The European Union slapped Google on Wednesday with a record 4.34 billion euros ($5 billion) antitrust fine for abusing the dominance of its Android operating system.
The fine represents just over two weeks of revenue for Google parent Alphabet Inc. and would scarcely dent its cash reserves of $102.9 billion.
EU Competition Commissioner Margrethe Vestager said the US tech giant illegally used Android's near-monopoly to boost usage of its own search engine and browser.
The decision, which follows a three-year investigation, comes as fears of a transatlantic trade war mount due to President Donald Trump's decision to impose tariffs on European steel and aluminum exports.
"Today the commission has decided to fine Google 4.34 billion euros for breaching EU antitrust rules," Vestager told a press conference in Brussels.
“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,” she said.
EU Commission President Jean-Claude Juncker is due to meet Trump at the White House next Wednesday in an effort to avert threatened new tariffs on EU cars amid Trump’s complaints over the US trade deficit.
Vestager said Google had shut out rivals by forcing major phone makers, including South Korea's Samsung and China's Huawei, to pre-install its search engine and Google Chrome browser, thereby freezing out rivals.
They were also made to set Google Search as the default, as a condition of licensing some Google apps. Google Search and Chrome are as a result pre-installed on the "significant majority" of devices sold in the EU, the European Commission says.
Google also prevented manufacturers from selling smartphones that run on rival operating systems based on the Android open source code, it said.
Google finally gave "financial incentives" to manufacturers and mobile network operators if they pre-installed Google Search on their devices, the commission said.
Google provides Android free to smartphone manufacturers and generates most of its revenue from selling advertisements that appear along with search results.
Vestager ordered Google to halt anti-competitive practices in contractual deals with smartphone makers and telecoms providers within 90 days or face additional penalties of up to 5 percent of parent Alphabet’s average daily worldwide turnover.
Google immediately said it would appeal the fine
"Android has created more choice for everyone, not less," Google spokesman Al Verney said in a statement. "A vibrant ecosystem, rapid innovation and lower prices are classic hallmarks of robust competition. We will appeal the Commission’s decision."
Vestager spoke by telephone with Google chief Sundar Pichai on Tuesday night to tell him about the decision in advance.
The EU enforcer dismissed Google’s argument of competition from Apple, saying the iPhone maker was not a sufficient constraint because of its higher prices and switching costs for users.
Android, which runs about 80 percent of the world’s smartphones according to market research firm Strategy Analytics, is the most important case out of a trio of antitrust cases against Google.
Regulatory action against tech giants like Google and Facebook with their entrenched market power may lack sting, said Polar Capital fund manager Ben Rogoff, who has been holding the stock since its initial public offering and is broadly neutral on Google.
“The reality is that as long as they’re delivering great utility to their consumers, consumers will still use those platforms. If they do, advertisers will be drawn to those platforms, too, because the ROIs (return on investment) are very difficult to replicate anywhere else,” he said.
Vestager's campaign against Silicon Valley giants in her four years as the 28-nation European Union's competition commissioner has won praise in Europe but angered Washington.
Brussels has repeatedly targeted Google over the past decade amid concerns about the Silicon Valley giant's dominance of internet search across Europe, where it commands about 90 percent of the market.
As well as the Android and Google Shopping files, it also has a third investigation under way, into Google's AdSense advert-placing business.
Vestager's other major scalps include Amazon and Apple.
The EU ordered Apple in 2016 to pay Ireland 13 billion euros in back taxes that the maker of iPhones and iPads had avoided by a tax deal with Dublin.
It has also taken on Facebook over privacy issues after it admitted that millions of users may have had their data hijacked by British consultancy firm Cambridge Analytica, which was working for Trump's 2016 election campaign.
