Google fined record $5B by EU over illegal app practices

The European Commission fined Google $5 billion (4.34 billion euros) for its "illegal practices" of pushing its Android apps on smartphone customers, the governing body said Wednesday.

The fine will exceed last year’s then-record 2.4 billion euro penalty following an investigation into Google’s shopping-search service.

Despite the eye-popping dollar amount, the fine is less than 1% of the company's market capitalization which is about $830 billion. Additionally, the company’s sales topped $31 billion in the first quarter. 

Shares rose on Thursday, a sign investors are not concerned at this point. For the year, the stock has gained 15% exceeding the 5% gain of the S&P 500.

Ticker Security Last Change Change %
GOOGL ALPHABET INC. 95.65 -1.77 -1.82%

The commission said the tech giant must end its current conduct within the next 90 days or it will face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet, the parent company of Google. It added that market dominance is not illegal under EU antitrust rules, but dominant companies have a “special responsibility” to not abuse their powerful position in the marketplace by restricting competition in markets “where they are dominant or in separate markets.”

“Google has used Android as a vehicle to cement the dominance of its search engine," Commissioner Margrethe Vestager, said in a statement. "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.”

Regulators said Google engaged in three separate types of practices, all of which were aimed at bolstering Google’s already strong position in general Internet search. The practices include “illegal tying of Google's search and browser apps,” “illegal payments conditional on exclusive pre-installation of Google Search” and “illegal obstruction of development and distribution of competing Android operating systems,” according to the commission.

These actions by Google harmed competition and further innovation in the “wider mobile space, beyond just internet search,” the regulating body said, arguing that they prevented other mobile browsers from competing in an effective manner with the pre-installed Chrome browser.

The fine ends an EU probe into Google’s contracts with smartphone manufacturers and telecom operators.

Investors appeared to shrug off the news as shares of Alphabet were little changed in premarket trade.