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Will EU penalty make a difference in Google’s smartphone dominance?

The European Union announced its most aggressive fine yet against Google for antitrust concerns, and gave the American tech giant 90 days to make changes. European officials say Google has abused the dominance of its Android operating system to entrench its apps and services on smartphones. John Yang talks with European Commissioner for Competition Margrethe Vestager.

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  • Judy Woodruff:

    The European Union has been taking a tough stance against the giant U.S. technology firms. And, today, it announced its most aggressive fine yet against Google for antitrust concerns.

    The E.U. has given Google 90 days to make changes. Google says it will appeal the decision.

    But, as John Yang tells us, the E.U.'s decision was made with an eye toward getting changes that would affect the future of the mobile phone market, search and advertising.

  • John Yang:

    Judy, European officials say Google has abused the dominance of its Android operating system to entrench its apps and services on smartphones. About 80 percent of the world's devices run on Android.

    We asked Google for someone to talk to, but they declined.

    Instead, they provided a video in which company CEO Sundar Pichai says Android gives consumers more choice.

  • Sundar Pichai:

    All of those choices have encouraged innovation and competition, which in turn lowers cost, so that even more people have access to all the world's information.

  • John Yang:

    Earlier, I spoke with European Commissioner for Competition Margrethe Vestager.

    I began by asking her about Europe's case against Google.

  • Margrethe Vestager:

    This is a case where we find that Google has put in place three illegal restrictions to cement its dominance in search, to say, for instance, if you want to have an Android operating system, well, then of course your users would like to have the Play Store, because they want to have apps.

    Then Google will say, you can have the Play Store, but then you have to take Google Search, you have to take Google Chrome. And not only do you have to take them, but we will also make you — we will also pay you so that Google Search is there exclusively, no competition.

    And last but not least, if you do something else, if you have a line of phones where you will do another Android version or something else, well, then you cannot use any of your — our products on any of your phones.

    And this, of course, limits innovation, limits choice, and makes it more difficult for rivals to present new things to us as consumers.

  • John Yang:

    In addition to the fine, you're asking for changes to Google's business practices. What are they?

  • Margrethe Vestager:

    They have to pay a fine of 4.34 billion euros. And they have to stop their illegal behavior.

    They have to put a stop to the infringement in an effective manner, and they have to go so in 90 days. At a minimum, they have to change the contracts, because you find these contractual restrictions there. And now it is Google's sole responsibility to make choices to make this happen.

  • John Yang:

    Google says that its Android operating system has expanded the choice of phones available around the world. They also say that some of the phones come pre-loaded with come competing apps, apps that compete with Google's apps, and that users can download other rival apps.

    What do you say to that?

  • Margrethe Vestager:

    Well, we all download a lot of apps.

    This is why, if you have an Android phone, you like the Play Store, because you want to download games, or weather apps, or traffic apps, or whatever is your liking. But there are some sort of very fundamental apps that we all like.

    And when it comes to search, and when it comes to the browser, well, we might download something else, but the fact is that we don't. Only in 1 percent of users have downloaded another search app, and only 10 percent of users has downloaded another browser app.

    So, you see, even though we might do it, we don't, because when it's there, out-of-the-box experience, we just start using it, and we don't think about that we could do something else. And this is why competition is very far away, if you first have done something illegal to make sure that the out-of-the-box experience is the Google experience.

  • John Yang:

    Android is already so dominant with the smartphones. Are these actions going to make a dent in that?

  • Margrethe Vestager:

    That, of course, remains to be seen, because Google now will have to make sure that they stop the infringement in an effective manner.

    And that will mean that those who produce the phone for us now have a free choice as to what apps to put on the phone when we have the out-of-the-box experience and open it and find a new phone that we have bought and look forward to, so that we have more choices when it comes to search apps, when it comes to browsers, when it comes to what version of an operating system would be the new and better version of an operating system.

    I think that you find a lot of gifted people out there, people with skills, with ideas, of course, to challenge our idea of search, to challenge our idea of what is a browser, how should an operating system work, because this is why Google became so big, because they challenged the way things were.

    And that's, of course, the point in competition.

  • John Yang:

    The fine the E.U. has imposed is, of course, a record for the European Union, but it amounts to only less than about 1 percent of Google's annual revenues.

    Is that really going to make any difference?

  • Margrethe Vestager:

    We have a set of guidelines to help us calculate the fine, so that the fine is the reflection of the duration of the illegal behavior and the seriousness and, of course, also, to some degree, the size of the company.

    And we always, of course, try to be proportional, so that you have the illegal behavior, and then you have the level of the fine to reflect that.

  • John Yang:

    I have seen you referred to as the person that Silicon Valley fears the most.

    There is a sense there that you are taking a very aggressive stance toward the digital companies in Silicon Valley. Is that fair or accurate?

  • Margrethe Vestager:

    I'm here on a very simple mission. And that is to make sure that European consumers, they can enjoy the benefits of a fair competition, competition on the merits, choice, innovation, affordable prices.

    And, as you see, lots of U.S. companies are doing great business within the European Union because they have great products. Consumers like them. And that I very much encourage, because success is a good thing, only you shouldn't misuse your success and start doing something illegal, because then consumers lose trust.

  • John Yang:

    Of course, this comes at a time of heightened tensions, trade tensions between the United States and the European Union.

    The president of the United States even called the European Union one of the top enemies of America. How do your actions fit into that context?

  • Margrethe Vestager:

    Well, we live in a world that seems to be more and more unpredictable.

    And the thing is that I think it's important also to do the predictable things. And it is predictable, because we have done this for decades, that, if you're if the European market, and you're doing something illegal, and we can prove it, well, then we will come and we will take a decision and impose the fine on you, and say you have to stop this.

    This is a predictable thing. We have done that for 60 years by now, and we will, of course, continue doing that.

  • John Yang:

    European Commissioner for Competition Margrethe Vestager, thank you very much.

  • Margrethe Vestager:

    It was indeed a pleasure to be with you. Thank you very much for having me.

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