps; and Google gets the resulting data and advertising dollars. If the EC throws a wrench into this cycle by making it harder for Google to serve ads, the likely result is that it will start charging for Android — thus leading to more expensive phones, reduced innovation and less choice for consumers.

The damage doesn't end there. One way Google imposes quality control over this ecosystem is by prohibiting manufacturers from using "forked" or customized versions of Android if they want to keep offering Google's apps. The EC wants to stop this practice in the interests of competition. Yet doing so would erode security and worsen the problem of "fragmentation," or inconsistencies across different versions of Android. Neither is in the interests of consumers.

For all that, the EC's decision comes about a decade too late to achieve even its stated goals. Because Google's apps benefit from network effects and the power of big data, they get better as they become more popular. The better they are, in turn, the more people want them. After so many years of Google's dominance, few consumers want to do without its apps and few manufacturers want to make products that exclude them. No amount of meddling by Europe's bureaucrats is likely to change that dynamic. 

In imposing this admittedly arbitrary penalty, then, the European Commission is threatening to harm consumers, impede innovation, make life difficult for developers, and undermine the security and usability of applications, all in pursuit of thoroughly implausible goals. If it is solving any problems along the way, it has yet to explain how.

Editorials are written by the Bloomberg View editorial board.

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